Human Resource Management - s.s. Khanka

HUMAN RESOURCE MANAGEMENT (Text and Cases)

Dr. S.S. KHANKA M.Com., Ph.D. Professor (HRM) National Institute of Financial Management (Ministry of Finance, Government of India) Sector 48, Pali Road, Faridabad–121 001 HARYANA(INDIA)

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© 2003, Dr. S.S. Khanka

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To My Loving Students (1994–2002 ) of Assam University Silchar

By the Same Author ■ ENTREPRENEURIAL DEVELOPMENT ■ ORGANISATIONAL BEHAVIOUR

PREFACE The times are changing and so is business environment. The ongoing LPG process (Liberalization, Privatization and Globalisation) has made business environment highly competitive and complex. These changes have led to changes in human resource environment which, in turn, has changed human behaviour in organisations. As such, the changing environment has necessitated a perspicacious and thorough study of its impact on human resource management practices. The present book is a modest attempt to fulfil this need. The book makes a presumptious attempt to knead all aspects of HRM logically dividing them into seven sections to enable the readers comprehend the key and vital issues of HRM in a dynamic environment. The seven sections are: (1) Human Resource Management—Environment and Strategies, (2) Acquisition and Absorption, (3) Development, (4) Maintenance and Retention, (5) Control, (6) Miscellaneous, and (7) Cases from Indian Organisations. Thus, the book gives a well-knitted and balanced coverage of theory, contemporary issues, and practical examples and anectodes drawn from the Indian business world. Employee empowerment, potential appraisal, succession planning, strategic human resource management, human resource management in a changing environment, HR in virtual organisations, international human resource management and leadership in the new millennium are some of the emerging and contemporary issues discussed in the book. These topics have not been dealt with in most of the books on HRM available in the market. The book covers the whole syllabus of HRM prescribed by the UGC Course Development Committee on Management. In all, the book provides a refreshing insight into all that a reader wants to know about human resource management. The book is written in a jargon-free and accessible style. It is hoped that the book would serve as a useful text for the students of M.B.A., M.Com. and other diploma courses in management. It would also be useful to the practitioners in the field of human resource management. Finally, a request to the discernible readers to do a great favour to me by sending their valuable suggestions and critical comments on the book for its improvement in subsequent editions. Tezpur 14-4-2003 (Baisakhi)

S.S. KHANKA

ACKNOWLEDGEMENTS Every author owes a great deal to others who extend assistance of one type or other. I am no exception. The list to acknowledge them individually will be too long. I wish to express my sincere thanks to all of them. Nonetheless, I must mention some of them whose help was of considerable importance. I express my sincere gratitude to my revered and erudite teacher Prof. T.S. Papola for his guidance and encouragement in my academic endeavours. I also wish to express my profound regards and gratitude to Prof. P. Bhattacharyya, Hon’ble Vice Chancellor, Tezpur University, Tezpur for his recognization and reward to my academic career. My sincere thanks are also due to my excolleagues in Assam University, Silchar and my colleagues in Tezpur University, Tezpur for their cooperation and encouragement extended to me during the course of the present study. I imbibed interest in HRM while teaching it in Assam University for about a decade. The students, in and outside the classroom, always acted as a sounding board to deepen my interest and, in turn, improve my knowledge in HRM. I take this opportunity to exonerate my debt to them by dedicating this book as a token of my love and affection to my loving students (1994-2002), in Assam University, Silchar. As always, I am deeply appreciative to my wife ‘Geetu’ and sons ‘Abhineet’ and ‘Abhinav’ who have provided me with a loving and supportive atmosphere needed to complete this and other academic projects over the years. Finally, my sincere thanks to my publishers, S. Chand & Company Private Limited, for their untiring effort and support in bringing out this book. Tezpur 14-4-2003 (Baisakhi)

S.S. KHANKA

CONTENTS Preface Acknowledgements

SECTION - I HUMAN RESOURCE MANAGEMENT: ENVIRONMENT AND STRATEGIES

1. Nature and Scope of Human Resource Management (HRM) 1.1 1.2 1.3 1.4 1.5 1.6

Meaning and Definition Difference between Personnel Management and Human Resource Management Objectives Scope Functions Summary

2.1 2.2 2.3

Evolution and Development of HRM Environment of HRM Summary

3.1 3.2 3.3 3.4 3.5

Meaning of Strategic HRM Benefits of Strategic Management Role of HRM in Stratgic Management Strategic HRM in Essar Steel Limited Summary

2. Evolution and Development

3. Strategic Human Resource Management

1– 8 1 2 4 4 5 7

9—17

9 14 16

18–24 18 19 20 21 23

SECTION- II ACQUISITION AND ABSORPTION

4. Human Resource Planning 4.1 4.2 4.3 4.4 4.5 4.6 4.7

Human Resource Planning (HRP) Defined Objectives of HRP Need for and Importance of HRP Human Resource Planning Process Problems / Barriers to HRP How to Make HRP Effective ? Summary

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

Concepts Why Job Analysis ? Process of Job Analysis Methods of Data Collection Concept of Job Design Factors Affecting Job Design Methods / Techniques of Design How to Enrich Job ? Summary

6.1 6.2 6.3 6.4 6.5

Meaning and Definition Factors Affecting Recruitment Sources of Recruitment Recruitment Process Recruitment Practices in India

5. Job Analysis and Design

27–38 27 29 29 31 36 37 37

39–52 39 41 42 43 45 46 47 50 51

6. Recruitment

53–67 53 54 55 60 62 (viii)

6.6 6.7 6.8

Methods of Recruitment Effectiveness of Recruitment Programme Summary

7.1 7.2 7.3 7.4

Meaning and Definition Need for Scientific Selection Selection Method / Process Summary

8.1 8.2 8.3 8.4

What is Placement ? Induction : Socialisation Summary

7. Selection

8. Placement, Induction and Socialisation

64 65 65

68–86 68 69 70 84

87–94 87 88 92 93

SECTION - III DEVELOPMENT

9. Career Planning and Development 9.1 9.2 9.3 9.4 9.5 9.6

Concepts of Career, Career Planning and Succession Planning Career Stages Career Planning Process Career Development Career Management Summary

10.1 10.2 10.3 10.4 10.5

Concept of Training Need for Training Importance of Training Steps in Training Programme Summary

11.1 11.2 11.3 11.4 11.5 11.6

Concepts and Objectives Importance of Executive Development Process Methods Evaluation Summary

12.1 12.2 12.3 12.4 12.5

Meaning of OD Models of OD Action Research Model of OD OD Interventions Summary

13.1 13.2 13.3 13.4 13.5

Promotion Transfer Demotion Separations Summary

10. Employee Training

97–106 97 100 101 103 104 104

107–122

107 109 110 110 121

11. Executive Development

123–130

12. Organisation Development (OD)

123 125 125 127 127 129

131–140

132 133 134 135 138

13. Internal Mobility and Separations

141–148

141 143 145 147 (ix)

SECTION - IV 14. Job Evaluation

MAINTENANCE AND RETENTION

14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8

Concept of Job Evaluation Objectives of Job Evaluation Procedure of Job Evaluation Advantages of Job Evaluation Drawbacks of Job Evaluation Methods of Job Evaluation Essentials of Successful Job Evaluation Programme Summary

15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8 15.9

Objectives of Wage and Salary Administration Principles of Wage and Salary Administration Components of Wage and Salary Administration Methods of Wage Payments Theory of Wages Wage Legislation in India Wage Differentials Executive / Managerial Remuneration Summary

16.1 16.2 16.3 16.4

Incentives Benefits Making Incentives and Benefits More Effective Summary

17.1 17.2 17.3 17.4 17.5 17.6

Meaning of Motivation Importance of Motivation Theories of Motivation Motivation Tools / Application Motivation and Morale Summary

18.1 18.2 18.3 18.4 18.5 18.6

What is Empowerment? Conditions Necessary for Empowerment Forms of Empowerment Empowerment in India : An Overview Barriers to Empowerment Summary

19.1 19.2 19.3 19.4 19.5 19.6 19.7

Rationale for WPM Definition and Objectives Forms of WPM WPM in India : A Review Evaluation of WPM Scheme MakingWPM Effective Summary

20.1 20.2

Meaning of Health Importance of Health

15. Wage and Salary Administration

16. Incentives and Benefits

17. Motivation : Concepts And Application

151–161 151 152 152 154 154 155 159 160

162–175

162 163 164 167 170 171 172 173 174

176–185

176 180 183 184

186–207

186 187 187 195 204 205

18. Employee Empowerment

208–218

19. Worker’s Participation in Management (WPM)

208 210 211 215 216 216

219–230

219 220 222 223 226 227 229

20. Employee Health and Safety

231–243 231 232 (x)

20.3 20.4 20.5 20.6 20.7 20.8 20.9 20.10

Occupational Hazards and Diseases Protection against Hazards Statutory Provisions concerning Health Accidents : Their Types and Causes Significance of Industrial Safety Safety Measures / Programmes Statutory Provisions for Industrial Health Summary

21.1 21.2 21.3 21.4 21.5

Concept and Scope Types of Social Security Social Securtiy Measures in India Social Security Legislation in India Summary

22.1 22.2 22.3 22.4 22.5 22.6 22.7 22.8 22.9 22.10

Meaning and Features of Discipline Objectives of Discipline Types of Disipline Causes of Indiscipline or Misconduct Guidelines of a Disciplinary Action Procedure of Disciplinary Action Disciplinary Actions : Penalties and Punishments Statutory Provisions Concerning Discipline Code of Discipline Summary

23.1 23.2 23.3 23.4 23.5 23.6 23.7

Meaning of Grievances Causes or Sources of Grievances Grievance Procedure Model Grievance Procedure Legislative Aspects of the Grievance Procedure in India Essentials of Sound Grievance Procedure Summary

24.1 24.2 24.3 24.4 24.5 24.6 24.7 24.8 24.9 24.10 24.11 24.12 24.13

Concept of IR Scope of IR Objectives of IR Importance of IR Approches to IR Parties to IR Causes for Poor IR Developing Sound IR Industrial Relations in India New Economic Policy (NEP) and IR International Labour Organisation (ILO) and IR in India Labour Legislation Summary

25.1 25.2 25.3 25.4 25.5

Concept of Industrial Disputes Causes of Industrial Disputes Industrial Disputes in India Consequences of Industrial Disputes Prevention of Industrial Disputes

21. Social Security

232 234 235 235 239 239 240 242

244–251

244 246 247 248 250

22. Employee Discipline

252–264

23. Employee Grievances

24. Industrial Relations (IR)

25. Industrial Disputes (ID)

(xi)

252 253 253 254 257 258 260 261 262 263

265–274

265 266 268 271 271 273 273

275–294

275 276 276 277 278 279 281 282 283 284 285 289 292

295–313

295 298 300 304 305

25.6 25.7

Settlement of Industrial Disputes Summary

307 311

26.1 26.2 26.3 26.4 26.5 26.6 26.7 26.8 26.9 26.10 26.11 26.12

Meaning of Trade Union Why do Workers Join a Trade Union? Types of Trade Unions Registration of Trade Union Recognition of Trade Union Trade Union Legislation Theories of Trade Unions Trade Union Movement in India Problems of Trade Unions Measures to Strengthen the Trade Union Movement in India Recommendations of National Commision on Labour Summary

27.1 27.2 27.3 27.4 27.5 27.6 27.7 27.8 27.9

Meaning Objectives Importance Bargaining Strategies Bargaining Process Bargaining Impasse, Mediation and Strikes Conditions of Effective Collective Bargaining Collective Bargaining in India Summary

28.1 28.2 28.3 28.4 28.5 28.6 28.7 28.8 28.9

What is Performance Appraisal? Purpose of Performance Appraisal Approches to Performance Appraisal Process of Performance Appraisal Methods of Performance Appraisal Problems of Performance Appraisal Making Performance Appraisal More Effective Potential Appraisal Summary

26. Trade Unionism

314–331

27. Collective Bargaining

28. Performance and Potential Appraisal

314 315 316 317 318 320 321 321 325 326 327 329

332–342

332 333 333 333 334 336 338 339 340

343–365

343 345 346 347 348 359 360 361 363

SECTION - V 29. Personnel Research and Audit

CONTROL

29.1 29.2 29.3

Personnel Research Personnel Audit Summary

30.1 30.2 30.3 30.4 30.5 30.6

Meaning and Objectives Advantages Limitations Methods of Valuations of Human Resources Controlling Costs of Human Resource Summary

31.1 31.2

Need for HRIS Advantages of HRIS

30. Human Resource Accounting (HRA)

31. Human Resource Information System (HRIS)

369–376 369 373 375

377–383

377 378 379 379 381 383

384–390

384 385 (xii)

31.3 31.4 31.5 31.6 31.7 31.8

Uses of HRIS Designing of HRIS Computerised HRIS Personnel Inventory Limitations of HRIS Summary

386 387 388 388 389 390

SECTION - VI MISCELLANEOUS

32. Human Resource Management in a Changing Environment 32.1 32.2

Changing Environment of HRM Changing Role of HRM Summary

33. International Human Resource Management (IHRM) 33.1 33.2 33.3 33.4

Types of International Business Perspective of International HRM Practices in International HRM Summary

34. Managing Human Resources (HR) in Virtual Organisations (VO) 34.1 34.2 34.3 34.4 34.5 34.6 34.7

What is Virtual Organisation? Types of Virtual Organisations? Difference between Traditional/ Face-to-Face and Virtual Organisation Advantages and Disadvantages Features of Virtual Organisation Human Resource Management in Virtual Organisation Summary

393–398 393 396 397

399–407

399 400 402 405

408–414 408 409 410 411 411 412 413

SECTION - VII 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

CASES FROM INDIAN ORGANISATIONS Biggest Buy-Out Deal Recruitment and Promotion Policies Engineering Industry Hindustan Chemicals Ltd. Workmen’s Compensation Major Mohanty of Sunrise Limited Empowering People in the HLL XYZ Corporation Pioneer Industries Limited Grievance Procedure Vs Collective Bargaining The Bulb Manufacturing Company High Salary Vs High Turnover Dilemma of HR Manager Amgen’s Global Workforce Glossary Abbreviations

(xiii)

417 418 419 421 422 423 424 425 427 430 431 432 433 435 436 447

SECTION – 1

HUMAN RESOURCE MANAGEMENT : ENVIRONMENT AND STRATEGIES 1. Nature and Scope of Human Resource Management (HRM) 2. Evolution and Environment 3. Strategic Human Resource Management

1 NATURE AND SCOPE OF HUMAN RESOURCE MANAGEMENT (HRM) Learning Objectives After studying this chapter, you should be able to: 1.

Define the term ‘human resource management’ (HRM),.

2.

Distinguish between personnel management (PM) and human resource management (HRM).

3.

List the objectives of HRM.

4.

Outline the scope of HRM.

5.

Discuss the various functions performed by HRM.

An organisation is made up of four resources, namely, men, material, money and machinery. Of these, the first one is living one, i.e, human and the other three are non-living i.e, non-human. It is the human/people that make use of non-human resources. Hence, people are the most significant resources in an organisation. It is man who makes all the difference in organisations. L.F. Urwick1 had remarked that “ business houses are made or broken in the long-run not by markets or capital, patents, or equipments, but by men”. According to Peter F. Drucker2, “ man, of all the resources available to man, can grow and develop.” Besides being living being, human resources differ from non-human resources in other respects also. Human resources are heterogeneous in the sense that they differ in personality, perception, emotions, values, attitudes, motives and modes of thoughts. Their behaviour to stimuli is often inconsistent and unpredictable. While other resources depreciate, human resources appreciate with the passage of time. Better educated, more skilled, better aware of their interest and rights are also some distinguishing features of modern human resources. These make it difficult for managers to use human resources always in an effective and efficient manner. Given the highly competitive and complex business environment, attracting and retaining qualified and competent employees have become a real challange of the day for the managers. The ‘rule of thumb’ has become obsolete and redundant. The need of the new persepective is to have right people for right jobs. This mantra offers organisations an edge, which management experts term as ‘competitive advantage’ or ‘core competencey’ to survive and thrive in the competitive business environment. The same gives genesis to the concept of HRM in business organisations. The main objective of this chapter is to present a persepective for human resource management in the Indian context. Accordingly, the meaning, objectives, scope and functions become the subject matter of this chapter. The chapter sets tone for discussion in the subsequent chapters of the book.

1.1 MEANING AND DEFINITION Before we define HRM, it seems pertinent to first define the term ‘human resources’. In common parlance, human resources means the people. However, different management experts have defined human resources differently. For example, Michael J. Jucius3 has defined human resources as “a whole consisting of inter-related, inter-dependent and interacting physiological, psychological, sociological and ethical components”. According to Leon C. Megginson4 “From the national point 1

2

Human Resource Management

of view, human resources are knowledge, skills, creative abilities talents, and attitudes obtained in the population; whereas from the view-point of the individual enterprise, they represent the total of the inherent abilities, acquired knowledge and skills as exemplified in the talents and aptitude of its employees”. Sumantra Ghosal5 considers human resources as human capital. He classifies human capital into three categories-intellectual capital, social capital and emotional capital. Intellectual capital consists of specialized knowledge, tacit knowledge and skills, cognitive complexity, and learning capacity. Social capital is made up of network of relationships, sociability, and trustworthiness. Emotional capital consists of self-confidence, ambition and courage, risk-bearing ability, and resilience.” Now it is clear from above definitions that human resources refer to the qualitative and quantitative aspects of employees working in an organisation. Let us now define human resource management. In simple words, HRM is a process of making the efficient and effective use of human resources so that the set goals are achieved. Let us consider some important definitions of HRM. According to Flippo6, “Personnel management,or say, human resource management is the planning, organising, directing and controlling of the procurement, development, compensation, integration, maintenance, and separation of human resources to the end that individual, organisational and social objectives are accomplished”. The National Institute of Personnel Management (NIPM) of India7 has defined human resource/personnel management as “ that part of management which is concerned with people at work and with their relationship within an enterprise. Its aim is to bring together and develop into an effective organisation of the men and women who make up an enterprise and having regard for the well-being of the individuals and of working groups, to enable them to make their best contribution to its success”. According to Decenzo and Robbins8, “HRM is concerned with the people dimension in management. Since every organisation is made up of people, acquiring their services, developing their skills, motivating them to higher levels of performance and ensuring that they continue to maintain their commitment to the organisation are essential to achieving organisational objectives. This is true, regardless of the type of organisation—government, business, education, health, recreation, or social action”. Thus, HRM can be defined as a process of procuring, developing and maintaining competent human resources in the organisation so that the goals of an organisation are achieved in an effective and efficient manner. In short, HRM is an art of managing people at work in such a manner that they give their best to the organisation.

1.2 DIFFERENCE BETWEEN PERSONNEL MANAGEMENT (PM) AND HUMAN RESOURCE MANAGEMENT (HRM) There are differences of opinion so far as the comparison between personnel management (PM) and human resource management (HRM) is concerned. A number of people, from students to managers to academics, mistakenly think that PM and HRM are synonymous concepts. There are some others who treat the two concepts as different. Hence, it is important to appreciate the difference between PM and HRM. According to Goss9, HRM has three principal distinguishing features as compared to PM. These are: emphasis not just on rule and contract but beyond them; focus on strategy; and individualisation of employee relations. A discussion on each of these follows: 1.

The assumptions underlying PM concepts emphasize clearly defined rules, procedures and contracts. Adherance to these rules and procedures governs the actions of the management.

Nature and Scope of Human Resource Management (HRM)

3

The relationship between the work force and the management is governed by collective bargaining as well as employment contracts. Especially collective bargaining becomes significant because employees and management see and treat each other as having divergent interests, Here, pluralism is respected as a social value and the role of unions in HR is considered legitimate.On the contrary, HRM emphasizes open-ended contracts, the terms of which are linked to the exigencies of business, conflict is viewed as something pathological, resulting from negative inter-personal relations rather than structural contradictions. Management assumes responsibility to motivate employees and constantly inspires performance based on commonality of goals10. 2.

PM does not focus on strategic management. Its main goal is peaceful or good labour- management relations. Its function is mainly reactive. On the other hand, HRM is a proactive function. It does not view labour-management relations as an end in themselves. It is not only concerned with the present organisational needs but anticipates future needs and then acts appropriately. HRM also seeks to release the inner potential and creativity of people.

3.

The edifice of PM is built on the collective agreement between the employees and the management. Employees get standardized rewards based on job evaluation. But, HRM leads to individualization of collective relations. Thus, performance- related pay (PRP) is given key strategic emphasis. Pay is linked with contribution made by an employee to the realisation of organisational goals. HRM seeks to develop the competencies of the employees so as to derive benefit from this development for the organisation, and to integrate individual and organisational goals. Skill formation and developments are recongnized as the main hallmarks of HRD11. The ultimate aim is to use the full potenial of human resources for serving the needs of the customers and developing organisational competencies. Some authors have developed these basic points into detailed differences as shown in Table 1.1. Table 1.1: Comparing HRM with PM

Dimensions

PM

HRM

a.

Nature of relations

Pluralist

Unitarist or neo-unitarist

b.

Perception of conflict

Conflict is institutionalized

Conflict is pathological

c.

Contract

Emphasis on compliance

Beyond contract-commitment

d.

Role of procedures

Rules dominated

Culture and values dominated

e.

Planning perspective

Ad hoc, reactive

Integrated, proactive

f.

Acceptability of unions

Acceptable

Not desirable

g.

Level of trust

Low

High

h.

Key relation

Labour-management

Customer

i.

Management’s role

Transactional

Transformational

j.

Basis of job design

Division of labour

Teams

k.

Key people

PM/IR specialists

Line people and general managers

l.

Skill acquisition

Training & Development

Learning organization

Standardized job evaluation

Performance related

m. Reward management

Source: D.E. Guest: Human Resource Management and Industrial Relations, Journal of Management Studies, 1987, Vol. 24, pp. 503-522.

4

Human Resource Management

1.3 OBJECTIVES The primary objective of HRM is to ensure the availability of right people for right jobs so as the organisational goals are achieved effectively. This primary objective can further be divided into the following sub-objectives: 1.

To help the organisation to attain its goals effectively and efficiently by providing competent and motivated employees.

2.

To utilize the available human resources effectively.

3.

To increase to the fullest the employee’s job satisfaction and self–actualisation.

4.

To develop and maintain the quality of work life (QWL) which makes employment in the organisation a desirable personal and social situation.

5.

To help maintain ethical policies and behaviour inside and outside the organisation.

6.

To establish and maintain cordial relations between employees and management.

7.

To reconcile individual/group goals with organisational goals.

Werther and Davis12 have classified the objectives of HRM into four categories as shown in table 1.2. Table 1.2 : HRM Objectives and Functions

HRM Objectives

Supporting Functions

1.

Societal Objectives

1. 2. 3.

Legal compliance Benefits Union-management relations

2.

Organisational Objectives

1. 2. 3. 4. 5. 6. 7.

Human resource planning Employee relations Selection Training and development Appraisal Placement Assessment

3.

Functional Objectives

1. 2. 3.

Appraisal Placement Assessment

4.

Personal Objectives

1. 2. 3. 4. 5.

Training and development Appraisal Placement Compensation Assessment

Source : William B. Werther, Jr and Keith Davis, Human Resource and Personnel Management, p. 15.

1.4 SCOPE The scope of HRM is, indeed, very vast and wide. It includes all activities starting from manpower planning till employee leaves the organisation. Accordingly, the scope of HRM consists of acquisition, development, maintenance/retention, and control of human resources in the organisation

Nature and Scope of Human Resource Management (HRM)

5

(see figure 1.1). The same forms the subject matter of HRM. As the subsequent pages unfold, all these are discussed, in, detail in seriatim. Fig. 1.1: Scope of HRM

Acquisition

Control Human Resource Audit Human Resource Accounting Human Resource Information System

Human Resource planning Recruitment, Selection Placement. Human Resource Management

Maintenance

Development

Remuneration Motivation Health & Safety Social Security Industrial Relations Performance Appraisal

Training, Career Development Organization Development Internal Mobility.

The National Institute of personnel Management, Calcutta13 has specified the scope of HRM as follows: 1. The Labour or Personnel Aspect.This is concerned with manpower planning, recruitment, selection, placement, transfer, promotion, training and development, lay-off and retrenchment, remuneration, incentives, productivity, etc. 2. Welfare Aspect. It deals with working conditions, and amenities such as canteen, crèches, rest and lunch rooms, housing, transport, medical assistance, education, health and safety, recreation facilities, etc. 3. Industrial Relations Aspects. This covers union-management relations, joint consultation, collective bargaining, grievance and disciplinary actions, settlement of disputes, etc.

1.5 FUNCTIONS We have already defined HRM. The definition of HRM is based on what managers do. The functions performed by managers are common to all organizations. For the convenience of study, the functions performed by the human resource management can broadly be classified into two categories, viz. (1) managerial functions, and (2) operative functions (see fig. 1.2) .These are discussed in turn.

Managerial Functions Planning. Planning is a predetermined course of actions. It is a process of determinig the organisational goals and formulation of policies and programmes for achieving them.Thus, planning is future oriented concerned with clearly charting out the desired direction of business activities in future. Forecasting is one of the important elements in the planning process. Other functions of managers depend on planning function. Organising. Organising is a process by which the structure and allocation of jobs are determined. Thus, organising involves giving each subordinate a specific task, establishing departments, delegating authority to subordinates, establishing channels of authority and communication, coordinating the work of subordinates, and so on.

6

Human Resource Management

Functions of Human Resource Management Managerial Functions Operative Functions

Planning

Organising Directing

Controlling

Procurement Job Analysis Human Resource Planning Recruitment Selection Placement Induction Transfer Promotion Separation

Development Performance Appraisal Training Executive Development Career Planning and Development

Compensation Job Evaluation

Integration Motivation

Maintenance Health

Wage and Salary Administration Bonus and Incentives Payroll

Job Satisfaction Grievance Redressal Collective Bargaining Conflict Management Participation of Employees Discipline

Safety Social Security Welfare Schemes Personnel Records Personnel Research Personnel Audit

Fig. 1.2 : Functions of Human Resource Management

Staffing: This is a process by which managers select, train, promote and retire their subordinates. This involves deciding what type of people should be hired, recruiting prospective employees, selecting employees, setting performance standard, compensating employees, evaluating performance, counseling employees, training and developing employees. Directing/Leading: Directing is the process of activating group efforts to achieve the desired goals. It includes activities like getting subordinates to get the job done, maintaining morale, motivating subordinates etc. for achieving the goals of the organisation. Controlling: It is the process of setting standards for performance, checking to see how actual performance compares with these set standards, and taking corrective actions as needed.

Operative Functions The operative, also called, service functions are those which are relevant to specific department. These function vary from department to department depending on the nature of the department. Viewed from this standpoint, the operative functions of HRM relate to ensuring right people for right jobs at right times. These functions include procurement, development, compensation, and maintenance functions of HRM, A brief description of these follows: Procurement. It involves procuring the right kind of people in appropriate number to be placed in the organisation. It consists of activities such as manpower planning, recruitment, selection, placement and induction or orientation of new employees. Development. This function involves activities meant to improve the knowledge, skills, aptitudes and values of employees so as to enable them to perform their jobs in a better manner in future. These functions may comprise training to employees, executive training to develop managers, organisation development to strike a better fit between organisational climate/culture and employees. Compensation. Compensation function involves determination of wages and salaries matching with contribution made by employees to organisational goals. In other words, this function ensures equitable and fair remuneration for employees in the organisation. It consists of activities such as job evaluation, wage and salary administration, bonus, incentives, etc.

Nature and Scope of Human Resource Management (HRM)

7

Maintenance. It is conecerned with protecting and promoting employees while at work. For this purpose, various benefits such as housing, medical, educational transport facilities, etc. are provided to the employees. Several social security measures such as providend fund, pension, gratuity, group insurance, etc. are also arranged. It is important to note that the managerial and operative functions of HRM are performed in conjunction with each other in an organisation, be large or small organisation. Having discussed the scope and functions of HRM, now it seems pertinent to delineate the HRM scenario in India. Accordingly, the next chapter is devoted to discuss evolution and environment of HRM in India.

1.6 SUMMARY This summary is organised by the learning objectives given on page..1: 1.

HRM is a process of procuring, developing, maintaining, and controlling competent human resources in the organisation so that the organisational goals are achieved in an effective and efficient manner.

2.

While personnel management is reactive, human resource management is proactive. HRM also differs from personnel management in the sense that the former emphasises on higher order needs, individualisation of employee relations, and strategic management.

3.

The main objective of HRM is to ensure the availability of right people for right jobs at right times so that the organisational goals are achieved effectively.

4.

The scope of HRM consists of acquisition, development, maintenance, and control of human resources in the organisation.

5.

The functions performed by human resource management are classified as managerial functions and operative functions.

KEY TERMS Human Capital

Personnel Management

Human Resource Management Quality of Work Life Organisational Climate Organisational Culture

Training

REVIEW AND DISCUSSION QUESTIONS 1. Define human resource management. How does it differ from personnel management? 2. “Human resource management is old wine in new bottle”. Comment. 3. Explain the objectives of HRM. How can these objectives be achieved? 4. “There are two sets of human resource management functions— managerial and operative.” Discuss these functions. 5. Outline the scope of human resource management in the light of ongoing changes in management thought.

REFERENCES 1. Quoted by C.B. Gupta: Human Resource Management, Sultan Chand & sons, New Delhi, (Reprint) 2002, p.13.

8

Human Resource Management

2. Peter F. Drucker: The Practice of Management,Allied Publishers, New Delhi, 1970. 3. Michael J. Jucius: Personnel Management, Richard D. Irwin, Homewood III, 1980, p.40. 4. Leon C. Megginson: Personnel and Human Resource Administration, Richard D. Irwin, Homewood III, 1982, p.6 5. Sumantra Ghosal: Competing on Human Capital , The Economic Times, June 11, 1999, pp. 1-2 (Supplement). 6. Edwin B. Flippo: Personnel Management, McGrow-Hill, New York, 1984, p.5 7. National Institute of Personnel Management : Personnel Management in India, Asia Publishing House, Bombay, 1973, pp.29-30. 8. David A. Decenzo and Stephen P. Robbins: Personnel /Human Resour ce Management, Printice Hall of India Private Ltd, New Delhi, (Third Edition) 1973, p.3. 9. David Goss: Human Resource Management, International Thomson Business Press, London, 1997. 10. Debi S, Saini: Globalisation and Developments in Human Resource Management, In : Saini and Khan (Eds.): Human Resource Management, Response Books, New Delhi, 2000, pp. 5052. 11. J.S.Sodhi: Industrial Relations and Human Resources in India,B.R. Publishing Corporation, Delhi, 1996, p.57. 12. William B. Werther and Keith Davis: Human Resources and Personnel Management,MeGrawHill, New York, 1965, p.15. 13. National Institute of Personnel Management: op, cit., 1973, pp, 29-30.

2 EVOLUTION AND ENVIRONMENT Learning Objectives After studying this chapter, you should be able to: 1.

Trace out the evolution and development of HRM in the Indian context.

2.

Delineate the environment for HRM in India.

HRM is one of the functional areas of management, of course, a relatively recent concept of the study as compared to the study of management. The evolution and development of HRM has inter –relationship with that of management. Evidences are available to cite that the history of management of people in the organisations has been quite old. To quote, The concepts of ‘minimum wage rate’ and ‘incentive plans’ were very much included in the Babylonian Code of Hammurabi around 1800 B.C. Even in India, Kautilya’s Arthashastra states that there existed a sound base for systematic management of people as early as in 320 B.C. However, in India, the orgin of HRM is traced to the beginning of the twentieth century with labour welfare in factories since 1920s. Since then, there has been continuous changes / developments in the concept of HRM in India. For the convenience of our understanding, an attempt has been made in the following section to chronicle the development of the subjects HRM since the 1920s.

2.1 EVOLUTION AND DEVELOPMENT OF HRM In fact, the seed of HRM were sown during the industrial revolution 1850s in Western Europe and USA. The wind gradually reached to India as well in the beginning of twentieth century. Since then to the present era, the development of HRM may be classified as follows: Trade Union Movement Era.The conditions of workers in the aftermath of factory system as an outcome of industrial revolution, were very pathetic. The First World War further worsened their conditions. This was the period when state intervention to protect the worker’s/ interest was felt necessary. The Royal Commission of Labour in India (1911) under the chairmanship of J.H, Whitley recommended the abolision of the ‘Jobber’ system and the appointment of labour officers in industrial enterprises to perform the recruitment function as well as to settle the worker’s grievances. Also, workers started forming their associations which was subsequently known as ‘trade unions’ to improve their lots. Trade Union Act, 1926 was passed in India. The basic philosophy underlying trade unionism was to safeguard the worker’s interest and to sort out of their problems such as use of child labour, long hours of work and poor working conditions. These unions used strikes, slowdowns, walkouts, picketing, boycotts, and sabotage as weapons for the acceptance of their problems. These activities of trade unions gave rises to personnel practices such as collective bargaining, grievance handling system,arbitration, disciplinary practices, employee benefit programmes, installation of rational and defensible wage structures1. Social Responsibility Era. In the starting decade of 20th century, some factory owners/ employers started showing humanistic approach towards the workers. Robert Owen, a British industrialist, reformer and humanitarian, is considered to be the first to adopt humanistic and paternalistic approach towards workers. He viewed that the principal social and economic environments influence the physical, mental, and psychological development of workers. Therefore, in order to improve the productivity, it is necessary to improve conditions of employees by removing them from an adverse 9

10

Human Resource Management

environment or by changing the environment with the provisions of more satisfactory living and working conditions2. The philosophy underlying in Owen’s paternistic approach was that worker’ is just like a child and owner is just like a father. Therefore, the owner should take care of a worker just like a father takes care of his child. Accordingly, Owen himself implemented this philosophy in his cotton mill at Scotland by introducing facilities such as shower baths and toilets in the factory premises, model villages for workers, raising minimum wage of employment of child labour to 11 years and reducing working hours from 12 to 10 hours. Owen also appealed to other industrialists to introduce the similar facilities in their factories. However, some critics view that, in the event of increasing trade unionism in factories, factory owners adopted these facilities to control over the labour problems and unrest. According to them, adoption of such practices was a compulsion for factory owners rather than their paternistic philosophy. Scientific Management Era. The concept of scientific management was introduced by Fredrick Winslow Taylor 3 in the USA early in the 20th century as an alternative to the prevailing system of management by initiative and incentive. Based on his shop floor job experience, Taylor developed four principles of scientific management: 1.

Development and use of scientific methods in setting work standards, determining a fair day’s work, and best way of doing work.

2.

Scientific selection and placement of workers best suited to perform the various tasks and provision of their training and development for maximum efficiency.

3.

Clear cut division of work and responsibility between management and workers.

4.

Harmonious relations and close cooperation with workers to secure performance of work in accordance with the planned jobs and tasks.

In his scientific theory, Taylor viewed man/worker as one driven by fear of hunger and search for profit. Accordingly, if economic reward is tied up with the efforts put on the job, the worker will respond with his maximum physical capability. Taylor’s study is limited to the physical characteristics of the human body as it responds to routine and to clearly defined jobs. He visualised man functioning as an “appendage to the industrial machine”. Realizing that with physical efforts, human body can get tired and thus, can affect worker’s performance both in quantity and quality, Taylor developed several techniques to introduce his scientific ideas in management. The following are the important techniques developed by him: 1.

Time study to analyse and measure the time taken in doing the various elements of a job and to standardize the operations of a job.

2.

Motion study involving close observation of the movements required to perform a job with a view to eliminate wasteful motions and decide on the best way of doing the job.

3.

Standardization of tools, equipments and machinery and working conditions.

4.

Incentive wage plan with differential piece rate of wages for efficient and inefficient workmen.

The main contribution of Taylor to management was it led to professionalisation of management and human engineering. However, some critics criticize his views on the ground that its focus was more on technology and not on human factor in industry. Human Relations Era. By 1920, it was felt that earlier approaches to human resource management were incomplete as these did not recognize workers as human beings having their feelings, attitudes and needs. It was between 1925 and 1935, many experts expressed their opinions towards the human aspects of organisational activities. A psychologist namely Hugo Munsterberg in his book

Evolution and Environment

11

“Psychology and Industrial Efficiency” suggested the use of psychology in selection, placement, testing and training of employees in an organisation. Elton Mayo4 and his associates conducted a series of experiments from 1924 to 1932 at the Hawthorne plant of the Western Electric company in the USA. The main findings of the Hawthorne Experiments were as follows: 1.

Physical environment at the work place do not have any material impact on the efficiency of work.

2.

Favourable attitudes of workers and work-team towards their work were more important factors determining efficiency.

3.

Fulfilment of the worker’s social and psychological needs had a beneficial impact on the morale and efficiency of workmen.

4.

Employee groups based on social interactions and common interests exercised a strong influence on worker’s performance.

5.

Workers cannot be motivated solely by economic rewards. More important motivators are job security, recognition, right to express their opinion on matters related to them.

Based on these findings, the researchers developed a human relations approach to HRM. It was based on the view that the modern organisation is a social system in which the social environment and inter-personal relations govern the behaviour of employees. The relationship between the superiors and supordinates should relate to the social and psychological satisfaction of the employees. In ultimate sense, the objective of human relations approach was to make employees productive and it was realized that employees satisfaction is the best means of making the employee productive. Behavioural Science Era. We have just seen that human relations era assumes that a happy worker is a productive worker. As a corollary to this, the behavioural science era assumes human behavior as a means to achieve efficiency in performance. Behavioural approach to HRM is based on the findings of intensive research carried out by behavioural scientists belonging to the disciplines of sociology, social psychology, anthropology and management experts. The major contributions made by the behavioral scientists are in the areas of motivation, leadership, communication, organisational, change and development, organisational culture, and individual and group dynamics. On the whole, behavioural science approach of HRM was concerned with the social and psychological aspects of human behaviour in organisations. Some of the important elements of the behavioural approach of HRM are outlined below: 1.

Individual behaviour is linked with the group behaviour. For example, a person be inclined to resist change his behaviour as an individual. But, he/ she will readily do so if the group to which he/ she belongs, decides to change its behaviour.

2.

Informal leadership rather than the formal leadership of manager is more effective in influencing people to achieve standards of performance. From this viewpoint, democratic leadership style of the manager is more acceptable to the subordinates and hence, more effective.

3.

By nature, people do not dislike work. Most people enjoy `work and are motivated by selfcontrol and self development. In fact, job itself is a source of motivation and satisfaction to employee.

4.

Expanding subordinate influence, self- control and self- direction can improve operating efficiency.

Systems Approach Era. A system may be defined as a set of interdependent parts forming an organised unit or entity. The system is defined as “ an organised and complex whole: an assemblage or combination of things or parts forming a complex unitary whole.”5 The parts, also known as sub-

12

Human Resource Management

systems, interact with each other and are subject to change. These sub-systems are inter-related and interdependent. Any working organisation usually consists of the following three broad sub- systems: 1.

Technical Sub-system, i.e., formal relationships among the members of an organisation.

2.

Social Sub- system, i.e, social satisfaction to the members through informal group relations.

3.

Power Sub-system, i.e., exercise of power or influence by individual or group.

The interaction of the various sub-system forms the total system, There is also interaction between total system/sub-systems and environment, Environment itself may influence or be influenced by the system or sub-system. The system approach is characterized by the following features: 1.

A system is a group of inter-related elements which are separate entities/units.

2.

All the elements are inter-related in an orderly manner.

3.

There is the need for proper and timely communication to facilitate interaction between the elements.

4.

The interaction between the elements should lead to achieve some common goal.

Let us also see how the system works. Activities relating to procuring and transforming inputs into outputs are viewed as enterprise operations. Materials, information and energy that flow into the organisation are inputs and products and services offered by an organisation are outputs. The organisation through its operations transforms inputs into output. Men, money and managers become the part of system. Sale of outputs provides energy called ‘feedback’ to repeat the system. Thus, the system goes on and on as shown in Figure 2.1.

Input

Transformatio process

Transformatio process

Fig. 2.1 : Cycle of Systems Approach

At the heart of the systems approach lies a management Information System (MIS) and communication network for collection, analysis, and flow of information to facilitate the functions of planning and control. Modern thinkers consider HRM as a system that integrates activities with an objective to make the best use of resources which are always scarce. Contingency Approach Era. Contingency refers to the immediate circumstances. Contingency approach believes that there is no one way of managing that works best in all situations. According to this approach, the best way to manage varies with the situation. Hence, this approach is also called ‘situational approach’. There may not be one universal way of managing in all situations. A particular approach may yield fruitful results in one situation but may drastically fail in other situations. Therefore, it is imperative for managers to analyse different situations and then use the best approach best suitable in that particular situation. This can be understood better by an example of the recurrent problem of how to improve productivity. The solution to this problem can be prescribed as follows:

Evolution and Environment

13

Scientific Management Approach: Prescribe work simpification and additional incentives. Behavioural Approach: Recommend job enrichment and democratic participation of employees in the decision- making process. Contingency Approach: Offer a solution which is responsive to the characteristics of the total situation faced. The above solutions may be suitable to different situations. As regards work simplification, it would be ideal where there is limited resources, unskilled labour and limited training opportunities available. Job enrichment would be ideal for that organisation where there are abundant skilled labour force. Thus, this clearly shows that management function depends upon given situations present in an organisation. Managers are supposed to systematically diagnose a given situation and then find out solutions to meet the situation. In short, contingency approach of management and for that matter HRM, emphasizes on two points: 1.

It focuses attention on situational factors that influence managerial decision.

2.

It highlights the need for developing skills for managers in situational analysis.

Ideas like contingency were also expressed by Mary Parker Follett (1865-1933) way back during 1920s. She was greatly interested in social work and had a gift for relating individual experience to general principles. Her concept of the Law of the Situationreferred to the necessity of acting in accordance with the specific requirements of a given situation. She noted that these requirements were constantly changing and needed continued efforts to maintain effective working relationship. F.W. Taylor6 also emphasized the importance of choosing the general type of management best suited to a particular case. Similarly, Henry Fayol 7 emphasized the point that there is nothing rigid or obsolete in management efforts. Thus, it is clear that contingency approach is not new, but it has been expanded in the modern times. This is the modern recent approach in management and for that matter in HRM as well. HRM has a humble beginning in India in 1920s. By now, this concept has blossomed into a matured subject and profession. Venkata Ratnam and Srivastava8 have outlined the evolution and development of HRM in India as shown in Table 2.1. Table 2.1: Evolution and Development of HRM in India

Period

Development Status

Outlook

Emphasis

Status

1920s –1930s

Beginning

Pragmatism of capitalists

Statuory, welfare, paternalism

Clerical

1940s –1960s

Struggling for recognition

Technical, legalistic

Introduction of techniques

Administrative

1970s –1980s

Impressing with sophistication

Professional, legalistic impersonal

Regulatory conformance, imposition of standards on other functions

Managerial

1990s

Promising

Philosophical

Human values, productivity through people

Executive

HRM in India: An Overview Now that we have delineated the evolution of the concept of HRM, we are prepared to outline an overview of HRM in India.

14

Human Resource Management

Like UK and USA, the evolution and development of HRM in India was not voluntary. The aftermath of the First World War rendered the country with difficult conditions. These manifested in various malpractices in the recruitment of workers and payment of wages leading to trade unionism in organisations causing colossal loss in production due to industrial disputes. Given such scene, government intervened under compulsions to take care of the situation. The Royal Commission of Labour in India, in 1931, under the chairmanship of J.H. whitley recommended the abolition of the ‘jobber’ system and the appointment of labour officers in industrial enterprises to deal with the recruitment of labour and to settle their grievances. After Independence, the Factories Act, 1948 laid down qualifications and duties of Welfare Officers and also made it madatory for companies employing 500 or more workers to appoint Welfare Officers with requisite qualifications and training. In course of time, two professional bodies emerged: ‘The Indian Institute of Personnel Management’ (IIPM), Calcutta, now Kolkata’ and the ‘National Institute of Labour Management ‘(NILM), Bombay, now Mumbai. These two places were the premier centres of traditional industry (jute and cotton respectively) in pre-independent India. During the aftermath of the Second World War and Idependence, worker’s needs and expectations increased. During the 1960s, the personnel function got expansion beyond welfare function. Three areas were added to it: Labour Welfare, Industrial Relations and Personnel Administration. All these three integrated into the emerging Profession called ‘ personnel management’. This was followed by the Government’s massive thurst to the development of basic and heavy industries since the Second Five Year Plan (1956-61) and also accelerated growth of public sector in the country. This, in turn, resulted in professional approach toward management of organisations. The professionalism in managing organisations became quite discernible by the 1970s. There was a clear shift from welfare approach to efficiency one. The two professional bodies, IIPM and NILM merged in 1980 to form the National Institute of Personnel Management(NIPM ) with Kolkata as the headquarter. Evolving along the years, the approach has shifted to human values and productivity through people. It is against such a shift in managing people, in the 1990s, a new approach has emerged, i.e., human resource management(HRM). This approach focuses more on development aspects of human resource, i.e., human resource development (HRD). The fact remains that the buzzword in people management in India is HRD and not the HRM 9. HRD, as is known, as a conscious proactive arrangement by employers that seeks to capacitate employees to give their maximum to the organisation and to fully use their potential to develop themselves. HRD is only one of the functions of HRM. A survey of changed PM titles in India would reveal that most organisations use HRD –related lebels, not HRM-related. Many organisations have no HRM policieshard or soft- and uncritically name their personnel department as the ‘HRM Department’.

2.2 ENVIRONMENT OF HRM What is environment? In simple words, environment comprises all those forces which have their bearing on the functioning of various activities including human resource activities. Environment scanning helps HR manger become proactive to the environment which is characterised by change and intense competition. Human resource management is performed in two types of environments- internal and external. These are discussed one by one:

Internal Environment These are the forces internal to an organisation. Internal forces have profound influence on HR functions. The internal environment of HRM consists of unions, organizational culture and conflict, professional bodies, organisational objectives, polices, etc. A brief mention of these follows. Unions. Trade unions are formed to safeguard the interest of its members/workers. HR activities like recruitment, selection, training, compensation, industrial relations and separations are carried

Evolution and Environment

15

out in consultaion with trade union leaders, Various activities of trade unions are discussed separately later in chapter 26. Organisational Culture and Conflict. As individuals have personality, organisations have cultures. Each organisation has its own culture that distinguishes one organisation from the another. Culture may be understood as sharing of some core values or beliefs by the members of the organisation. “ Value for time” is the culture of Reliance Industries Limited. The culture of Tata conglomerate is “get the best people and set them free”. HR practices need to be implemented that best fit the organisation’s culture. There is often conflict between organizational culture and employee’s attitude. Conflict usually surfaces because of dualities such as personal goal vs. organisational goal, discipline vs autonomy, rights vs. duties, etc. Such conflicts have their bearings on HR activities in an organisation. Professional Bodies. Like other professional bodies, the NIPM as the HR professional body regulates the functions of HR practitioners in India. For this, the NIPM in India has laid down a code of ethics which the HR practitioners are expected to declare their allegiance to the code (see Figure 2.2). Thus, professional bodies also influence HR functions of an organisation.

As a member of the National Institute of Personnel Management, I Declare that I shall: 

Subscribe to the aims and objects of the National Institute of Personnel Management and be bound by its Constitution;



Recognise and accept the dignity of an individual as human being, irrespective of religion, language, caste or creed;



Maintain high standard of integrity and behaviour demanded by the profession;



Conduct myself as responsible member of the management team committed to the achievement of the organisational goals;



Take keen interest in the establishment of healthy personnel practices and development of the profession;



Try to win confidence and gain respect of the employers and employees and make myself available to them provide formal and informal intervention to resolve industrial conflicts;



Endeavour to enhance the good name of my profession in dealing with other professional bodies, government departments, and employer’s and employees’ organisations;



Cooperate in maximising the effectiveness of the profession by exchanging freely information and experience with other members;



Not allow any interest other than professional to interfere with my official work;



Not interfere with the right of association of the employees;



Not disclose any information of a confidential nature that I may acquire in the course of my professional work without obtaining the consent of those concerned and shall not use confidential information for personnel gains:



Not accept or offer any improper gratification in any form or manner whatsoever in connection with or in the course of my professional work; and



Not take of acquiesce in any such action with may bring the institute and/or the profession into disrepute. Fig. 2.2 : Code of Ethics

16

Human Resource Management

External Environment External environment includes forces like economic, political, technological, demographic etc. these exert considerable influence on HRM. Each of these external forces is examined here. Economic: Economic forces include growth rate and strategy, industrial production, national and per capita incomes, money and capital markets, competitions, industrial labour and globalisation. All these forces have significant influence on wage and salary levels. Growing unemployment and reservation in employment also affect the choice for recruitment and selection of employees in organisations. Political: Political environment covers the impact of political institutions on HRM practices. For example, democratic political system increases the expectations of workers for their well being. The total political environment is composed of three institutions: 1. Legislature: This is called Parliament at the central level and Assembly at the state level. A plethora of labour laws are enacted by the legislature to regulate working conditions and employment relations. 2. Executive: It is the Government that implements the law. In other words, the legislature decides and the executive acts. 3. Judiciary: This is like a walchdog above the two. It ensures that both the legislature and the executive work within the confines of the constitution and also in the overall interest of the people. These affect, in one way or the other, all HR activities from planning to placement to training to retention and maintenance. Technological: Technology is a systematic application of organised knowledge to practical tasks. Technological advances affect the HR functions in more than one way. First, technology makes the job more intellectual or upgraded. Second, it renders workers dislocated if they do not equip themselves to the job. Third, job becomes challenging for the employees who cope with the requirements of technology. Fourth, technology reduces human interaction at the work place. Finally, job-holders become highly professionalised and knowledgeable in the job they perform. Demographic: Demographic variables include sex, age, literacy, mobility, etc. Modern work force is characterized by literate, women and scheduled caste and scheduled trides workers, Now, workers are called ‘ knowledge workers’ and the organisations wherein they work are called ‘knowledge organisations’. As such, the traditional line of distinction between manual and non-manual workers is getting blurred. Employees are demanding parity in remuneration and responsibility among various categories and levels of employees.

2.3 SUMMARY This summary is organised by the learning objectives given on page…9: 1.

In India, the evolution of HRM is traced back to the 1920s as a state intervention to solve the problems of employee grievances. Evolving along the years, a new approach-the human resource management- has emerged for managing people with a pragmatic, flexible approach.

2.

Environment of HRM comprises of internal environment, i.e., unions, organizational culture and conflict, professional bodies and organisational objectives, and external environment, i.e., economic, political, technological and demographic forces.

KEY TERMS Arbitration

Industrial Revolution

Collective Bargaining

Minimum Wages Recruitment

Evolution and Environment

17

Grievances

Scientific Management

Human Engineering Human Resource Development

Trade Union

REVIEW AND DISCUSSION QUESTIONS 1. Bring out the evolution of HRM in India. 2. “HRM has evolved along the years”. Comment. 3. Discuss the environment of HRM in India.

REFERENCES 1. Henry Albert: The Development of Personnel Management in the United States, Business History Review, Vol. 33, No.3, 1959, pp. 345-364. 2. Robert Owen: A New View of Society, Quoted in Lyndall F. Urwick. The Golden Book of Management, Newman, London, 1956 p.7. 3. F.W. Taylor: Scientific Mangement, Harper and Brothers, New York, 1911. 4. Elton Mayo: The Human Relations of an Industrial Civilization,Macmillan, New York, 1933. 5. Richard A. Johnson, Fremont E. Kast, and James E. Rosenzwein: The Theory and Management of Systems, McGraw-Hill, New York, 1973, p.4. 6. F. W. Taylor: op. cit., 1911. 7. Henry Fayol: General and Industrial Management, Pitman & Sons, London, 1916. 8. C.S. Venkata Ratnam and B.K. Srivastava: Personnel Management and Human Resources, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1996, p.5. 9. Debi S. Saini and Sami A.Khan (Eds): Human Resource Management (Perspectives for the New Era), Response Books, New Delhi, 2000, p.35.

3 STRATEGIC HUMAN RESOURCE MANAGEMENT Learning Objectives After studying this chapter, you should be able to: 1.

Define strategic HRM

2.

List the various benefits that strategic management offers to an organisation.

3.

Discuss the role of HRM in strategic management.

4.

Delineate the strategic human resource practices implemented by Essar Steel Ltd.

We mentioned in the previous chapter that the post World War Second rendered the world economy with bad economic conditions. The business world witnessed metamorphic changes reflected in terms of internationalisation of business, ferocity of competition, amazing technological advancement, ever-growing state interference, fast changing socio-economic and political environment and emergence of new human values. While these developments opened tremendous growth opportunities, at the same time, these also complicated business problems and even posed business threats to survival of the existing business. In order to cope with and survive in the midest of such business environment, the need for a comprehensive management approach that could enable to exploit business opportunities with the minimum risks involved in highly complex and competitive business environment was seriously felt. Thus, the concept of strategic management evolved against such background. It has now been widely recognized in corporate world that if corporate enterprises have to face successfully competitive challanges and exploit the business opportunities, adoption of strategic management approach is must. This is so in all functional areas of management including HRM. So as to know how HRM can be aligned and integrated with the complex and competitive business environment, it would be pertinent to have an understanding of the concept and mechanism of stratgic human resource management. With this in mind, this chapter is devoted to dilate upon the same.

3.1 MEANING OF STRATEGIC HRM Before we try to explain the meaning of strategic HRM, let us first define the terms ‘strategy’ and ‘strategic management’. The term ‘strategy’ is widely used in and presupposes importance. In the words of the Oxford Concise Dictionary, strategy means ‘generalship’. Thus, strategy is associated with the long-term decisions taken at the top of the enterprise. The original literary meaning of strategy is ‘the art and science of directing military forces’. The term strategy is frequently being used in the present-day corporate world. It envisages thinking ahead to survive and grow in a highly competitive environment1. Strategy is concerned with determining which option will provide maximum benefits. According to Jauch and Glueck2. “ Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challanges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation.” 18

Strategic Human Resource Management

19

Basically any strategic process can be broken down into two phases: 

Strategy formulation



Strategy implementation

Strategic formulation is concerned with making decisions with regard to defining the organisation’s vision and mission, establishing long- and short-term objectives to achieve the organisation’s vision and selecting the strategy to be used in achieving the organisation’s objectives. Strategic implementation is concerned with aligning the organisation structure, systems and processes with the chosen strategy. It involves making decisions with regard to matching strategy and organisational structure and providing organisational leadership pertinent to the strategy and monitoring the effectiveness of the strategy in achieving the organisation’s objectives. Strategic management is the process of formulating, implementing and evaluating business strategies to achieve organisational objectives. Cunningham3 has defined strategic management as a manner by which oeganisations plan to deal with the various aspects of management like problem perception, divergent thinking, substantial resources, decisions making, innovations, taking risks and facing uncertainty. According to Bourgeois4, “Strategic management is a means by which management in an organisation establishes purpose and pursues that purpose through the coalignment of organisational resources with environmental oppurtunities and constraints”. Now that the terms strategy and strategic management are already defined, we are ready to define the term ‘Strategic Human Resource Management’. Strategic human resource management is to ensure that human resource management is fully integrated into strategic planning, that HRM policies cohere both across policy areas and across hierarchies and that HRM policies are accepted and used by line managers as part of their every day work, opines Guest5. According to Donald F. Harvey6 “Strategic management is that set of managerial decisions and actions that determine the long-term performance of a corporation. It includes environmental scanning, strategy formulation, strategy implemention and evaluation and control. The study of strategic management, therefore, emphasizes monitoring and evaluating environmental opportunities and threats in the light of a corporation’s strengths and weaknesses”. The success of an organisation depends on the people therein. This means how they are acquired, developed, motivated and retained in the organisation play an important role in the organisational success. Then, this presupposes an integral approach toward human resouce functions and overall business functions of an organisations. Thus, strategic HRM means a strategic look at HR functions in line with the business functions of an organisation. Strategic HRM, therefore, is concerned with the following: 1.

Analyse the opportunities and threats existing in the external environment.

2.

Formulate strategies that will match the organisation’s (internal) strengths and weaknesses with environmental (external) threats and opportunities. In other words, make a SWOT analysis of organisation.

3.

Implement the strategies so formulated.

4.

Evaluate and control activities to ensure that organisation’s objectives are duly achieved.

3.2 BENEFITS OF STRATEGIC MANAGEMENT As opined by Ulrick and Lake7, the strategic HR framework aims to leverage and / or align HR practices to build critical capabilities that enable an organisation to achieve its goals. Strategic

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management offers both financial and non-financial benefits to an organisation which practises it. Fred R. David8 has listed the following benefits that strategic management brings for an organisation: 1. 2. 3. 4. 5. 6. 7.

Allows identification, prioritisation and exploitation of opportunites. Provides an objective view of management problems. Represents a framework for improved co-ordination and control of activities. Minimises the effects of adverse conditions and changes. Allows major decisions to better support established objectives. Allows more effective allocation of time and resources to identified opportunities. Allows fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions. 8. Creates a framework for internal communication among personnel. 9. Helps to integrate the behaviours of individuals into a total effort. 10. Provides a basis for the clarification of individual responsibilities. 11. Gives encouragement to forward thinking. 12. Provides a co-operative, integrated and enthusiastic approach to tackling problems and opportunities. 13. Encourages a favourable attitude towards change. 14. Gives a degree of discipline and formality to the management of a business.

3.3 ROLE OF HRM IN STRATEGIC MANAGEMENT We have already mentioned that strategic business plan is formulated to achieve competitive advantage. From this, specific strategy for each functional area viz., marketing, finance, production/ operations and human resouces need to be drawn in alignment with strategic business plan to carry out the organisational plan. In other words, the formulation of organisational strategy is integrative with the formulation of functional strategies. Here, human resource strategy assumes more importance because it provides human resources for other functional areas also. Lengnick Hall and LengnickHall9 in this respect argue in ‘Strategic Human Resource Management’ that reciprocal interdependence between an organisation’s business strategy and human resource strategy underlines the proposed approaches to the strategic management of human resources. This suggests that we must recognize that human resources integrally affect the overall strategy of an organisation. With this in mind, we are now discussing the integrative role played by human resources in the strategic management of an organisation. Basically any strategic process can be broken down into two phases: 

Strategy Formulation



Strategy Implementation

Let us examine the role of HR in these two phases separately.

Role in Strategy Formulation As we mentioned earlier in this chapter, environmental scanning is followed by strategy formulation. Environmental scanning helps an organisation identify its opportunities and threats prevailent in the external environment. Here, HRM proves of great help in scanning the existing (external) environment, and thus, identifies the specific opportunities and threats of it for the organisation. Besides, HRM is also of great help to make the organisation competitive intelligence available. This may include the incentive plans being used by the competitors, customer-complaints, labour laws, etc10.

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21

HR also participates in strategy formulation process by supplying information regarding the company’s internal strengths and weaknesses. Instances are available to mention that the unique HR capabilities of an organisation serve as a driving force in strategic options and strategy formulation. A well known accounting and consulting firm, Arthur Anderson represents one such example11. The Illinois training facility develops unique HR capabilities for the firm and that enables the firm to react quickly to the changing demands of the firm. Similarly, IBM’s decision to buy Lotus was probably prompted in part by IBM’s conclusion that its own resources were indequate to enable the firm to reposition itself as an industry leader in networking systems, or at least to do so quickly enough. In India, Essar Steel Limited represents one such case where HR plays an important role in the strategy formulation of the company. The HR Strategy of Essar Steel Limited is discussed, in detail, later in this chapter’.

Role In Strategy Implementation As stated earlier, HRM provides competent human resouces to other functional areas also. In this way, HRM plays a crucial role in the successful execution or implementation of company’s strategic business plan. Many such stories abound in our country. Maruti Udyog and Hindustan Motors are two. We know that Maruti Udyog and Hindustan Motors are Manufacturing cars, essentially using identical technology. The secret behind the meteoric rise of Maruti is its human resource/workforce. HRM supports strategy implementation in other ways as well. For example, HR is today heavily involved in the execution of strategy in the form of downsizing and restructuring strategies, through outplacing employees instituting performance linked pay plans, reducing health-care costs and retraining employees. Even, in an increasingly competitive global market place, instituting HR practices that build employee commitment can help improve an organisation’s responsiveness.

3.4 STRATEGIC HRM IN ESSAR STEELLIMITED* Human resource plays an expanded role under the strategic human resource approach. No longer in human resource strategy a simply personnel management strategy with operative employees driven by the overall corporate strategy. As Michael Porter argues in Competitive Advantage, human resource management can help a firm to achieve a competitive advantage. By involving the HRD consideration when an overall strategy is formulated, HRD can help achieve a strategic advantage. This is true for Essar Steel Ltd. which has integrated HRD consideration in strategic formulations. The Essar group is one of India’s leading business conglomerates, with asset base of over US $4 billion (Rs. 17,000 crores). The group is committed to the development of core structure and infrastructure business in India and abroad. It is actively involved in five principal areas of business viz., Steel, Shipping, Oil and Gas, Power and Communications. Essar Steel is the second largest company in India in the private sector producing 2.2 MMTPA hot rolled flat products. They have the following manufacturing facilities: 

Vizag Pellet Complex



Hazira Steel Complex



Indonesia Cold Rolled complex



Strategic Investment in IIVA, Italy.

In fact, executives are increasingly recognizing the human resource development as one of the key considerations for ensuring an overall sucess of the company’s strategy. For example, more than 50 per cent training programmes are designed and implemented primarily taking a strategic *

Reproduced from Biswajeet Pattanayak: Human Resource Management , Printice Hall of India Private Limited, New Delhi, 2001, p.p. 324-326.

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Human Resource Management

perspective. The vision-mission statement is the evolution of people in the organisation from the various levels of participation. Instead of conducting various programmes in conventional ways just to claim that the organisation is concerned for people development, Essar took a different approach. Of late, they realize that HRD would be a powerful tool in achieving the corporate strategy and business objectives. They hire the author from one of the premier institutions of the country and gave him responsibility to align corporate strategy with the HRD strategy of the organisation. The work started with an action research to understand the problems in the business which hinder the performance. Based on the findings, they could identify that the low performance was due to the low morale of the people. Insecurity, poor communication, lack of professionalism, adhocism, etc., were the basic problems. The company formulated HRD policy which was drawn from the business strategy. The organisation implemented the following HR strategies: 1.

Right Sizing Human Resources-Manpower audit based on competence mapping in turn making the organisation right-sized.

2.

Developing a Learning Culture through Continuous Learning- People were exposed to latest technology and management technique through workshops, discussions and technical session in each department.

3.

Web Based Customer Relationship Management—The organisation linked its manufacturing unit with each vital customers through net.

4.

Introduction of Open House—The new techniques like ‘Open House’ system for employees to ventilate their problems in a forum wherein present were superiors including the directors were indroduced.

5.

Organisation of Executive Leadership Camp to Develop Corporate Pride among the Employees—The young executives in an organisation were taken into a hill station wherein they were exposed to yoga, meditation and latest management techniques of team working etc., for ten days.

6.

Introduction of Willy Korf Innovation Award Scheme—This scheme was to encourage the employees to generate new ideas in improving the workplace productivity. In this process, employees were lending a contributory hand towards management.

7.

Regular Training with a Target of Seven Mandays per Employee—It was made compulsory for each employee to undergo training at least for 7 days in a year on different topics identified through training needs analysis.

8.

Training Programmes on Areas of Concern—The major areas of concern were identified through—interaction with technical heads of department and the training is imparted.

9.

Special Programme—Four-point programme to enhance shareholders’ value through capacity enhancement, contribution enhancement, reduction in financial cost, enhancing the value of intangibles were adopted as strategic steps toward achieving business performance.

After implementing the above strategies within a period of two years, the organisation ended with a half year of current fiscal year (September 30, 2000) with a higher sales volume and record level of exports. The total sales grew in volume by 28% at 8.73 lakh tonnes (6.80 lakh tonnes in the corresponding period last year). Exports registered a quantum jump of 113 % at 4.43 lakh tonnes (2.08 lakh tones in the corresponding period last year). The production of HR coils has grown over 21 % at 8.73 lakh tonnes during the current half vis-a-vis 7.20 lakh tonnes in the corresponding period last year. This shows the enhancement of productivity. Moreover, it has been assessed that the down time has been reduced drastically with high employee satisfaction.

Strategic Human Resource Management

23

Today, they are amongst the low cost producers of hot rolled coiled by virtue of being integrated right from the iron or steels, resulting in one of the highest operating margins in India, with a dominant market share in specially high value-added products.

3.5 SUMMARY This summary is organised by the learning objectives given on page...18: 1.

Strategy refers to steps taken by an organisation in achieving its vision and mission. Strategic HRM means long-term HR process that is in alignment with overall business plan.

2.

The biggest benefit that strategic HRM offers is competitive advantage by building critical capabilities of HR in an organisation.

3.

Strategic HRM facilitates in strategy formulation by making an organisation’s SWOT analysis and also in policy implementation by providing competent human resources and competitive intelligence.

4.

Essar Steel Limited had introduced strategic HRM to capacitate its employees by imparting them required training.

KEY TERMS Competitive Advantage

Strategic HRM

Environmental Scanning

SWOT Analysis

Human Resource Development

Vission

Mission

REVIEW AND DISCUSSION QUESTIONS 1. Define strategic human resource management. List the benefits it offers. 2. Bring out the role of human resource management in strategic management. 3. Describe in case of an organisation known to you, in what ways its HR practices contribute to the firm’s strategic management process.

REFERENCES

1. Arun Monappa : Strategic Human Resources Management, Indian Journal of Social Work, Special Issue on Human Resource Management, Vol. LII, No.4, October 1991, pp. 527-531. 2. Lawrence R. Jauch and William F. Glueck: Business Policy and Strategic Management, McGrawHill, Singapore, 1988 P.11 3. Robert B. Cunningham : Perspectives on Public Sector Strategic Management, In: Jack Rabin et al (Eds): Handbook of Strategic Management, Marcel Dekker, New York, 1989, pp. 123-139. 4. L.J. Bourgeois : Strategy Making Environment and Economic Performance, In: Jack Rabin et al (Eds): Handbook of Strategic Management, Marcel Dekker, New York. 1989, P.57. 5. D. Guest : Personnel and HRM : Can you Tell the Difference ? Personnel Management, vol. 28, No.1, Jan. 1989, pp. 48-51. 6. Donal F. Harvey: Strategic Management and Business Policy, Merril Publishing, Columbia (Second Edition), 1988, p.5.

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Human Resource Management

7. D. Ulrich and D. Lake : Organisational Capabilities: Competing from the Insight / Out, John Wiley, New York, 1990. 8. Fred R. David : Strategic Management, Printice-Hall, 1995, p. 238. 9. Quoted by Biswajeel Pattanayak: Human Resource Management, Printice- Hall of India Private Ltd., New Delhi, 2001, p.319. 10. Gary Dessler: Huaman Resource Management, Printice- Hall of India Private Limited, New Delhi, 2002 (Seventh Edition), pp. 22-23. 11. Ibid, p.23.

SECTION – 2

ACQUISITION AND ABSORPTION 4. 5. 6. 7. 8.

Human Resource Planning Job Analysis and Design Recruitment Selection Placement, Induction and Socialisation

4 HUMAN RESOURCE PLANNING Learning Objectives After studying this chapter, you should be able to: 1.

Define human resource planning and differentiate it from manpower planning.

2.

Appreciate the need for and importance of human resource planning.

3.

Outline and elaborate the process involved in human resource planning.

4.

Describe human resource information system.

5.

Identify problems / barriers which complicate and distoran effectiveness of human resource planning.

6.

Describe how human resource planning can be made effective?

Most of us are fairly familiar with the term ‘planning’ in our every day life. We do often plan in advance about the things to be done on a busy working day. Parents make advance decisions on the education of their children. As students, you aslo may think in advance how to go ahead with the preparation of your forthcoming examination, how to make use of your time in the best possible manner. In fact, planning has been an omni present phenomenon in our all walks of life. This holds true of organisations also. The quality of an organisation is, to a large degree, considered merely the summation of the quality of people it hires and keeps. Therefore, before actually selecting the right people for right jobs, it becomes a prerequisite to decide on the quantity and quality of people required in the organisation. This is done through human resource planning. Human Resource Management, thus, begins with human resource Planning (HRP). It is against this backdrop, this chapter is devoted to expose you to various aspects of human resource planning especially in business organisations. The chapter specifically deals with meaning, need, importance and process of human Resource planning. It also discusses the prerequisites of a successful human resource planning and the limitations/ barriers which complicate and distort effective human resource planning (HRP).

4.1 HUMAN RESOURCE PLANNING (HRP) DEFINED What is HRP? In simple words, HRP is a process of stricking balance between human resources required and acquired in an organisation. In other words, HRP is a process by which an organisation determines how it should acquire its desired manpower to achieve the organisational goals. Thus, HRP helps an organisation have the right number and kind of people at the right places and right times to successfully achieve its overall objectives. Let us also consider a few important definitions of HRP: According to Terry L. Leap and Michael D. Crino, “ HRP includes estimation of how many qualified people are necessary to carry out the assigned activities, how many people will be available and what, if anything, must be done to ensure that personnel supply equals personnel demand at the appropriate point in the future.”1 In the words of Beach, “ Human resource planning is a process of determining and assuming that the organisation will have an adequate number of qualified persons, available at the proper times, 27

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Human Resource Management

performing jobs which meet the needs of enterprise and which provide satisfaction for the individuals involved”2. Geisler3 opines, “HRP is the process- including forecasting, developing and controlling-by which a firm ensures that it has the right number of people and the right kind of people at the right places at the right time doing work for which they are economically most useful.” Having gone through above definitions, HRP can now be defined as the comparsion of an organisation’s existing labour resources with forecast labour demand, and hence the scheduling of activities for acquiring, training, redeploying and possibly discarding labour. It seeks to ensure that an adequate supply of labour is available precisely when required. HRP could be seen as a process, consisting of the following series of activities: 1.

Forecasting future personnel requirements, either in terms of mathematical projections of trends in the economy and developments in the industry, or of judgements estimates based upon specific future plans of the company.

2.

Inventorying present manpower resources and analysing the degree to which these resources are employed optimally.

3.

Anticipating Manpower Problems by projecting present resources into the future and comparing them with the forecast of requirements, to determine their adequacy, both quantitatively and qualitatively.

4.

Planning the necessary programmes of recruitment, selection, training, employment, utilizatiion, transfer, promotion, development, motivation and compensation so that future manpower requirements will be duly met.

4.1.1

Manpower Planning vis-a-vis Human Resource Planning

There are two terms— manpower planning and human resource planning in the management literature. In the current pursuit of human resource management, many organisations appear to be practising ‘Human Resource Planning’ as opposed to “Manpower Planning”. How are we to understand this change? Is it one which is best described as, old wine in new bottles’. And, hence, simply a matter of semantic change, or is something more fundamental happening in the process, techniques, ambitions and outcomes of resource planning ? An attempt is made in this section to address to this question. In fact, a shift from manpower planning to human resources planning is a shift of the concept of planning philosophy. In case of manpower planning, it is made based on the “power” or “strengths” man prossesses. “Manpower” is the concern of manpower planning. Manpower planning takes care of the “power” of people to make positive contribution. The other side of the coin, i.e., weaknesses, is not its concern. Taking into account the organisation’s manpower system, manpower planning includes the key elements like manpower forecasting job analysis, carrer path, training etc. After all , all men are human beings, So to say, they are primarily human beings with human strengths, weaknesses, desires, needs, hopes and aspirations. This human side of manpower/workforce is stressed in the human resources planning. But, it does not mean that the manpower aspect is ignored or rejected. The fact remains that the manpower aspect is taken care of , but the human aspect is given more emphasis in planning process. Human resources planning, thus, refers to the resourcefulness and human aspect of the whole enterprise. Human ability to contribute to productivity is the hallmark of human resource planning. Therefore, it assigns greater importance to develop human potentiality and helps individual employee overcome his weaknesses, if any, so as to strengthen his/her positive contribution to the organisation. Accordingly, human resources planning primarily concentrates on the key elements like human re-

Human Resource Planning

29

source development, succession planning, human resource needs, human values, personnel policy, overall human resources needs in a long-term perspective, a cordial organisational climate particularly with the help of cordial industrial relations and employee welfare, and so on. In sum and substance, while manpower planning is concerned with the “power” of people to make positive contributions, human resource planning is primarily interested in the “people” themselves and not merely on peoples “power”. In other words, human and humane aspects are more emphasised in human resources planning.

4.2 OBJECTIVES OF HRP The main objective of having human resource planning is to have an accurate number of employees required, with matching skill requirements to accomplish organisational goals. In other words, the objectives of human resource planning are to: 

Ensure adequate supply of manpower as and when required.



Ensure proper use of existing human resources in the organisation.



Forecast future requirements of human resources with different levels of skills.



Assess surplus or shortage, if any, of human resources available over a specified period of time.



Anticipate the impact of technology on jobs and requirements for human resources.



Control the human resources already deployed in the organisation.



Provide lead time available to select and train the required additional human resource over a specified time period.

According to Sikula5, “the ultimate purpose/objective of human resource planning is to relate future human resources to future enterprise needs so as to maximise the future return on investment in human resources”.

4.3 NEED FOR AND IMPORTANCE OF HRP The need for human resource planning in organisation is realised for the following reasons: 1.

Despite growing unemployment, there has been shortage of human resources with required skills, qualification and capabilities to carry on works. Hence the need for human resource planning.

2.

Large number of employees who retire, die, leave organisations, or become incapacitated because of physical or mental ailments, need to be replaced by the new employees. Human resource planning ensures smooth supply of workers without interruption.

3.

Human resource planning is also essential in the face of marked rise in workforce turnover which is unavoidable and even beneficial. Voluntary quits, discharges, marriages, promotions and seasonal fluctuations in business are the examples of factors leading to workforce turnover in organisations. These cause a constant ebb and flow in the work force in many organisations.

4.

Technological changes and globalisation usher in change in the method of products and distribution of production and services and in management techniques. These changes may also require a change in the skills of employees, as well as change in the number of employees required. It is human resource planning that enables organisations to cope with such changes.

5.

Human resource planning is also needed in order to meet the needs of expansion and diversification programmes of an organisation.

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Human Resource Management

6.

The need for human resource planning is also felt in order to identify areas of surplus personnel or areas in which there is shortage of personnel. Then, in case of surplus personnel, it can be redeployed in other areas of organisation. Conversely, in case of shortage of personnel, it can be made good by downsizing the work force.

Human resource planning is important to organisation because it benefits the organisation in several ways. The important ones are mentioned below: 1. Human resource planning meets the organisation need for right type of people in right number at right times. 2. By maintaining a balance between demand for and supply of human resources, human resource planning makes optimum use of human resources, on the one hand, and reduces labour cost substantially, on the other. 3. Careful consideration of likely future events, through human resource planning might lead to the discovery of better means for managing human resources. Thus, foresceable pitfalls might be avoided. 4. Manpower shortfalls and surpluses may be avoided, to a large extent. 5. Human resource planning helps the organisation create and develop training and succession planning for employees and managers. Thus, it provides enough lead time for internal succession of employees to higher positions through promotions. 6. It also provides multiple gains to the employees by way of promotions, increase in emoluments and other perquisites and fringe benefits. 7. Some of the problems of managing change may be foreseen and their consequences mitigated. Consultations with affected groups and individuals can take place at an early stage in the change process. This may avoid resistance for change. 8. Human resource planning compels management to asses critically the strength and weaknesses of its employees and personnel policies on continuous basis and, in turn, take corrective measures to improve the situation. 9. Through human resource planning, duplication of efforts and conflict among efforts can be avoided, on the one hand, and coordination of worker’s efforts can be improved, on the other. 10. Last but no means the least, with increase in skill, knowledge, potentialities, productivity and job satisfaction, organisation becomes the main beneficiary. Organisation is benefitted in terms of increase in prosperity / production, growth, development, profit and , thus, an edge over its competitors in the market.

4.3.1 Levels of Human Resource Planning Human resource planning is useful at different levels6. At the National Level. Human resource planning by Government at the national level covers population projections, programme of economic development, educational and health facilities, occupational distribution and growth, mobility of personnel across industries and geographical regions. At the Sector Level. This would cover manpower requirements of the agricultural sector, industrial sector and service sector. At the Industry Level. This would forecast manpower need for specific industries, such as engineering, heavy industries, textile industries, plantation industries, etc. At the Level of Industrial Unit.It relates to the manpower needs of a particular enterprise.

Human Resource Planning

31

4.4 HUMAN RESOURCE PLANNING PROCESS How to have the right number of people with right skills at right times? The process of human resource planning helps in this regard. The human resource planning process consists of activities relating to future demand for and supply of manpower and matching the two in the context of overall organisational plans and objectives . Figure 4.1 illustrates these activities.

COMPANY OBJECTIVE

COMPANY OBJECTIVE DEMAND FOR LABOUR HOW many ? What kind? When? Where? FEEDACKpossible modification to company objectives

–+

Present supply minus wastage external labour market factors

–+

Changes in hours. productivity of working conditions

–+

Possible and economic increases in supply of labour e.g. use of part-time workers

COMPANY OBJECTIVE Recruitment/redundancy programme Training and development programme Industrial relations policy Accommodation plan

Fig. 4.1 : The Human Resources Planning Process

The various activities involved in the process of human resource planning are now discussed one by one. 1. Analysing Organisational Plans and Objectives.The process of human resource planning begins with analysing the overall plans and objectives of organisation. The reason being the human resource plans stem from business plans. Analysis of business plans into sub-sectional and functional plans such as technology, production, finance, marketing, expansion and diversification provides for assessing the human resource requirements for each activity in each section and department. Similarly, the analysis of organisational objectives also provides for human resources required by an organisation. For example, if the objective of the organisation is rapid growth and expansion, it would require more human resources for its all functional areas. Thus, it is evident that the human resource planning needs to be made in accordance to the overall organisational plans and objectives. 2. Analysing Objectives of Human Resource Planning. The main purpose of human resource planning is matching employees abilities to enterprise requirements, with an emphasis on future

32

Human Resource Management

instead of present arrangements. According to Sikula7, “the ultimate mission or purpose of human resource planning is to relate future human resources to future enterprise need so as to maximise the future return on investment in human resources”. For this, managers need to specify the objectives of human resource planning with regard to the utilization of human resources in the organisation. While developing specific objectives of human resource planning, certain questions need to be addressed like:

3.



Whether the vacancies, as and when these arise, will be filled in by promotion, transfer or from external sources?



What will be the selection procedure?



How will provisions be made for training and development of employees?



How to restructure job positions, i.e., how to abolish the old or boring jobs and replace these by the challanging ones?



How to downsize the organisation in the light of changing business and industrial environment?

Forecasting Demand for Human Resources.The demand for human resources in an organisation is subject to vary from time to time, depending upon both external and internal factors. External factors include competition, economic and political climate, technological changes, government policy, etc. Among the internal factors include growth and expansion, design and structural changes, management philosophy, change in leadership style, employees resignation, retirement, termination, death, etc. Therefore, while forecasting future demand for human resources in the organisation, these factors need to be taken into consideration. Forecasting demand for human resources is good for several reasons8 because it can help: (i) quantify the number of jobs required at a given time for producing a given number of goods, or offering a given amount of services. (ii) ascertain a staff-mix needed at different points of time in the future, and (iii) ensure adequate availability of people with varying qualifications and skills as and when required in the organisation. How to forecast requirement for human resources in the future? There are various techniques varying from simple to sophisticated ones employed in human resource forecasting. These include: 1.

Management Judgement

2.

Work-Study Method

3.

Ratio-Trend Analysis

4.

Delphi Technique

5.

Flow Models

6.

Mathematical Models. These are described one by one:

1. Management Judgement. This technique is very simple and time-saving. Under this technique, either a “bottom-up’ or a ‘top-down’ approach is employed for forecasting future human resource requirement of an organisation. In case of bottom-up approach, lime managers prepare departmental requirements for human resource and submit it to the top managers for their review and consideration. In the ‘top-down’ approach, the top managers prepare the departmental forecasts which are reviewed with the departmental heads or managers. However, neither of these approaches is accurate. Forecasts based on these approaches suffer from subjectivity. This technique is suitable only for small firms or in those organisations where sufficient data- base is not readily available.

Human Resource Planning

33

2. Work-Study Method. This method can be used when it is possible to measure work and set standards and where job methods do not change frequently. In this method, as used by Fredrick Winslow Taylor9 in his ‘Scientific Management’, time and motion study are used to ascertain standard time for doing a standard work. Based on this, the number of workers required to do standard work is worked out. The following example illustrates this method. Planned output for next year

25,000 units

Standard hours per unit

4

Planned hours required for the year (25000 × 4)

1,00,000

Productive hours per worker/year (after allowing normal overtime, absenteeism and idle time)

2,000

Number of workers required

 1, 00, 000     2, 000 

50

Supposing, the span of control is ten, then, there will be requirement for five (50/10) supervisors also to supervise the work of 50 workers as forecast just above. 3. Ratio- Trend Analysis. This is one of the quickest forecasting technique. Under this method, forecasting for future human resource requirements is made on the basis of time series data. In other words, this technique involves studying past ratios (e.g., total output/ number of workers, total sales volume/ number of sales persons, direct workers,is made for indirect workers) and, based on these, forecasting is made for future ratios. While calculating future retios, allowances can be made for expected changes in organisation, methods and jobs . The demand for human resources is calculated on the basis of established ratios between two variables. Go through the following illustration. It will help you understand how Ratio-Trend Analysis is used for forecasting human resources requirement of an organisation.

Illustration Production level in 1999-2000 Number of workers in 1999-2000 Ratio (worker/production) Number of supervisors in 1999-2000 Ratio Estimated production in 2000-2001

1,00,000 100 100:1,00,000 or 1:1,000 10 10:100 or 1:10 1,20,000 1, 20, 000 × 1

Number of workers required in 2000-2001 Number of supervisiors required in 2000-2001

1, 000 1

Units

Units

= 120

× 120 = 6

10

In case, there is change in the employees mental and physical health in 2000-2001, the above estimates need to be revised accordingly in order to estimate appropriate requirement for human resources in 2000-2001. 4. Delphi Technique. Delphi technique is named after the ancient Greek oracle at the city of Delphi. This is one of the judgemental methods of forecasting human resource needs. It is a more complex and time-consuming technique which does not allow group members to meet face-to-face. Therefore, it does not require the physical presence of the group members. The following steps characterize the Delphi technique:

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Human Resource Management

1.

The members are asked to provide their estimates of human resource requirements through a series of carefully designed questionnaires.

2.

Each member anonymously and independently completes the first questionnaire.

3.

Results of the first questionnaire are compiled at a central location, transcribed, and copied.

4.

Each member receives the copy of the result.

5.

After viewing the results, members are again asked to review their estimates. The initial results typically trigger new estimates or cause changes in the original position.

6.

Steps 4 and 5 are repeated as often as necessary until a consensus is reached.

The Delphi technique insulates group members from the undue influence of others. Also, since it does not require the physical presence of group members, even a global company could use this technique with members/managers stationed in different countries. As the technique is extremely time consuming, it is frequently not appropriate when a speedy decision is necessary. Further, the technique might not develop the rich pool of alternatives that interacting or nominal groups do. The ideas that might arise from the heat of face-to-face interaction might never come up. 5. Flow Models. Among the flow models, the simplest one is called the Markov model. This model involves the following: (i) Determination of time period that will be covered under forecast. (ii) Establishment of employee’s categories, also called states. There should not be overlapping among the various categories. (iii) Enumeration of annual flows among various categories or states for several time periods. (iv) Estimation of probability of flows or movements from one category to another based on past trends in this regard. However, the Markovian model suffers from disadvantages like heavy reliance on past data, which may not be accurate in abnormal situations like periods of turbulant change, and individual accuracy in forecast is sacrificed at the cost of group accuracy. 6. Mathematical Models. Mathematical models express relationship between independent variables (e.g., production, sales, etc.) and dependent variable (e.g., number of workers required). The following is one10 such widely used mathematical model for forecasting employees need:  Lagg n +G 1/% En = Y Where, En is the estimated number of workers required in n number of years. Lagg refers to the overall value (in rupee terms) of current business operations. G denotes the overall growth in business activity over n years at current value terms i.e. in rupees.

X implies average improvement in productivity estimated during n mumber of years. Y is level of business activity per worker. Following above formula, estimates for manpower requirements in future are made. Due allowence can also be made for expected changes in business strategy in future. 4.

Forecasting Supply of Human Resources. Having forecast human resource demand, the next task involved in human resource planning is to forecast human resource supply. Forecast of human resource supply gives the quantity and quality of people available from internal and external sources of manpower supply, after making due allowences for absenteeism, transfers, promotions, changes in work hours, and other conditions of works11.

Human Resource Planning

35

Forecasting of human resources begins with the current human resource inventory, also called human resource audit. Human resource audit is separately discussed in detail later in chapter 29. In brief, human resource inventory contains information about present human resources in the organisation. It reveals what is available in the stock of manpower and what can be expected in future. Thus, it can indicate whether the supply of human resources is less than its demand or more than its demand. Whatever be the situation, the same will be made good accordingly. 5.

Matching Demand and Supply. Once demand for and supply of human resources of an organisation is forecast, the two need to be reconciled. Such reconciliation will reveal either shortage or surplus of human resources in future. Accordingly, action plans will be prepared to meet the situation, i.e., to strike a balance between the two. In the case of shortage of human resources, this will be met through recruitment, transfer, promotion, training and development, retention, etc. On the contrary, in case of surplus human resources, it can be made good through schemes like redeployment, retrenchment, voluntary retirement scheme (VRS) through golden handshake,etc. will be recommended and implemented. Yes, downsizing should be done in consultation with the employees union. This will help avoid employees resistance for change in job size of organisation.

6.

Monitoring and Control. The sixth and final step involved in human resource planning is monitoring and control. Once the action plans are implemented, these need to be reviewed, regulated and monitored against the set standards. Mointoring of action plans and programmes help reveal deficiencies, if any. Corrective measures help remove deficiency and, thus , control the implementation of action plans in the right direction. In case of changes in business environment, the action plans formulated earlier need to be modified in the light of changing needs of organisation in the changed environment.

4.4.1

Guiding Principles of Effective HRP

There are certain fundamental principles that make human resource planning effective12. These are as follows: 

The plan should be as detailed as expenditure constraints allow.



Plan should not extend too far into the future, accurate prediction of the distant future is simply impossible.



All alternative courses of action shoule be considered.



Side effects and implications of the actions envisaged should be examined.



Instructions to individuals and departments must be incorporated into the plan.



Plans should be concise and easy to understand.

Once the plan so formulated is executed, its effectiveness in achieving set stated objectives should be periodically monitored. Variations, if any, between actual and desired positions must be identified as early as possible and the remedial measures should be introduced immediately. There cannot be a good planning without good data and information. Hence, the need for good and sufficient data relating to human resources of an organisation. This is made possible by Human Resource Information System (HRIS) . As HRIS is discussed in detail later in the Chapter 31, only an overview of it as a passing reference is given here.

4.4.2

Human Resource Information System (HRIS)

Human Resource Information System (HIRS) refers to a computerised system that aids the processing of information relating to human resource management. It is a system of gathering, classifying, processing, recording and disseminating the information required for effective management of human resources in an organisation. HRIS forms an integral part of the Management Information

36

Human Resource Management

System (MIS). MIS includes information relating to assets, finances, production, marketing, sales,accounting, etc. HIRS collects and analyses data relating to human resources of the organisation. The inputs of HRIS include the information relating to employees, their abilities, qualifications, potentialities, creative instincts, age, sex, their jobs, pay scales, organisational objectives, policies and procedures, etc.. These inputs are processed and transformed into multiple forms of outputs like printouts and many other devices. These outputs are made available at the fingertips of the managers through computer network. Thus, managers find HRIS as a decision support system device for managing human resources in the organisation. HRIS is considered superior one to that of mannual system. The main advantages that HRIS offers include: (i) It is both time saving and cheaper device. (ii) It gives accurate information relating to human resources. (iii) It makes information readily available as and when desired. (iv) It acts as a decision support system. (v) It establishes strong management control. For detailed discussion on HRIS, see chapter 31 of this book

4.5 PROBLEMS / BARRIERS TO HRP Human resource planning is as important is not so easy to make. The planners face various problems while formulating human resource plans. The major ones are discussed as follows: 1.

People perceive that people are available in abundance in our labour surplus economy. Then, why to spend time and money in forecasting human resources? Surprisingly, this perception about human resource planning is also held by the top management.

2.

Another problem in human resource planning is that the demand for and supply of human resources is not cent percent accurate. Experience suggests that longer the time horizon for forecasting human resource requirements, greater is the possibility of inaccuracy in estimates of human resource needs.

3.

Various types of uncertainties like labour turnover, absenteeism, seasonal employment, market fluctuations and changes in technology render human resource planning ineffective. The reason being these uncertainties make human resource forecast mere a guess far from reality.

4.

Sometimes human resource planning suffers from a conflict between quantitative and qualitative approches used for it. Some people view human resource planning as a mere numbers game to track the flow of people across the departments and in and out of the organisation. Conversely, others take a qualitative approach focussing on the quality of human resources like career planning development, skill, morale, etc.

5.

Generally, human resource personnel are perceived as experts in handling personnel matters. But, they are not experts more than often. Hence, human resource requirements estimated by such people are not realistic ones. The organisational plans based on such estimates are endangered to be flopped.

6.

As human resource planning is based on data relating to human resources, the same is not maintained in a proper manner in some of the industrial organisations. Then, in the absence of reliable data, it becomes difficult to develop effective human resource plans. In sum and substance, problems in human resource planning arise both from inherent limitations of forecasting, on the one hand, and from weaknesses of human who do it, on the other. But, both can be overcome.

Human Resource Planning

37

4.6 HOW TO MAKE HRP EFFECTIVE ? Following are some of the steps that may improve the effectiveness of human resources planning. 1.

Human resource plans must be viewed as an integral part of corporate planning. So to say, human resource plans should be tailored with the objectives, strategies and overall environment of the particular organisation.

2.

The support and commitment of the top management be ensured before starting the process of human resource planning.

3.

Personnel records must be complete, up-to-date and readily available to ensure an adequate and strong data-base. Data-base serves as backbone for human resource planning.

4.

The time horizon of the human resource plan should be appropriate to accommodate the changing needs and circumstances of the particular organisation.

5.

Both quantitative and qualitative aspects of human resource plans should be stressed in a balanced manner in order to avoid conflicts between the two.

4.7 SUMMARY This summary is organised by the learning objectives given on page....25: 1.

Human resource planning is a process by which the management of an organisation ensures that it has the right number and kind of people at the right places and at the right times to successfully achieve its overall objectives. Human resource planning differs from manpower planning in the sense that while the former is primarily concerned with the ‘human aspects’ of people, the latter mainly concentrates on the ‘power’ of the people.

2.

The need for and importance of human resource planning is explained by the fact that it maintains a fine balance between demand for and supply of human resources required to effectively complete those tasks that help organisation achieve its objectives.

3.

The process of human resource palnning includes activities like analysing organisational plans and objectives, forecasting demand for and supply of human resources, matching demand and supply and monitoring and controlling of human resource plans.

4.

Human resource information system is a computerised system of collecting and analysing information relating to human resources of an organisation.

5.

The main problems in human resource planning are misperception, inaccuracy, uncertainties, unbalanced focus, unrealistic, inefficient information system. etc.

6.

Tailor made approach, support of the top management , sound and up-to-date information system, appropriate time horizon and balance focus are the prerequisites for making human resource planning effective.

KEY TERMS Brainstorming

Human Resource Planning

Delphi Technique

Job Analysis

Human Resource Infromation System

Personnel Audit Succession Planning

REVIEW AND DISCUSSION QUESTIONS 1. What do you understand by human resource planning? How is it different from manpower planning?

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Human Resource Management

2. “Human resource planning is a prerequisite for effective management of human resources of an organisation’’. In the light of this statement, analyse the significance of human resource planning. 3. Explain with suitable illustrations the process of human resource planning. 4. How is demand for human resource forecast? 5. “The human resource planning is becomming more and more important and complex with organisations are becoming more global”. Comment. 6. Discuss the problems faced in human resource planning. How can these problems be overcome? 7. How is human resource information system useful in human resource planning? 8. The Hindustan Paper Corporation wants, because of several technological inovations, 20 per cent less employees in the next three years. What actions would you recommend as a human resource consultant? 9. If you were a human resource planner, how will you develop accurate human resource plans when there are so many rapidly changing environmental factors around you over which you have either little or no control? 10. Writes notes on: (a) Delphi Technique of Human Resource Forecasting. (b) Human Resource Information System. (c) Personnel Audit. (d) Human Resource Inventory.

REFERENCES

1. Terry L. Leap and Michael D. Crino: Personnel / Human Resource Management, Macmillan, New York,1990, p. 156. 2. Dale S. Beach: Personnel- Management of People at Work, 1977, p. 411. 3. E.B . Geisler: Manpower Planning: An Emerging Staff Function,American Management Association, New York, 1967. 4. W.S. Wikstrom: Manpower Planning : Evolving Systems,Conference Board Report No. 521, The Conference Board Inc., New York, 1971, p.2. 5. A.F. Sikula : Personnel Administration and Human Resource Management, John Wiley & Sons, New York, 1977, p. 148. 6. V.S. Narayanarao: Manpower Planning in Companies, Indian Management, 10(12), 1971, pp. 1731. 7. A.F. Sikula : op. cit, 1977, p. 148. 8. William J. Rothwell: Strategic Human Resource Planning and Management, Printice Hall, New Jersey, 1988, p. 173. 9. F.W. Taylor: The Principles of Scientific Management, Harper & Brothers, New York, 1911. 10. Eelmer H. Burak and Robert D. Smith : Personnel Management—A Human Resource Systems Approach, West Publishing, Minnesota, 1977, p.128. 11. Michael Armstrong: Handbook of Personnel Management, Practice, Kogan Page Ltd., London, 1988, (3rd Wd.) p.210. 12. Tim Hannagan: Management: Concepts and Practices, Macmillan Indian Ltd., Delhi, 1977, p.298.

5 JOB ANALYSIS AND DESIGN Learning Objectives After studying this chapter, you should be able to: 1.

Understand the nature of job analysis, job description and job specification.

2.

Appreciate the need for job analysis.

3.

Outline the process involved in job analysis.

4.

Discuss the methods of data collection for job analysis.

5.

Define job design and enumerate the factors that affect job design.

6.

Explain the techniques/methods used for job design.

Alongside its forecasts of the demands for human resources to perform various jobs, as discussed in the previous chapter 4, managers, especially managers of men, need to know the nature and requirements of jobs to be filled in the organisation. Such knowledge can be obtained through job analysis and design. This chapter accordingly deals with the same.

5.1 CONCEPTS Before we proceed to explain the concept of job analysis, let us first understand the meaning of the term ‘job’ itself. Job: In simple words, a job may be understood as a division of total work into packages/positions. According to Dale Yoder 1, “A job is a collection or aggregation of tasks, duties and responsibilities which as a whole, is regarded as a regular assignment to individual employees and which is different from other assignments”. Thus, a job may be defined as a group of positions involving some duties, responsibilities, knowledge and skills. Each job has a definite title based on standard trade specialisations within a job. Each job is different from other jobs like peon, clerk, supervisor, accountant, manager, etc. A job may include many positions. A position is a particular set of duties and responsibilities regularly assinged to an individual.

5.1.1

Job Analysis

Job analysis refers to the process of collecting information about a job. In other words, it refers to the anatomy of the job. Job analysis is performed upon ongoing jobs only. It contains job contents. For example, what are the duties of a supervisor, grade II, what minimal knowledge, skills and abilities are necessary to be able to adequately perform this job?. How do the requirements for a supervisor, grade II, compare with those for a supervisor, grade I? These are the questions that job analysis answers. Let us consider a few important definitions of job analysis. According to Jones and Decothis 2, “Job analysis is the process of getting information about jobs: specially, what the worker does; how he gets it done; why he does it; skill, education and training required; relationship to other jobs, physical demands; environmental conditions”. Edwin B. Flippo 3 has defined job analysis as the process of studying and collecting information relating to the operations and responsibilities of a specific job. The immediate products of this analysis are job descriptions and job specifications”. 39

Human Resource Management

40

In the opinion of Herbert G. Hereman 4 III, et. al., “A job is a collection of tasks that can be performed by a single employee to contribute to the production of some product or service provided by the organisation. Each job has certain ability requirements (as well as certain rewards) associated with it. Job analysis is the process used to identify these requirements”. Now, job analysis can be defined as an assessment that describes jobs and the behaviours necessary to perform them. There are two major aspects of job analysis : These are: 1.

Job Description

2.

Job Specification

A brief description of these follows:

5.1.2

Job Description

Job description is prepared on the basis of data collected through job analysis. Job description is a functional description of the contents what the job entails. It is a narration of the contents of a job. It is a description of the activities and duties to be performed in a job, the relationship of the job with other jobs, the equipment and tools involved, the nature of supervision, working conditions and hazards of the job and so on. All major categories of jobs need to be spelled out in clear and comprehensive manner to determine the qualifications and skills required to perform a job. Thus, job description differentiates one job from the other. In sum, job description is a written statement of what a job holder does, how it is done, and why it is done. Purposes of Job Description. Job description is done for fulfilling the following purposes:       

Grading and classification of jobs Placement and Orientation of new employees Promotions and transfers Outlining for career path Developing work standards Counselling of employees Delimitation of authority

The contents of a job description are given in Table 5.1.

5.1.3

Job Specification

While job description focuses on the job, job specification focuses on the person i.e, the job holder. Job specification is a statement of the minimum levels of qualifications, skills, physical and other abilities, experience, judgement and attributes required for performing job effectively. In other words, it is a statement of the minimum acceptable qualifications that an incumbent must possess to perform a given job. It sets forth the knowledge, skills and abilities required to do the job effectively. Job specification specifies the physical, psychological, personal, social and behavioural characteristics of the job holders. These contents of the job specification are contained in Table 5.1. Usages of Job Specification: The uses of job specification include: 

Personnel planning



Performance appraisal



Hiring



Tranining and development



Job evaluation and compensation

Job Analysis and Design

41



Health and safety



Employee discipline



Work scheduling



Career planning

Contents of Job Description and Job Specification: The contents of job description and job specification are presented in the following Table 5.1. Table 5.1: Job Contents

Job Description

Job specification

A statement containing items such as

A statement of human qualifications necessary to do the job. Usually contains such items as

 Job title



Education

 Location



Experience

 Job summary



Training

 Duties



Judgement

 Machines, tools, and equipment



Initiative

 Materials and forms used



Physical effort

 Supervision given or received



Physical skills

 Working conditions



Responsibilities

 Hazards



Communication skills



Emotional characteristics



Unusual sensory demands such as sight, smell, hearing.

Source: Dale S. Beach: Personnel-The Management of People at Work, Macmillan, New York, 1980, p. 166.

5.1.4

Job Evaluation:

Job evaluation is a comparative process of establilshing the value of different jobs in a hierachical order. It allows one to compare jobs by using common criterial to define the relationship of one job to another. This serves as basis for grading different jobs and developing a suitable pay structure for them. It is important to mention that job evaluation cannot be the sole determining factor for deciding pay structures because job evaluation is about relationships, and not absolutes. The techniques used for job evaluation include ranking, job classification, points rating, etc. These will be discussed, in detail, later in the subsequent chapters of the book.

5.2 WHY JOB ANALAYSIS ? (USES) Through job analysis is useful for overall management of all personnel activities, the same is specified as follows: 1. Human Resource Planning: Human resource planning, as discussed in Chpater 4, estimates the quantity and quality of people will be required in future. How many and what type of people will be required depends on the jobs to be staffed. Job-related information available through job analysis is, therefore, necessary for human resource planning.

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Human Resource Management

2. Recruitment and Selection: Recruitment succeeds job analysis. Basically, the goal of the human resource planning is to match the right people with the right job. This is possible only after having adequate information about the jobs that need to be staffed. It is job analysis that provides job information. Thus, job analaysis serves as basis for recruitment and selection of employees in the organisation. 3. Training and Development: Job analysis by providing information about what a job entails i.e., knowledge and skills required to perform a job, enables the management to design the training and development programmes to acquire these job requirements . Employee development programmes like job enlargement’. job enrichment, job rotation, etc., discussed under job design later in this chapter, are also based on job analysis only. 4. Placement and Orientation: As job analysis provides information about what skills and qualities are required to do a job, the management can gear orientation programmes towards helping the employees learn the required skills and qualities. It, thus, helps management place an employee on the job best suited to him/her. 5. Job Evaluation: As mentioned earlier also, job evaluation refers to determination of relative worth of different jobs. It, thus, helps in developing appropriate wage and salary structures. Relative worth is determined manly on the basis of information provided by job analysis. 6. Performance Appraisal: Performance appraisal involves comparing the actual performance of an employee with the standard one, i.e., what is expected of him/her. Such appraisal or assessment serves as basis for awarding promotions, effecting transfers, or assessing traning needs. Job analysis helps in establishing job standards which may be compared with the actual perfomance/contribution of each employee. 7. Personnel Information: Increasing number of organisations maintain computerised information about their employees. This is popularly known as ‘Human Resource Information System (HRIS) as discussed briefly in the previous chapter 4 and in detail, in the chapter 31. HRIS is useful as it helps improve administrative efficiency and provide decision support5. Information relating to human resources working in the organisation are provided by job analysis only. 8. Health and Safety: Job analysis helps in identifying and uncovering hazardous conditions and unhealthy environmental factors such as heat, noise, fumes, dust, etc.) and, thus, facilitates management to take corrective measures to minimise and avoid the possibility of accidents causing human injury 6.

5.3 PROCESS OF JOB ANALYSIS Job analysis is as useful is not so easy to make. In fact, it involves a process. Though there is no fool-proof process of making job analysis, following are the main steps involved in job analsysis: 1. Organisational Job Analysis: Job analysis begins with obtaining pertinent information about a job7. This, according to Terry 8, is required to know the make up of a job, its relation to other jobs, and its contribution to performance of the organisatioin. Such information can be had by dividing background information in various forms such as organisation charts i.e., how the particular job is related to other jobs; class specifications i.e., the general requirement of the job family; job description i.e., starting point to build the revised job description, and flow charts i.e, flow of activities invloved in a particular job. 2. Selecting Representative Jobs for Analysis: Analysing all jobs of an organisation is both costly and time consuming. Therefore, only a representative sample of jobs is selected for the purpose of detailed analysis. 3. Collection of Data for Job Analysis: In this step, job data features of the job and required qualifications of the employee are collected. Data can be collected either through questionnaire,

Job Analysis and Design

43

observation or interviews. However, due care should be taken to select and use the method of data collection that is the most reliable in the given situation of the job. 4. Preparing Job Description: The job information collected in the above ways is now used to prepare a job description. Job description is a written statement that describes the tasks, duties and responsibilities that need to be discharged for effective job performance. 5. Preparing Job Specification: The last step involved in job analysis is to prepare job specification on the basis of collected information. This is a written statement that specifies the personal qualities, traits, skills, qualification, aptitude etc. required to effectively perform a job. The job analysis process discussed above is now delineated in Figure 5.1. Organisational Job Analysis

 Selection of Representative Jobs

 Data Collection  Job Description  Job Specification Fig. 5.1 : The Job Analysis Process

5.4 METHODS OFDATA COLLECTION Job analysis is based on job data. Hence the question: how to collect job related data? A variety of methods are available for collecting job data. The method that was historically linked to the concept of job analysis was observation supplemented by the interview. In recent years, questionnaires, check lists, critical incidents, diaries, personnel records and technical conference method have also been experimented for collecting job-related data. A brief description of each method is in order.

Observation Under this method, data is collected through observing an employee while at work. The job analyst on the basis of observation carefully records what the worker does, how he/she does, and how much time is needed for completion of a given task. This is the most reliable method of seeking first hand information relating to a job. This method is suitable for jobs that consist primarily of observable physical ability, short job cycle activities. The jobs of draftsman, mechanic, spinner or weaver are the examples of such jobs. However, the flip side of this method is that this method is not suitable for jos that involve unobservable mental activities reveal overlaps and grey areas and have not complete job cycle. That it is time consuming is its yet another handicap. Given these, the job analyst needs to be quite skilful in collecting data about jobs with a high degree of discretion or decision content. Training can make the job analyst skilful.

Interview In this method, the job analyst directly interviews the job holder through a structured interview form to elicit information about the job. This method is found suitable particularly for jobs wherein

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44

direct observation is not feasible. By way of directly talking to the job holder, the interviewer job analyst may extract meaningful information from the job holder about his/her job. However, the interview method is both time consuming and costly. Particularly, the professional and managerial jobs due to their complicated nature of job, require a longer interview 8. This may also be a possibility that bias on the part of the analyst and the job holder i.e., the respondent may cloud the accuracy and objectivity of the information gathered through interview. Nonetheless, the effectiveness of the interview method will depend on the ability of both — interviewer and respondent — in asking questions and responding them respectively. The following guidelines, as outlined by Carrol L. Shartle, Otis and Lenhert9, may help the interviewer make his/her interview more effective: 

Introduce yourself to make the worker know who you are and why you are there.



Allay the worker’s fear whatsoever by showing keen interest in both him/her and his/her job.



Do not advise the worker how to do the job.



Try to talk to the worker in his/her language, to the extent possible.



Do not create confusion between the work and the worker.



Make a full — fledged job study within the objectives of the programmes; and



Verify the job information whatsoever obtained.

Questionnaire Questionnaire method of job data collection is desirable especially in the following two situations: First, where the number of people doing the same job is large and to personally interview them is difficult and impracticable. Second, where giving enough time to employees is desirable to enable them to divulge and explore the special aspects of the jobs. In this method, the employee is given structured questionnaire to fill in, which are then returned to the supervisors. The supervisor, after making the required and necessary corrrections in the information contained in the questionnaire, submits the corrected information to the job analyst. Questionnaire provides comprehensive information about the job. Information so obtained can be quantified and processed in the computer. The greatest advantage of the questionnaire method is that it enables the analyst to cover a large number of job holders in the shortest possible time. However, the method suffers from certain shortcomings as well. In the absence of direct rapport between the job analyst and the employee, both cooperation and motivation on the part of the employee tends to be at low level. Often employee due to lack of training and skill, do not express the job related information in a meaningful and clear fashion10. As such, job related data tends to be inaccurate. Moreover, the method is time-consuming and costly.

Checklists The checklist method of job data collection differs from the questionnaire method in the sense that it contains a few subjective questions in the form of yes or know. The job holder is asked to tick the questions that are related to his/her job 10. Checklist can be prepared on the basis of job information obtained from various sources such as supervisors, industrial engineers, and other people who are familiar with the particular job. Once the checklist is prepared, it is then sent, to the job holder to check all the tasks listed in the list he/she performs. He/she is also asked to mention the amount of time

Job Analysis and Design

45

spent on each task by him/her and the type of tranining and experience required to do each task. Information contained in checklist is, then, tabulated to obtain the job-related data. Like questionnaire method, the checklist method is suitable in the large organisations wherein a large number of workers are assigned one particular job. Since the method is costly and, therefore, is not suitable for small organisations.

Critical Incidents This methd is based on the job holder’s past experiences on the job. They are asked to recapitulate and describe the past incidents related to their jobs. The incidents so reported by the job holders are, then, classified into various categories and analysed in detail. Yes, the job analyst requires a high degree of skill to anlayse the incidents appropriately described by the job holders. However, this method is also time-consuming one.

Diaries or Log Records In this method, the job holder is asked to maintain a diary recording in detail the job-related activities each day. If done judiciously, this methd provides accurate and comprehensive information about the job. This overcomes memory lapses on the part of the job holder. As recording of activities may spread over several days, the method, thus, becomes time-consuming one. The disadvantage associated with this method is that it remains incomplete because it does not give desirable data on supervisor relationship, the equipment used and working conditions prevalent at the work place.

Technical Conference Method In this method, a conference is organised for the supervisors who possess extensive knowledge about job. They deliberate on various aspects of the job. The job analysist obtains job information from the discussion held among these experts/supervisors. The method consumes less amount of time. However, the main drawback of this method is that it lacks accuracy and authenticity as the actual job holders are not involved in collecting job inforrmation. It is seen from the preceding desription that no single method is complete and superior. In fact, none of the method is to be considered as mutually exclusive. The best data related to a job can be obtained by a combination of all methods described above. Before we skip to the next content, a brief mention about the problems with job analysis is in order. The problems that may crop up while conducting job analysis are: 1.

Lack of support from the top management.

2.

Relying on one source and method of data collection.

3.

Non-trained and non-motivated job holders who are the actual source of job data.

4.

Distorted information/data provided by the respondents i.e., the job holders because of nonpreparedness on their part.

5.5 CONCEPT OF JOB DESIGN What is job design? As we just explained, job analysis provides job-related data as well as the skills and knowledge required for the incumbent to perform the job. A better job performance also requires deciding on sequence of job contents. This is called ‘job design’. Job design is a logical sequence to job analysis. In other words, job design involves specifying the contents of a job, the work methods used in its performance and how the job relates to other jobs in the organisation. A few definitions on job design are produced here with a view to help you understand the meaning of job design in a better manner.

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Michael Armstrong11 has defined job design as “the process of deciding on the contents of a job in terms of its duties and responsibilities, on the methods to be used in carrying out the job, in terms of techniques, systems and procedures, and on the relationships that should exist between the job holder and his superiors, subordinates and colleagues”. Mathis and Jackson 12 have defined job analysis as “a process that integrates work content (tasks, functions, relationships), the rewards(extrinsic and intrinsic), and the qualifications required (skills, knowledge, abilities) for each job in a way that meets the needs of employees and organisations.” Popplewell and Wildsmith13 define job design in these words: “......involves conscious efforts to organise tasks, duties, and responsibilities into a unit of work to achieve certain objectives”. Having gone through the above definitions of job design, it can now be described as a deliberate attempt made to structure both technical and social aspects of the job to attain a fit betwen the individual (job holder) and the job. The very idea is that job should be designed in such a way as to enable employees to control over the aspects of their work. The underlying justification being that by doing this, it enhances the quality of the work life, harnesses the potential of the workers in a more effective manner and thereby improves employee performance.

5.6 FACTORS AFFECTING JOB DESIGN Job design is not an exclusive one. It affects and is also affected by various factors. All the factors that affect job design are broadly classified into three categories: 1.

Organisational factors

2.

Environmental factors

3.

Behavioural factors.

A description of each of these follows:

5.6.1. Organisational Factors The various factors under organisational factors include task features, work flow, ergonomics, work practices, etc. A brief description of these follows: Task Features: A job design involves a number of tasks performed by a group of workers. Further, each task consists of three internal features, namely, (i) planning, (ii) executing, and (iii) controlling. An ideal job design needs to integrate all these three features of tasks to be performed. Work Flow: The very nature of a product influences the sequences of jobs, i.e., work flow. In order to perform work in an effective and efficient manner, the tasks involved in a job need to be sequenced and balanced. Consider the car as a product. The frame of a car needs to be built before the fenders, and similarly the doors will be built later 14. Thus, once the sequence of tasks are determined, then the balance between tasks is established. Ergonomics: Ergonomics refers to designing and shaping job in such a manner so as to strike a fit between the job and the job holder. In other words, jobs are designed in such a way to match job requirements with worker’s physical abilities to perform a job effectively. Work Practices: Practice means a set way of doing work based on tradition or collective wishes of workers. While designing jobs, these work practices need to be taken into consideration. Evidences are available to state that ignoring work practices can result in undesirable consequences15. F.W. Taylor 16 determined work practices by time and motion study. Such determinations requires repeated observations. However, the accuracy of the determined work practice is subject to distortions depending on the competence of the observer and deviations from the normal work cycle. Another limitation of this method is its applicability only when production is underway.

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5.6.2

47

Environmental Factors

Environmental factors include social and cultural expectations, and employee ability and availability. These are discussed one by one. Social and Cultural Expectations: Gone are days when workers were ready to do any job under any working conditions. But, with increase in their literacy, education, knowledge, awareness, etc. have raised their expectations from the jobs. In view of this, jobs for them need to be designed accordingly. It is due to this reason that the job design now is characterised by the feautres like work hours, rest breaks, vaocations, religious beliefs, etc. Disregarding these social expectations can create dissatisfaction, low motivation, high turnover and low quality of working life17. Employee Ability and Availability: The various task elements should be included in accordance with the employee abilities and capabilities. Incorporating job elements beyond the employee abilitiy will be causing mismatch between the job and the job holder. Therefore, due consideration should be given to employee ability while determining job design. Henry Ford did follow it. He made job design simple and requiring little training for assembly line considering that most potential workers lacked any automobile-making experience.

5.6.3

Behavioural Factors

Behavioural factors are based on the premise that people are influenced to work to satisfy their needs. Higher the need, more one finds job challanging. One’s behaviour at work is governed by certain factors as discussed below: Autonomy: Autonomy means freedom to control one’s actions/responses to the environment. Research studies report that jobs that give autonomy to workers also increase sense of responsibility and self esteem18. On the contrary, absence or lack of autonomy can cause workers apathy to jobs and, in turn, low and poor performance. Use of Abilities: Workers perform jobs effectively that offer them opportunity to make use of their abilities. Workers find such jobs as interesting and challanging. Feedback: Job design shuld be determined in such a way that workers receive meaningful feedback about what they did. Feedback helps workers improve their performance. Variety: Lack of variety, or say, doing the same work, causes boredom which, in turn, leads to fatigue. Fatigue causes mistakes and accidents. But, by incorporating elements of variety in the job, boredom, fatigue and mistakes can be avoided and the job can be done in an effective and efficient manner.

5.7 METHODS/TECHNIQUES OF JOB DESIGN How to design jobs? Jobs can be designed to range from very simple to highly complex depending on the use of the worker’s skills. Some of the popular methods of job design used are (See figures 5.2): 1.

Work Simplification

2.

Job Rotation

3.

Job Enrichment

4.

Job Enlargement

A discussion of each of these is in order.

5.7.4

Work Simplification

Under this method, the job is simplified by breaking it down into small sub-parts.

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Fig. 5.2 : Aspects of Job Design

Then, each part of the job is assigned to a worker who does the same task over and over again. This enables the worker to gain proficiency and deftness in doing the repetitive task. This increases worker’s productivity, on the one hand, and, in turn, profits, on the other. The training costs of so simplified jobs are virtually nil because very low level of skill is required to do these simplified jobs10. However, due to the repetitive job, workers feel boredom. They tend to remain absent frequently. Boredom also leads to mistakes and accidents. On the whole, the quality and quantity of output gets adversely affected20. Thus, the company may not always reap the benefits of task specialization due to work simplification.

5.7.2

Job Rotation

One solution to boredom, as seen in work simplification, is job rotation’. Job rotation implies the moving of employees from job to job without any change in the job. In case of job rotation, an employee performs different jobs, but of the same nature. The advantages of job rotatin are: (i) It removes boredom (ii) It broadens employee’s knowledge and skill. (iii) Employees become competent in several jobs rather than only one. However, job rotation suffers from certain disadvantages also. (i) Frequent shifting of employees across the jobs causes interruption in the job routine. (ii) Employees may feel alienated when they are rotated from job to job. (iii) The employees who look for more challanging assignments may still feel frustrated.

5.7.3

Job Enlargement

Job enlargement involves adding more tasks to a job. This is a horizontal expansion in a job. By adding more tasks to job, job enlargement expands job scope and gives variety of tasks to the job holder. For example, a mail-sorter’s job could be enlarged to include physically delivering the mail to the various departments in the organization. Job enlargement reduces boredom and monotony by providing the employee more variety of tasks in the job. Thus, it helps increase interest in work and

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49

efficiency. A recent study 21 found that by expanding the scope of job, workers found benefits such as more satisfaction, enhanced customer service, and less errors. It is said that job enlargement removes boredom and contributes to employee motivation. However, the same is not validated in practice. Even with job enlargement, the job could become boring to employee after a time especially when the job was already monotonous . That’s why Frederick Herzberg tempted to say that job enlargement is simply “adding zero to zero”, meaning that “One set of boring tasks (zero) is simply added to another set of boring tasks (zero)”. That is very poossibly the reasons why job enlargement is usually resisted by employees.

5.7.4

Job Enrichment

Another approach to designing motivating jobs is job enrichment. Reasons for job enrichment being installed are varied. As seen earlier, the excessive job specialisation (through job rotation) have been dehumanising the work by making the worker’s job routine, repetitive and removing all challenges from it. As such, human capabilities are not being fully utilised under such conditions and it is creating frustration among the workers and alienating them from their jobs. Moreover, workers today are better educated and higher paid. Job enrichment involves adding motivating factors to job. Thus, job enrichment is a vertical expansion of a job by adding more responsibility and freedom to do it. Fredrick Herzberg 22 et.al. describe job enrichment as that type of improvement in the context of the job which may give a worker more of a challenge, more of a complete task, more responsibility, more opportunity for growth, and more chance to contribute his ideas. Job enrichment increases job depth, which refers to the degree of control employees have over their work. Job enrichment can improve the quality of work output, employee motivation, and satisfaction. Let a real case be quoted. In the Traveller’s Insurance Company, the job of a key operator was enriched to include: (a) Working for one particular department; (b) Communicating directly with user-clients; (c) Checking one’s own quality; (d) Establishing a personal work schedule, and (e) Correcting one’s errors. The result was all-encouraging. (a) An increase in the quantity of output by 31% (b) Decrease in the error rate by 8.5%. (c) Decrease in absenteeism by 3% Job enrichment is founded on the Herzberg’s two factor theory of motivation. Herzberg has outlined the process involved in a job enrichment programme23. This is summarized in Table 5.2. Table. 5.2 : Principles of Job Enrichment Change aimed at enriching jobs 1. 2.

Removing some controls while retaining accountability Increasing the accountability of individuals for own work

Motivation generated by the changes Responsibility and personal achievement Responsibility and recognition

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Change aimed at enriching jobs 3. 4.

5.

6. 7.

Giving a person complete a natural unit of work (Division/area). Granting additional authority to an employee in his activity. Give more job freedom. Making periodic reports directly available to the worker himself rather than to his superior. Introducing new and more difficult tasks not previously handled. Assigning individuals specific or specified tasks enabling them to become experts.

Motivation generated by the changes Responsibility, achievement and recognition Responsibility, achievement and recognition.

Internal recognition

Growth and learning Responsibility, growth and advancement

Source: Frederick Herzberg “One More Time—How Do You Motivate Employees”. Harward Business Review, Jan. Feb., 1968, p.59.

5.8 HOW TO ENRICH JOB? There is no single way of enriching a job. The technology and the circumstances dictate which techniques or combination of techniques could be appropriate. Some of the important techniques followed for enriching job are: 1.

Increasing responsibilities of the employees by adding variety of tasks.

2.

Assigning the employee a complete natural unit of work i.e., reducing task specialisation.

3.

Allowing the employee to set his own standards.

4.

Making the employee directly perform for his work.

5.

Encouraging the participation of employees in planning work, innovating new techniques and reviewing new results.

6.

Introducing new and more difficult and challenging tasks not previously assinged to and handled by the employee.

7.

Removing some controls from while ensuring that individuals are clearly accountable for achieving standards.

8.

Allowing the employee to make crisis decision in problem situations rather than relying on the boss.

According to Edwin B. Flippo 24, the most critical core dimension of job enrichment is that of job autonomy. The autonomy is created through a process of “vertical loading” of job, that is the employee is given self-management rights in multiple areas. In fact, the same is the critical difference between job enrichment and job enlargement. The theory of job enrichment outlined by Flippo is presented in the following figure 5.3. Core Job Dimensions Skill Variety Task Identity Task Significance

Critical Psychological States Experienced Meaning fullness of work.

Personal and work outcomes High interest work performance

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Autonomy

Experienced Responsibility for outcomes of the work

High quality work performance

Feedback

Knowledge of the actual work activities Employee Growth need srtength

High motivation with the work. Low absenteeism and turn over.

Fig. 5.3: Model of job Enrichment

5.9 SUMMARY This summary is organised by the learning objectives given on page...39: 1.

Job analysis is an anatomy of job explaining the activities within a job. While job description refers to the activities and duties performed in a job, job specification specifies the skills and qualification required to perform a job.

2.

Job analysis is useful for human resource planning, recruitment and selection, training and development, placement and orientation, job evaluation, performance appraisal, personnel information, and health and safety.

3.

The main steps involved in job analysis are-collect to data about organisation, select representative jobs, collect data, prepare job description and prepare job specification.

4.

The methods used for data collection for job analysis include—observation method, interview, questionnaire, checklists, critical incidents, diaries and technical conference method.

5.

Job design involves specifying the content of a job, the work methods used in its performance and how the job relates to other jobs in the organisation. The factors that affect job design are classified into organisational, environmental and behavioural factors.

6.

Work simplification, job rotation, job enlargement and job enrichment are the popular techniques of job design

KEY TERMS Autonomy Ergonomics Job Analysis Job Description Job Design

Job Enrichment Job Evaluation Job Rotation Job Specification Orientation

Job Enlargement

REVIEW AND DISCUSSION QUESTIONS 1. Briefly describe the concept of job analysis , and explain the job analysis process. 2. From the human resource manager’s point of view, what are the uses of job analysis? 3. Bring out the factors that affect job design 4. Distinguish between: (a) Job Description and Job Specification (b) Job Enlargement and Job Enrichment (c) Job Analysis and job Design.

(MBA, Gwahati Universtiy, May 2002.)

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5. Discuss the need for and techniques of job enrichment. Can these techniques improve employee motivation? How?

REFERENCES 1. Dale Yoder : Personnel Management and Industrial Relations , Printice Hall of India, New Delhi, 1975, p.86. 2. Jean J. Jones and Thomas A. Decothis: Job Analysis: National Survey Findings, Personnel Journal, October 1969, p. 805. 3. Edwin B. Flippo: Personnel Management, McGrow-Hill, New York, 1984, p. 114. 4. David A. Decenzo and Stephen P. Robbins: Personnel/Human Resource Management, PrinticeHall of India, New Delhi, 1989, p. 79. 5. Michael Armstrong:A Handbook of Personnel Management Practice, Kogan Page, London, 1988, p. 316. 6. Dale S. Beach: Personnel—The Management of People at Work, Macmillan, New York, 1980, p. 169. 7. E.B. Flippo: OP. CIT., 1984, P. 110 8. G.R. Terry: Principles of Management, Richard D. Irwin, Homewood, 1970. 9. Mathis and Jackson: Personnel—Contemporary Perspectives and Applications, West Publishing Co., New York, 1982, p.152. 10. Carrol L. Shartle: Occupational Information,1952, Chapter 2, and Jay L. Ottis and Richard H. Lenhert: Job Evaluation, 1954, Quoted by Edwin B.Flippo: Personnel Management, McGraw Hill, New York, 1984, pp. 120-122. 11. Dale S. Beach: op. cit, 1980, p.172. 12. Mcihael Armstrong : op-cit, 1988, p.101. 13. Mathis and Jackson : OP. CIT., 1982, P .138. 14. Barry Popplewell and Alan Wildsmith : Becoming the Best, Gower, 1988, p.140. 15. William B. Werther and Keith Davis: Human Resources and Personnel Management (Fourth Edition), Mc Graw Hill, New York, 1993, p.148. 16. Ibid, p.149. 17. Fredrick W. Taylor: The Principles of Scientific Management, Harper & Row, New York, 1911. 18. William B. Werther and Keith Davis: op. cit., 1993, p.150. 19. Ibid, p. 151. 20. A.D. Singh: Man Management in Tata Steel : A Collection of Articles, Personnel Division, Tata Iron & Steel Company, Jamshedpour, 1974. 21. Uma Sekaran and R.S. Trafton: The Dimensionality of Jobs—Back to Square One, Twenty First Midwest Academy of Management, 1978, pp. 249-262. 22. Michael A. Campion and Carol L. McClelland: Follow-up and Extension of the Interdisciplinary Costs and Benefits of Enlarged Jobs, Journal of Applied Psychology, June 1993, pp. 339-351. 23. Fredrick Herzberg, B. Mausner and B.B. Snyderman: The Motivation to Work,Wiley, New York, 1959. 24. Fredrick Herzberg: One More Time—How Do you Motivate Employees? Harvard Business Review, Jan-Feb. 1968, p.59. 25. Edwin B. Flipp: op.cit., 1984, p.117.

6 RECRUITMENT Learning Objectives After studying this chapter, you should be able to: 1.

Define recruitment and list the factors that affect recruitment.

2.

Describe different sources of recruitment.

3.

Outline various steps involved in recruitment process.

4.

Highlight the recruitment practices followed in India.

5.

Explain the methods of recruitment.

6.

Indicate the essential attributes of an effective recruitment programme.

Once it is determined what types of jobs in how many numbers are to filled up with what qualification of people, then what next is done is search for people with such qualification. So to say, the next step involved in acquiring human resource is to hire right people in right number for jobs falling vacant. Hiring of people involves three broad groups of activities but not mutually exclusive, viz., recruitment, selection and placement, in that order. While recruitment is discussed in this chapter, selection and placement are considered in the next two chapters 7 and 8 respectively. Recruitment is the first step in the process of filling a vacancy. In this chapter, you will learn the meaning and purpose of recruitment, sources of recruitment, recruitment process, recruitment practices in India, effectiveness of recruitment programme, etc.

6.1 MEANING AND DEFINITION Recruitment is the generating of applications or applicants for specific positions to be filled up in the organisation. In other words, it is a process of searching for and obtaining applicants for jobs so that the right people in right number can be selected. Go through the following definitions of recruitment. These will help you understand the meaning of recruitment in a better manner. According to Dale Yoder, “Recruitment is a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient working force”.1 In the words of Werther and Davis, “Recruitment is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected”2. Flippo3 has defined recruitment as “a process of searching for prospective employees and stimulating and encouraging them to apply for jobs in an organisation”. According to Bergmann and Taylor4, “ Recruitment is the process of locating, identifying, and attracting capable applicants”. Recruitment can now easily be defined as the process of searching for and securing applicants for the various job positions which arise from time to time in the organisation. 53

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6.2 FACTORS AFFECTING RECRUITMENT There are a number of factors that affect recruitment. These are broadly classified into two categories: 1.

Internal Factors

2.

External Factors

These are discussed one by one.

6.2.1

Internal Factors

The internal factors also called endogenous factors are the factors within the organisation that affect recruiting personnel in the organisation. Some of these are mentioned here. 1. Size of the Organisation: The size of an organisation affects the recruitment process. Experience suggests that larger organisations find recruitment less problematic than organisations with smaller in size. 2. Recruiting Policy: The recruiting policy of the organisation i.e., recruiting from internal sources (from own employees) and from external sources (from outside the organisation) also affects recruitment process. Generally, recruiting through internal sourcing is preferred, because own employees know the organisation and they can well fit into the organisation’s culture. 3. Image of Organisation: Image of organisation is another internal factor having its influence on the recruitment process of the organisation. Good image of the organisation earned by a number of overt and covert actions by management, helps attract potential and competent candidates. Managerial actions like good public relations, rendering public services like building roads, public parks, hospitals and schools help earn image or goodwill for the organisation. That is why blue chip companies attract large number of applications. 4. Image of Job: Just as image of organisation affects recruitment, so does the image of a job also. Better remuneration and working conditions are considered the characteristics of good image of a job. Besides, promotion and career development policies of organisation also attract potential candidates.

6.2.2

External Factors

Like internal factors, there are some factors external to organisation which have their influence on recruitment process. Some of these are given below: 1. Demographic Factors: As demographic factors are intimately related to human beings, i.e., employees, these have profound influence on recruitment process. Demographic factors include sex, age, literacy, economic status etc. 2. Labour Market: Labour market conditions i.e., supply and demand of labour is of particular importance in affecting recruitment process. For example, if the demand for a specific skill is high relative to its supply, recruiting employees will involve more efforts. On the contrary if supply is more than demand for a particular skill, recruitment will be relatively easier. In this context, the observation made by I I PM 5 in regard to labour market in India is worth citing: “The most striking feature in the Indian Labour market is the apparent abundance of labour – yet the ‘right type’ of labour is not too easy to find”. 3. Unemployment Situation: The rate of unemployment is yet another external factor having its influence on the recruitment process. When the unemployment rate in a given area is high, the recruitment process tends to be simpler. The reason is not difficult to seek. The number of applicants is expectedly very high which makes easier to attract the best qualified applicants. The reverse is also true. With a low rate of unemployment, recruiting process tends to become difficult.

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4. Labour Laws: There are several labour laws and regulations passed by the Central and State Governments that govern different types of employment. These cover working conditions, compensation, retirement benefits, and safety and health of employees in industrial undertakings. Child Labour (Prohibition and Regulation) Act, 1986, for example, prohibits employment of children in certain employments. Similarly, several other acts such as Employment Exchange (Compulsory Notification of Vacancies) Act, 1959, the Apprentices Act, 1961; the Factory Act, 1948 and the Mines Act, 1952 deal with recruitment. 5. Legal Considerations: Another external factor is legal considerations with regard to employment. Reservation of jobs for the scheduled castes, scheduled tribes, and other backward classes (OBCs) is the popular example of such legal consideration. The Supreme Court of India has given its verdict in favour of 50 per cent of jobs and seats. This is so in case of admissions in the educational institutions also.

6.3 SOURCES OF RECRUITMENT The various sources of recruitment are classified into two broad categories, namely: 1.

Internal sources

2.

External sources.

The sources included under each category are depicted in figure 6.1. Sources of Recriutment

 External Sources

 Internal Sources 1.

Present Employees

1.

Employment Exchanges

2.

Employee Referrals

2.

Advertisements

3.

Former Employees

3.

Employment Agencies

4.

Previous Applicants

4.

Professional Associations

5.

Campus Recruitment

6.

Deputation

7.

Word-of-Mouth

8.

Raiding.

Fig. 6.1: Recruitment Sources

6.3.1

Internal Sources

1. Present Employees: Promotions and transfers from among the present employees can be a good source of recruitment. Promotion implies upgrading of an employee to a higher position carrying higher status, pay and responsibilities. Promotion from among the present employees is advantageous because the employees promoted are well acquainted with the organisational culture, they get motivated, and it is cheaper also. Promotion from among present employees also reduces the requirement for job training 6. However, the disadvantage lies in limiting the choice to a few people and denying hiring of outsiders who may be better qualified and skilled. Furthermore, promotion from among present employees also results in inbreeding which creates frustration among those not promoted.

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Transfer refers to shifting an employee from one job to another without any change in the position/post, status and responsibilities. The need for transfer is felt to provide employees a broader and varied base which is considered necessary for promotions. Job rotation, as discussed in the previous chapter, involves transfer of employees from one job to another on the lateral basis. 2. Former Employees: Former employees is another source of applicants for vacancies to be filled up in the organisation. Retired or retrenched employees may be interested to come back to the company to work on a part-time basis. Similarly, some former employees who left the organisation for any reason, may again be interested to come back to work. This source has the advantage of hiring people whose performance is already known to the organisation. 3. Employee Referrals: This is yet another internal source of recruitment. The existing employees refer their family members, friends and relatives to the company as potential candidates for the vacancies to be filled up in the organisation. This source serves as one of the most effective methods of recruiting people in the organisation because employees refer to those potential candidates who meet the company requirements known to them from their own experience. The referred individuals are expected to be similar in type in terms of race and sex, for example, to those who are already working in the organisation. 4. Previous Applicants: This is considered as internal source in the sense that applications from the potential candidates are already lying with the organisation. Sometimes, the organisations contact through mail or messenger these applicants to fill up the vacancies particularly for unskilled or semiskilled jobs.

Evaluation of Internal Source Let us try to evaluate the internal source of recruitment. Obviously, it can be done in terms of its advantages and disadvantages. The same are spelled out as follows: Advantages : The advantages of the internal source of recruitment include the following: 1. Familiarity with own Employees: The organisation has more knowledge and familiarity with the strengths and weaknesses of its own employees than of strange and unknown outsiders. 2. Better Use of the Talent: The policy of internal recruitment also provides an opportunity to the organisation to make a better use of the talents internally available and to develop them further and further. 3. Economical Recruitment: In case of internal recruitment, the organisation does not need to spend much money, time and effort to locate and attract the potential candidates. Thus, internal recruitment proves to be economical, or say, inexpensive. 4. Improves Morale: This method makes employees sure that they would be preferred over the outsiders as and when vacancies will be filled up in their organisation. 5. A Motivator: The promotion through internal recruitment serves as a source of motivation for employees to improve their career and income. The employees feel that organisation is a place where they can build up their life-long career. Besides, internal recruitment also serves as a means of attracting and retaining competent employees in the organisation. Disadvantages: The main drawbacks associated with internal recruitment are as follows: 1. Limited Choice: Internal recruitment limits its choice to the talent available within the orgnisation. Thus, it denies the tapping of talent available in the vast labour market outside the organisation. Moreover, internal recruitment serves as a means for “inbreedng”, which is never healthy for the future of the organisation.

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2. Discourages Competition: In this system, the internal candidates are protected from competition by not giving opportunity to otherwise competent candidates from outside the organisation. This, in turn, develops a tendency among the employees to take promotion without showing extra performance. 3. Stagnation of Skills: With the feeling that internal candidates will surely get promoted, their skill in the long run may become stagnant or obsolete. If so, the productivity and efficiency of the organisation, in turn, decreases. 4. Creates Conflicts: Conflicts and controversies surface among the internal candidates, whether or not they deserve promotion.

6.3.2

External Sources

External sources of recruitment lie outside the organisation. These outnumber internal sources. The main ones are listed as follows: 1. Employment Exchanges: The National Commission on Labour (1969) observed in its report that in the pre-Independance era, the main source of labour was rural areas surrounding the industries7. Immediately after Indpendence, National Employment Service was established to bring employers and job seekers together. In response to it, the compulsory Notification of Vacancies Act of 1959 (commonly called Employment Exchange Act) was instituted which became operative in 1960. Under Sectin 4 of the Act, it is obligatory for all industrial establishments having 25 workers or more, to notify the nearest employment exchange of vacancies(with certain exceptions) in them, before they are filled. The main functions of these employment exchanges with their branches in most cities are registration of job seekers and their placement in the notified vacancies. It is obligatory for the employer to inform the outcome of selection within 15 days to the employment exchange. Employment exchanges are particularly useful in recruiting blue-collar, white-collar and technical workers. A study conducted by Gopalji 8 on 31organisations throughtout the country also revealed that recruitment through employment exchanges was most preferred for clerical personnel i.e., white-collar jobs. 2. Employment Agencies: In addition to the government agancies, there are a number of private employment agencies who register candidates for employment and furnish a list of suitable candidates from their data bank as and when sought by the prospective employers. ABC Consultants, Datamatics, Ferguson Associates, S B Billimoria, etc. are the popular private employment agencies in our country. Generally, these agencies select personnel for supervisory and higher levels. The main function of these agencies is to invite applications and short list the suitable candidates for the organisation. Of course, the final decision on selection is taken by the representatives of the organisation. At best, the representatives of the employment agencies may also sit on the panel for final selection of the candidates. The employer organisations derive several advantages through this source. For example, this method proves cheaper than the one organisations recruiting themselves. The time saved in this method can be better utilized elsewhere by the organisation. As the organisatonal identity remains unknown to the job seekers, it, thus, avoids receiving letters and attempts to influence. However, there is always a risk of loosing out in screening process done by the agencies, some applicants whom the representatives of the organisation would have liked to meet and select. 3. Advertisement: Advertisement is perhaps the most widely used method for generating many applications. This is because its reach is very high. This method of recruitment can be used for jobs like clerical, technical and managerial. The higher the position in the organisation, the more specialized the skills, or the shorter the supply of that resource in the labour market, the more widely dispersed the advertisements is likely to be. For example, the search for a top executive might include advertisements in a national daily like ‘The Hindu’.

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Some employers / companies advertise their posts by giving a post box number or the name of some recruiting agency. This is done to particularly keep own identity secret to avoid unnecessary correspondence with the applicants. However, the disadvantage of this blind ad, i.e., post box number is that the potential job seekers are hesitant to apply without knowing the image of the organisation, on the one hand, and the bad image/reputation that blind ads have received because of organisations that place such advertisements without positions lying vacant just to know the supply of labour/workers in the labour market, on the other. While preparing advertisement, lot of care has to be taken to make it clear and to the point. It must ensure that some self-selection among applicants takes place and only qualified applicants respond to the advertisement. For this, advertisement copy should be prepared by using a four-point guide called AIDA. The letters in the acronym denote that advertisement should attract Attention, gain Interest, arouse a Desire and result in Action. However, not many organisations mention complete details about job positions in their advertisements. What happens is that ambiguously worded and broad-based advertisements may generate a lot of irrelevant applications which would, by necessity, increase the cost of processing them. Here, the findings of a study 10 of 496 recruitment advertisements published in The Hindu during 1981 seem worth mentioning. It was found that 33.6% of public sector advertisements and 20.7% of private sector advertisements provided necessary information about job possibilities, tasks and reporting relationships. As far as compensation was concerned, more of the public sector organisations provided information about pay packets rather than the private sector organisations (71.2% as against 29.4%). Another interesting feature showed that all public sector organisations provided information on minimum qualifications while only 18.3% of private sector organisations offered this information. Finally, only 5.6% of the public and 1.1% of the private organisations provided information on selection process. 4. Professional Associations: Very often, recruitment for certain professional and technical positions is made through professional associations also called ‘headhunters’. Institute of Engineers, Indian Medical Association, All Indian Management Association, etc., provide placement services for their members. For this, the professonal assocations prepare either list of job seekers or publish or sponsor journals or magazines containing advertisements for their members. The professional associations are particularly useful for attracting highly skilled and professional personnel11. However, in India, this is not a very common practice and those few that provide such kind of service have not been able to generating a large number of applications. 5. Campus Recruitment: This is another source of recruitment. Though campus recruitment is a common phenomenon particularly in the American organisations, it has made its mark rather recently. Of late, some organisations such as HLL, HCL, L &T, Citi Bank, ANZ Grindlays, Motorola, Reliance etc. , in India have started visiting educational and training institutes/campuses for recruitment purposes. Examples of such campuses are the Indian Institutes of Management, Indian Institutes of Technology and the University Departments of Business Management. For this purpose, many institutes have regular placement cells/offices to serve as liaison between the employers and the students.Tezpur Central University has one Deputy Director (Training and Placement) for the purposes of campus recruitment and placement. The method of campus recruitement offers certain advantages to the employer organisations. First, the most of the candidates are available at one place; Second, the interviews are arranged at short notice; Third, the teaching faculty is also met; and Fourth, it gives them opportunity to sell the organisation to a large student body who would be graduating subsequently. However, the disadvantages of this type of recruitment are that organisations have to limit their selection to only “entry” positions and they interview the candidates who have similar education and experience, if at all. 6. Deputation: Another source of recruitment is deputation, i.e., sending an employee to another organisation for a short duration of two to three years. This method of recruitment is practiced, in a pretty manner, in the Govertnment Departments and public sector organisations. Deputations is

Recruitment

59

useful because it provides ready expertise and the organisation does not have to incur the initial cost of induction and training. However, the disadvantage associated with deputation is that the deputation period of two/three years is not long enough for the deputed employee to prove his/her mettle, on the one hand, and develop commitment with the organisation to become part of it, on the other13. 7. Word-of-Mouth: Some organisations in India also practice the ‘word-of-mouth’ method of recruitment. In this method, the word is passed around the possible vacancies or openings in the organisation. Another form of word-of-mouth method of recruitment is “employee-pinching” i.e., the employees working in another organisation are offered an attractive offer by the rival organisations. This method is economic, both in terms of time and money. Some organisations maintain a file of the applications and bio-data sent by job-seekers. These files serve as very handy as and when there is vacancy in the organisation. The advantage of this method is no cost involved in recruitment. However, the drawbacks of this method of recruitment are non-availability of the candidate when needed and the choice of candidates is restricted to a too small number. 8. Raiding or Poaching: Raiding or poaching is another method of recruitment whereby the rival firms by offering better terms and conditions, try to attract qualified employees to join them. This raiding is a common feature in the Indian organisations. For example, several executives of HMT left to join Titan Watch Company, so also exodus of pilots from the Indian Airlines to join private air taxi operators. Whatever may be the means used to raid rival firms for potential candidates, it is often seen as an unethical practice and not openly talked about. In fact, raiding has become a challenge for the human resource manager. Besides these,, walk-ins, contractors, radio and television, acquisitions and mergers, etc., are some other sources of recruitment used by organisations.

Evaluation of External Sources Like internal sources of recruitment, external sources are mixed of advantages and disadvantages. The following are the main advantages: 1. Open Process: Being a more open process, it is likely to attract large number of applicants/ applications. This, in turn, widens its options of selection. 2. Availability of Talented Candidates: With large pool of applicants, it becomes possible for the organisation to have talented candidates from outside. Thus, it introduces new blood in the organisation. 3. Opportunity to Select the Best Candidates: With large pool of applicants, the selection process becomes more competitive. This increases prospects for selecting the best candidates. 4. Provides Healthy Competition: As the external members are supposed to be more trained and efficient. With such a background, they work with positive attitude and greater vigour. This helps create healthy competition and conducive work environment in the organisation. However, the external sources of recruitment suffer from certain disadvantages too: These are: 1. Expensive and Time Consuming: This method of recruitment is both expensive and time consuming. There is no guarantee that organisation will get good and suitable candidates. 2. Unfamiliarity with the Organisation:As candidates come from outside the organisation, they are not familiar with the tasks, job nature and the internal scenario of the organisation. 3. Discourages the Existing Employees:Existing employees are not sure to get promotion. This discourages them to work hard. This, in turn, boils down to decreasing productivity of the organisation. Now the question arises is: Where from can an organisation recruit potential job seekers? Table 6.1 offers some guidance. The source that is used should reflect the local labour market, the type or level of position, and the size of the organisation14.

60

Human Resource Management Table 6.1: Major Sources of Potential Job Candidates

SOURCE

ADVANTAGES

DISADVANTAGES

Internal search

Low cost; builds employee morale; candidates are familiar with organization

Limited supply; may not increase proportion of employees from protected groups

Advertisements

Wide distribution; can be targeted to specific groups

Generates many unqualified candidates

Employee referrals

Knowledge about the organization provided by current employee, can generate strong candidates because a good referral reflects on the recommender

May not increase the diversity and mix of employees

Public employment agencies

Free or nominal cost

Candidates tend to be unskilled or minimally trained

Private employment agencies

Wide contacts; careful screening; short-term guarantees often given

High cost

Campus / School placement

Large, centralized body of candidates

Limited to entry level positions

Temporary help services

Fills temporary needs

Expensive; may have limited understanding of organization’s overall goals and activities

According to Flippo, the present tendency among most business firms is to “home grow” their executive leaders15. Similarly, Koontz and O’Donnel rightly observe that the policy should be to “raise” talent rather than “raid” for it16.

6.4 RECRUITMENT PROCESS As was stated in the beginning of the chapter, recruitment is the process of locating, identifying, and attracting capable applications for jobs available in an organisation. Accordingly, the recruitment process comprises the following five steps17. (i) Recruitment Planning (ii) Strategy Development (iii) Searching (iv) Screening (v) Evaluation and Control These are depicted in Figure 6.2.

Recruitment

61

Personnel Planning

Job Analysis

Job Vacancies

Recruitment Planning –Numbers –Types

Searching Activation “Selling” –Message –Media

Strategy Development –Where –How –When

Applicant Population

Employee Requisition

Applicant Pool

Screening

Potential Hires

To Selection

Evaluation and Control

Fig. 6.2 : Recruitment Process

Source: Herbert G. Herman III et. al.: Personnel/Human Resource Management, Homewood, 1986, p. 226. Now, a brief description of these follows:

Recruitment Planning The first step involved in the recruitment process is planning. Here, planning involves to draft a comprehensive job specification for the vacant position, outlining its major and minor responsibilities; the skills, experience and qualifications needed; grade and level of pay; starting date; whether temporary or permanent; and mention of special conditions, if any, attached to the job to be filled 17.

Strategy Development Once it is known how many with what qualifications of candidates are required, the next step involved in this regard is to devise a suitable strategy for recruiting the candidates in the organisation. The strategic considerations to be considered may include issues like whether to prepare the required candidates themselves or hire it from outside, what type of recruitment method to be used, what geographical area be considered for searching the candidates, which source of recruitment to be practiced, and what sequence of activities to be followed in recruiting candidates in the organisation.

Searching This step involves attracting job seekers to the organisation. There are broadly two sources used to attract candidates. These are: 1.

Internal Sources, and

2.

External Sources

These have been just discussed, in detail.

Screening Though some view screening as the starting point of selection, we have considered it as an integral part of recruitment. The reason being the selection process starts only after the applications have been screened and shortlisted. Let it be exemplified with an example.

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Human Resource Management

In the Universities, applications are invited for filling the post of Professors. Applications received in response to invitation, i.e., advertisement are screened and shortlisted on the basis of eligibility and suitability. Then, only the screened applicants are invited for seminar presentation and personal interview. The selection process starts from here, i.e., seminar presentation or interview. Job specification is invaluable in screening. Applications are screened against the qualification, knowledge, skills, abilities, interest and experience mentioned in the job specification. Those who do not qualify are straighway eliminated from the selection process. The techniques used for screening candidates vary depending on the source of supply and method used for recruiting. Preliminary applications, de-selection tests and screenng interviews are common techniques used for screening the candidates.

Evaluation and Control Given the considerable cost involved in the recruitment process, its evaluation and control is, therefore, imperative. The costs generally incurred in a recruitment process include 18. (i) salary of recruiters; (ii) cost of time spent for preparing job analysis, advertisement, etc.; (iii) administrative expenses; (iv) cost of outsourcing or overtime while vacancies remain unfilled; and (v) cost incurred in recruiting unsuitable candidates. In view of above, it is necessary for a prudent employer to try to answer certain questions like: whether the recruitment methods are appropriate and valid? and whether the recruitment process followed in the organisation is effective at all or not? In case the answers to these questions are in negative, the appropriate control measures need to be evolved and exercised to tide over the situation. However, such an exercise seem to be only rarely carried out in practice by the organisations/ employers. Having discussed recruitment process, it will be now relevant to have an idea about recruitment practices in India. The following section delineates the same.

6.5 RECRUITMENT PRACTICES IN INDIA The Indian firms practice not a single source of recruitment, but a host of sources of recruitment. These have been classified20 as within the organisation, badli or temporary workers, employment agencies, casual callers, applicants introduced by the existing employees in the organisation, advertisements and labour contractors. According to a research study 21, the following practices were employed in the public and private sector organisations to recruit their employees: Recruitment in Public Sector. The major sources of recruitment practised in the public sector organisations in order of preference were: (i) Employment exchanges (ii) Advertisements (iii) Internal sources (through promotion and transfer) (iv) Casual employment seekers (v) Displaced persons (vi) Employees relatives and friends Recruitment in Private Sector . In private sector organisations, procedures and methods in regard to recruitment were not formalised. As such, each private sector employer followed its own method. Nonetheless, the following methods were found popular in their hierarchical order of importance:

Recruitment

63

(i) Advertisements (ii) Employment exchanges (iii) Relatives and friends of existing employees and their recommendations (iv) Internal sources through promotion and transfers (v) Casual callers As regards recruitment practices in the Government organisations, they follow, by and large, public recruitment policies viz., employment exchanges in recruiting lower-level semi-skilled jobs. Advertisements are used for filling the higher-level jobs. These are filled either through promotion from internal sources or through deputation from other organisations. Cadre build vacancies such as IAS, IFS, IPS etc., are filled through competitive examinations through advertisement. ‘Sons of the Soil’ Claim. In recent years, a controversy has arisen about claims of ‘sons of the soil’ for preference in recruitment. As per this claim, the vacancies of an organisation must be first offered to suitable hands hailing from the immediate vicinity of the organisation. However, in this connection, the National Commissin on Labour22 has observed and studied this claim and then recommended the following: 1.

Young persons from families who surrendered their lands for establishing the organisation must be given first priority for employment with proper training, wherever required.

2.

Second preference is given to suitable hands hailing from immediate vicinity of the organisation.

3.

Selection committee be formed with a representative of state government for filling up vacancies of lower level jobs.

4.

Middle and higher level appointments be supervised by the Public Service Commission.

5.

State participation must be ensured in the Board of Directors.

6.

Periodic return on status of employment be submitted to the central and state governements.

Table 6.2 bears out the recruitment practices followed in India23. Table 6.2: Recruitment Practices in India

SI.

Method of Recruitment

No

Types of Jobs White Blue

Percentage of Firms

Both Total

Method Method used not used

1.

Public employment agencies

2.

Private employment agencies

3.

Direct hiring at gate

4.

—

—

36

36

100%

NIL

6

—

—

6

17%

83%

—

22

—

22

61%

39%

Nomination by present

1

4

17

22

61%

39%

5.

College/Universities

7

—

—

7

20%

80%

6.

Advertisement

—

—

32

32

89%

11%

7.

Productivity/Training centres

4

—

—

4

11%

89%

8.

Personal Applications

1

—

29

30

83%

17%

(unsolicited)

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Human Resource Management

6.6 METHODS OF RECRUITMENT Recruitment methods refer to the means by which an organisation reaches to the potenetial job seekers. In other words, these are ways of establishing contacts with the potential candidates.It is important to mention that the recruitment methods are different from the sources of recruitment. The major line of distinction between the two is that while the former is the means of establishing links with the prospective candidates, the latter is location where the prospective employees are available. Dunn and Stephen 24 have broadly classified methods of recruitment into three categories. These are: 1.

Direct Method

2.

Indirect Method

3.

Third Party Method.

A brief description of these follows in seriatim. Direct Method: In this method, the representatives of the organisation are sent to the portential candidates in the educational and training institutes. They establish contacts with the candidates seeking jobs. These representatives work in cooperation with placement cells in the institutions. Persons pursuing managment, engineering, medical etc. programmes are mostly picked up in this manner. Sometimes, some employer firms establish direct contact with the professors and solicit information about students with excellent academic records. Sending the recruiter to the conventions, seminars, setting up exhibits at fairs and using mobile office to go to the desired centres are some other methods used to establish direct contact with the job seekers. Indirect Methods: Indirect methods include advertisements in news papers, on the radio and television, in professional journals, technical magazines etc. This method is useful when (i) organisation does not find suitable candidates to be promoted to fill up the higher posts 25, (ii) when the organisation wants to reach out to a vast territory, and (iii) when organisation wants to fill up scientific, professional and technical posts26. The experience suggests that the higher the position to be filled up in the organisation, or the skill sought by the more sophisticated one, the more widely dispersed advertisement is likely to be used to reach to many suitable candidates. Sometimes, many organisations go for what is referred to as blind advertisement in which only Box No. is given and the identity of the organisation is not disclosed. However, organisations with regional or national repute do not usually use blind advertisements for obvious reasons. While placing an advertisement to reach to the potential candidates, the following three points need to be borne in mind: 

First, to visualise the type of the applicant one is trying to recruit.



Second, to write out a list of the advnatages the job will offer.



Third, to decide where to run the advertisement, i.e., newspaper with local, state, nation-wide and international reach or circulation.

Third Party Methods: These include the use of private employment agencies, management consultants, professional bodies/associations, employee referral/recommendations, voluntary organisations, trade unions, data banks, labour contractors etc., to establish contact with the jobseekers. Now, a question arises: which particular method is to be used to recruit employees in the organisation? The answer to it is that it will depend on the policy of the particular firm, the position of the labour supply, the Government regulations in this regard and agreements with labour organisations. Notwithstanding, the best recruitment method is to look first within the organisation.

Recruitment

65

6.7 EFFECTIVENESS OF RECRUITMENT PROGRAMME One last mention about the effectiveness of recruitment programme before we end this chapter. Though there has so far not been evolved any formula as such that makes a recruitment programme effective. However, a successful and effective recruitment programme necessitates to have certain attributes such as: 

A well-defined recruitment policy.



A proper organisational structure.



A well-laid down procedure for locating potential job seekers.



A suitable method and technique for tapping and utilizing these candidates.



A continuous assessment of effectiveness of recruitment programme and incorporation of suitable modifications from time to time to improve the effectiveness of the programme.



An ethically sound and fool-proof practice telling an applicant all about the job and its position, the firm to enable the candidate to judiciously decide whether or not to apply and join the firm, if selected.

6.8 SUMMARY This summary is organised by the learning objectives given on page....51: 1.

Recruitmnent is the process of searching for and attracting applicants for the various job positions which arise from time to time in the organisation. Both internal and external factors affect recruiting employees in the organisation.

2.

There are two sources of recruitment — internal (consisting of promotion and transfer of existing employees) and external (consisting of recruitment form outside the organisation).

3.

Recruitment process involves five steps — recruitment planning, strategy development, searching, screening, and evaluation and control.

4.

The recruitment practices the Indian organisations follow include existing employees, employment exchanges, advertisement, casual callers, friends and relatives of the existing employees, badli or temporary workers, labour contractors, displaced employees, etc.

5.

There are three methods of recruitment by which organisations establish contact with the potential candidates — direct method, indirect method and third party mehod.

6.

A well-defined recruitment policy, proper organisational structure, continuous assessment of recruitment programme, etc., are the attributes of an effective recruitment programme.

KEY TERMS Advertising

Raiding

External Sources

Recruitment

Headhunters

Screening

Internal Sources

Transfer

Promotion

REVIEW AND DISCUSSION QUESTIONS 1. Define recruitment. Bring out the factors that influence recruitment. 2. What are the various sources of recruitment? Discuss their relative merits and demerits.

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Human Resource Management

3. If you were a personnel officer in a scientific institution and asked to recruit scientists, which source of recruitment you will use for this purpose and why? (MBA, Gauhati University, May 2002) 4. Explain the recruitment process. 5. Distinguish between different methods of recruitment. Which method, in your opinion, will be more suitable to recruit a higher post like production manager? 6. Write a note on recruitment practices followed in the Indian organisations-both public and private sector organisations. 7. What are the key attributes that make a recruitment programme effective? 8. Write short notes on: (a) Blind Advertisement (b) Raiding of Employees (c) Direct Method of Recruitment (d) Screening

REFERENCES 1. Dale Yoder and Others: Personnel Management and Industrial Relations , Printice Hall of India, New Delhi, 1975, p. 63. 2. William B. Werther and Keith Davis: Human Resources and Personnel Management, Fourth Edition, Mc Graw-Hill, New York, 1993, p. 195. 3. Edwin B. Flippo: Personnel Management, Sixth Edition Mc-Graw Hill, New York, 1984, p. 131. 4. Thomas J. Bergmann and M.S. Taylor: College Recruitment: What Attracts students to organisations? Personnel, May-June 1984, pp. 34-46. 5. Sujit Sen and Sailendra Saxena: Managing Knowledge Workers, Personnel Today, Vol. XVIII, No. 4, Jan-March 1997. 6. Arun Monappa and Mirza S. Saiyadain: Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, Second Edition, 1996, p. 134. 7. Cited by Mirza S. Saiyadain: Human Resources Management, Tata McGraw- Hill Publishing Company Limited, New Delhi, 1988, p. 65. 8. Gopalji: Recruitment Practices in Indian Manufacturing Industries, Productivity, 1983, 14 (1), pp. 51-56. 9. David A. Decenzo and Stephen P. Robbins: Personnel/Human Resource Management, PrinticeHall of India Private Limited, New Delhi, Fourth Edition, 1996, p.123. 10. D.A. Ramasubramaniam and P. Sridevi: Recruitment Advertising, Indian Management, Vol. 23, No .8, 1984, pp.33-38. 11. Terry L.Leap amd Michael D. Crino: Personnel/Human Resource Management, Macmillan, New York, 1990, p. 190. 12. R.P. Siedel and G.N. Powell: On the Campus: Matching Graduates with Jobs, Personnel, Vol. 60, No.4, 1963, pp. 66-67. 13. Arun Monappa and Mirza S. Saiyadain: op. cit., 1996, p. 134. 14. Stephen P. Robbins and Mary Coulter: Management, Printice-Hall of India Private Limited, New Delhi, 1998, Fifth Edition, p.380.

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67

15. Edwin B. Flippo: op.cit., 1984, p.131. 16. Koontz and O’Donnel: Principles of Management, Mc Graw-Hill Book Co., New York, 1972, p. 418. 17. Herbert G. Herman III et. al.: Personnel/Human Resource Management, Homewood, 1986, p.226. 18. Tim Hannagan: Management: Concepts & Practices, Macmillan India Limited, New Delhi, 1997, p.302. 19. Ian Beandwell and Len Holden: Human Resource Management, Macmillan India Ltd., New Delhi, 1996, p. 208. 20. Indian Institute of Personnel Management: Personnel Management in India, Calcutta, 1973, p. 221. 21. M.N. Rudrabasavaraj: Personnel Administration Policies in India, V.M.N. Institute of Cooperative Management, Pune, 1969, pp.105-107. 22. Report of the National Commission on Labour, New Delhi, ,1969. 23. P. Sethirmadhavan and Kuldeep Singh: Sprucing up the Organisation, Indian Management, December 1997. 24. J.D. Dunn and E.C. Stephens: Management Personnel: Manpower Management and Organisational Behaviour, McGraw-Hill Book Co., New York, 1972, p.99. 25. I.I.P.M.: op. cit., 1973, p. 221. 26. French Wendell: The Personnel Management Process, Houghton Mufflin, Boston, 1974, p. 259.

7 SELECTION Learning Objectives After studying this chapter, you should be able to: 1.

Define selection and appreciate the need for scientific selection.

2.

Discuss the steps involved in selection process.

3.

Explain the methods of selection.

Selection starts where recruitment ends. Or say, selection follows recruitment. Having identified the potential candidates, the next logical step in the human resource process is selection of the qualified and competent candidates in the organisation. Due attention needs to be given to selection as it establishes the ‘best fit’ between job requirements and the candidate’s qualification. Mismatch between the two can have a far-reaching impact on the organisational functioning. This is the premise why this chapter is devoted to a detailed explanation of selection with its various aspects. Let us begin with understanding the meaning and definition of selection.

7.1 MEANING AND DEFINITION What is selection? Selection is hiring the best candidate from the pool of applications. It refers to the process of offering jobs to one or more applicants/candidates from the applications received through recruitment. In other words, it is the process of picking the suitable candidates from the pool of job applications to fill various jobs in the organisation. Following are some of the popular definitions of selection: According to Yoder1, “Selection is the process by which candidates for employment are divided into class — those who will be offered employment and those who will not”. David and Robbins2 have defined selection as a “managerial decision-making process as to predict which job applicants will be successful if hired”. In the opinion of Koontz 3et.al, “Selection is the process of choosing from among the candidates from within the organisation or from the outside, the most suitable person for the current position or for the future position.” According to Stone4, “Selection is the process of differentiating between applicants in order to identify (and hire) those with a greater likelyhood of sucess in a job”. Now, selection can be defined as a process of choosing the most suitable candidates from applicants for the various jobs in the organisation. It seeks to ensure which applicants will be successful if hired. Thus, selection is an exercise in prediction.

7.1.1

Selection Differs from Recruitment

Recruitment and selection are often considered as synonymous and are used interchangeably. They are the two sides of the same coin, there exists a fine distinction between the two. How selection differs from recruitment is neatly brought out in the Table 7.1. 68

Selection

69 Table 7.1: Distinction between Recruitment and Selection

Recruitment

Selection

1.

Recruitment technically precedes selection.

Selection follows recruitment.

2.

Recruitment refers to the process of identifying and encouraging potential candidates to apply for jobs in the organisation.

Selection involves choosing the best out of those recruited.

3.

Recruitment is positive as it aims at increasing the number of job seekers (applications) for wider choice or increasing the selection ratio.

Selection, on the other hand, is said to be negative in its application inasmuch as it rejects a large number of unqualified applicants in order to identify those who are suitable for the jobs.

4.

In sum, recruitment involves searching

Selection involves comparing those already searched.

7.2 NEED FOR SCIENTIFIC SELECTION There is no denying of the fact that it is people only working in the organisations who make all the difference. Hence, choosing the right person for the job is critical to the organisation’s success. Faulty selection or choice can have a far-reaching impact on the organisational functioning and performance. Wrong or inappropriate selection is not welcome because it proves costly to the organisation, demoralises the employees put in the wrong job and also demotivates to the rest of the work force5. Given the selection function littered with human complexity, having a fail-proof method of selection is just impossible. The perfect match between the employee and the job is not always possible. Nonetheless, scientific methods of selection for establishing better fit between the two are of immense importance. The need for scientific methods of selection is appreciated by three basic reasons: No matter how scientific the method of selection, some mistakes invariably occur while making selections. Studies report that any selection decision can result in four possible outcomes6 as shown in the following figure 7.1 False Performance Criteria

1.

Negtive

True

Error

Positive

(A)

(c)

True

False Positive

Negative

Error (D)

(B) Selection Criteria Fig. 7.1: Selection Decision Outcomes.

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Human Resource Management

In the Figure 7.1, A refers to those who were rejected but who would have been successful had they been selected. This is termed ‘False negative error’ In case of ‘false positive error’ (D), those are selected who subsequently perform poorly on the job. B i. e., ‘true negatives’ and C i.e., ‘true positives’ contrast with A and D. B and C refer respectively to those who are rightly rejected and rightly accepted. The objective of a scientific method of selection is to reduce the number of false negatives (A) and false positives (D). 2.

In either cases A and D, selection proves costly to the organisation. False negative error historically means that the costs in performing selection activities will increase. Similarly, false positive error have very obvious costs to the organisation. These may include the cost of training the employee, the costs generated(or profits forgone) due to the employee’s poor performance, the cost of severence, and the subsequent costs of further recruiting and selection screening7.

3.

Organisations are social systems.They cannot exist in isolation. In order to communicate to the society about its image and impartiality, organisations need to have an objective system/ method of selection. This helps the organisation attract the most qualified and competent candidates to it. So much so, the Constitution of India makes it obligatory to specially state employment agencies to be impartial and objective while selecting candidates for filling vacancies in them. Here clause 1 and 2 of Article 16 of the constitution are worth citing.

Article 16, Clause 1 There shall be equality of opportunity for all citizens in matters relating to employment and appointment to any office under the state.

Article 16, Clause2 No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be uneligible for or discriminated against in respect of any employment or office under the state.

7.3 SELECTION METHODS / PROCESS There is no single universally accepted selection process followed by all organisations. The selection process is likely to vary from organisation to organisation depending upon the nature of jobs and organisation. Notwithstanding, following are the steps involved in a standard selection process: 1.

Preliminary Interview

2.

Application Blank

3.

Selection Tests

4.

Selection Interview

5.

Reference Checks

6.

Physical Examination

7.

Final Selection

These are discussed one by one.

7.3.1

Preliminary Interview

Preliminary interview follows screening which was discussed in the previous chapter. Like screening, the purpose of the preliminary interview is to eliminate unsuitable or unqualified candidates from the selection process. In screening unqualified candidates are eliminated on the basis of information given in the application form, whereas preliminary interview rejects misfits for reasons, which did not

Selection

71

appear in the application forms. Due care needs to be taken to ensure that the weeding out process does not lead to the elimination of desirable candidates.Obviously, preliminary interviews should be conducted by someone who inspires confidence, who is genuinely interested in people and whose judgement in the adjudging of applicants is fairly reliable. Besides, the interviewer should be courteous, kind and receptive. He/she should not appear brusque or impatient. That is precisely the reason, preliminary interview is also called ‘courtesy interview’.

7.3.2

Application Blanks

Application blank is the commonest device for getting information from a prospective candidate. Almost all organisations require job seekers to fill up an application. This serves as a personal record of the candidate bearing personal history profile, detailed personal activities, skills and accomplishments. Accordingly,the following data is generally called on from the applicant through application blank: (a) Biographical Information: It includes name, father’s name, age, sex, nationality, height, marital status, identification mark and number of dependents. (b) Educational Information: These cover candidate’s academic qualification, courses, year of passing, subjects offered, percentage of marks, division, names of the educational institutions, training acquired, scholarship, etc. (c) Work Experience: It includes positions held, name of the employer, nature of job, salary, duration of various assignments, reasons for leaving the present job, membership of professional bodies, etc. (d) Salary: It refers to the minimum salary accetable and minimum joining period required. (e) Extra Curricular Information: It covers information like participation in games, level of participation, prizes won. dramas, debates, NSS, NCC, hobbies, etc. (f) References: It includes the names of (two or three) referees who know the character, work and abilities of the candidate. However, empirical evidences8 report a very slight relationship between references and performance measures. Besides inaccurate facts, this can also be attributed to the referee’s inability to assess and describe the candidate, and his limited knowledge about him. The questions inserted in the question blank should be valid. Superfluous questions should be avoided. The information supplied by the candidate in the application blank should be authentic and verifiable. In case of false information given, the selection of the candidate, if selected, should stand cancelled. A specimen of the Application Blank is given as follows:

DEPARTMENT OF TELECOMMUNICATIONS Office of the Telecom. District Manager: Mahabubnagar-509050 No. E. 1-9/MD-Rectt/TDM-MBN/99-2000/83 tddtd. at MBN 12-06-2000 NOTIFICATION Sub:- Recruitment to the Cadre of Motor Drivers. It is proposed to recruit Motor Drivers to work in the jurisdiction of Mahabubnagar Telecom. District to fillup the vacancies from the Departmental/Outside candidates.

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Applications are invited from the eligible candidates (in the prescribed proforma) so as to reach this office positively by 25-7-2000. Vacancies : Departmental Quota: OC-1, SC/ST-Nil, Total-1, Outside Quota: OC-1, SC/ST-Nil, Total-1 Scale of Pay: Rs. 3050-75-3950-80-4590/Age : Between 21 and 30 years (Relaxable upto 42 years for Departmental candidates and upto 47 years in respect of SC/ST candidates and Upper Age limit is also relaxable by three(3) years in respect of OBC candidates). Educational and Other Qualifications: (a) Essential : Abillity to read and write Local languages and to make simple arithmetical calculations, should be free from defective hearing and colour/night blindness. (Doctor’s certificate should be enclosed). (b) Desirable :Middle standard Pass, should have knowledge in linked languages i.e. English/ Hindi. (c) Licence : They should be in possession of a valid Driving Licence for Light and Heavy Motor Vehicles. (d) Experience : They should have at least four (4) years Driving Experience of Light and Heavy Motor Vehicles provided that the candidate should have at least one year experience of driving Heavy motor vehicles. (e) Eligibility : All Group ‘C’ and Group ‘D’ officials having three (3) years of Regular Service in the eligible cadre in the Unit of recruitment and whose pay scale is lower than that of Drivers. (f) Selection : Selection shall be made from amongst the candidates possessing the above qualifications and Licence on the basis of a Driving Test to assess their competency to drive Light and Heavy Vehicles. Note: The Departmental candidates should apply through Proper Channel. Applications received incomplete manner and after the last date will not be entertained. Divisional Engineer (Admn) Telecom. Dist. Manager Mahabubnagar-509050 Department of Telcommunications Application for the post of MotorDrivers in MahabubnagarTelecom District, A.P. Circle. 1. 2. 3. 4. 5. 6. 7.

Name of the Candidate (in block letters) Name of Father Date of Birth (Attested copy of Certificate to be attached) Whether belongs to SC/ST/OBC Nationality Educational Qualifications (Attested copy of Certificate to be attached) Nature of Licence possessed (Light/Heavy) (Attested copy to be attached)

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8. Experience in Driving 9. Employment Registration No.,if any 10. Postal Address for Communication I hereby declare that all the particulars given above are correct. Date:

Signature of the Candidate

Place: Now, some issues that concern application blank seem pertinent to mention here: (i) What items should be included in the application blanks and what weightage should be assinged to them to take the decision on selection? (ii) What is the reliability and validity of information generated through application blanks to determine its worth in predicting success on the job? (iii) How to justify the inclusion of certain items in the application blanks ? 1.

Application blanks have been the most important tools for generating information about the candidates. Hence, generally all kinds of information is asked in the application blanks. In the Indian context, Hafeez9 analysed the contents of application blanks of 20 organisations (08 private Sector, 05 public sector, and 07 government departments). According to his analysis, the number of items and sub-items in these application blanks ranged from 14 to 50 with an average of 25 items and sub-items. Some studies have used a weighted application blank. The procedure followed includes identification of items that differentiate long from short tenure, and then developed point scales for items such as age, education, job held previously and marital status.

2.

So far, very little is known about the validity of items shown in the application blanks. To what extent the various items like biographic variables predict work efficiency is not thoroughly investigated to reach to a fool-proof conclusion. Let some stray and scattered evidences in this respect be given here: Some studies conducted in the West have shown that some biographic variables can predict efficiency in work. A study by Naylor and Vincent10 showed significant relationship between absenteeism and number of dependents. Female employees with large number of dependents were found to be more absent than those with less number of dependents. However, no relationship was found between absenteeism and age and marital status of the female employees. In India, Das11 conducted a correlative study between work efficiency (rated on 5 point scale) and some biographic variables like age, income, education, previous experience, length of service, marital status and number of dependents of 150 clerical staff. He found a positive significant correlation between number of dependents and length of service and work efficiency. Employees with more dependent and more length of service, compared to less dependents and short length of service, were significantly more efficient. However, age and efficiency were found negatively related. So far previous experience and education are concerned, a selection report12 on two batches of MBA graduates from the Indian Institute of Management, Ahmedabad reported a significant positive correlation between previous education and grades in college for one batch of students, but not the other. However, not much confidence can be placed in the relationship because the magnitude of coefficients is too low.

3.

Not all the information contained in application blanks is used to make selection decision. Then, the question is: Why should an organisation seek that information? Further, though certain variables may show high predictive power on work efficiency, but can they be justi-

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fiably included in the application blanks? Particular reference is made here on items seeking information on religion, sex, language and place of birth. Given our democratic setup, one can also question the legality of seeking information on these variables. Because, Article 14 of the Constitution of India prohibits discrimination on the basis of “religion, race, sex, language, or place of birth whether in respect of employment or admission to educational institutions”. Although organisations may not be concerned with these items while making selection decisions, but it haunts applicants whether such information is used for discrimination purposes. As such, inclusion of such items in application blank may deter the applicants to apply on the one hand, and may also tarnish the image of the organisations, on the other. Therefore, organisations should avoid to ask information on such items.

7.3.3

Selection Tests

Individuals differ in many respects including job-related abilities and skills. In order to select a right person for the job, individual differences in terms of abilities and skills need to be adequately and accurately measured for comparison. This is done through a device called ‘selection test’. Selection test is a device that uncovers the information about the candidate which are not known through application blank and interview. In this way, selection test is an adjunct to a selection method. What is selection test? Test is defined differently by different writers and psychologists. Some define test as “an objective and standardised measure of a sample behaviour.”13 It is considered standardised because the procedure of administering the test, the environment in which the test is conducted, and method of calculating individual score are uniformly applied. It is called objective because test measures the individual differences in terms of their abilities and skilled following an unbiased and scientific method avoiding interference of human factors14. According to Lee J. Groonbach15, “A test is a systematic procedure for comparing the behaviour of two or more persons”. Milton M. Blum16 has difined test as “a sample of an aspect of an individual’s behaviour, performance and attitude”. After going through above definitions of test, now test can simply be difined as a systematic procedure for sampling human behaviour . All tests are first psychological and then tests of specific abilities and skills. A close scrutiny of above definitions of tests against the following three constructs will help comprehend the meaning of test in better manners. 1. Objective: Here, ‘objective’ means the validity and reliability of measuring job related abilities and skills. It is crazy of the whole testing movement. The psychological tests should show that the test is predictive of the important aspects of role behaviour relevant to the job for which the candidate is under evaluation. Besides, objectivity also refers to equality of opportunity for those being tested avoiding discrimination in terms of caste, creed,, sex, religion etc. 2. Standardized: In our earlier mentioned definition, ‘standardized’ refers to the uniformity of procedure administered and the environment in which the test is taken. Here uniformity refers to testing conditions which include the time limit, instructions, testee’s, state of mind and health, room temperature, test instruments, etc. 3. Sample of Behaviour: This refers to the fact that a total replication of reality of human behaviour in any given testing situation is just not possible.Therefore, the behaviour predicted through test is likely to be representative one, or say, a sample of behaviour.

Purpose of Tests Tests, i.e. psychological tests are conducted for various purposes17. They include:

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1.

Guiding and counselling students seeking admissions in the educational institutes.

2.

Career guidance to those thinking to make careers in specific vocations.

3.

Research into human behaviour and its personality.

4.

Employment selection of the candidates for an organisation. As regards selection tests, these are conducted mainly to fulfil the following purposes18:

(i) For the selection and placement of new employees. (ii) For appraising employees for promotional potentials. (iii) For counselling employees to enable them to perform better in their jobs. William C. Byham19 puts the use of selection tests in these words: “The tests ar e the most misused, the least understood, yet the most valuable sources of information about applicants” .

Types of Tests The history of tests, as cited by Saiyadain20, can be traced back to the efforts of Francies Galton who developed a variety of tests of sensory determination to measure person’s intellect as far back as 1883. Since then, there is no looking back with regard to the use of selection tests. As a result, a large number of general aptitude tests and specific skill tests for the purpose of selecting employees are available to - day. For example, the Indian Statistical Institute, Kolkata21 has developed selection tests for selecting management trainees and other officers for several organisations including Indian Airlines, Hindustan Steel Limited, Hindustan Aeronautics Ltd., Indian Telephone Industries, TELCO, BHEL, Bharat Aluminium Company Ltd., etc. Similarly, specific tests have also been developed for the selection of weavers22 and card punch operators23. All the tests so far developed for the selection of employees can broadly be divided into two categories: (i) Ability Tests, and (ii) Personality Tests. Tests covered under each category are shown in the Following chart 7.1 Selection Tests







Ability Tests

Personality Tests



 1.

Aptitude Tests

1.

Interest Tests

2.

Achievement Tests

2.

Personality Tests

3.

Intellingence Tests

3.

Projective Tests

4.

Judgement Tests

4.

Attitude Tests

Chart 7.1: Types of Psychological Tests

It is not the purpose of this chapter to review, in detail, each of these test types. One reason for not reviewing these is such a review is the province of books on industrial psychology24. Yet, for the convenience of the readers, a brief description of these follows:

Ability Tests Though a number of ability tests have been developed so far for the use of employee selection, important among these are the following:

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1. Aptitude Tests: Aptitude tests measure ability and skills of the testee. These tests measure and indicate how well a person would be able to perform after training and not what he/she has done25. Thus, aptitude tests are used to predict the future ability/ performance of a person. There are two objectives of the aptitude tests . One to advise youth or jobseekers regarding field of activities in which they are likely to succeed. This is called ‘vocational guidance’. Second, to select best persons for jobs where they may succeed. This test is called ‘vocational selection’. Specific aptitude tests have been designed to measure special abilities to perform a job. Examples of such tests are Mechanical Aptitude Test, Clerical Aptitude Test, Artistic Aptitude Test, Musical Aptitude Test, Management Aptitude Test, Differential Aptitude Test, etc. 2. Achievement Tests: Achievement tests measure a person’s potential in a given area/job. In other words, these tests measure what a person can do based on skill or knowledge already acquired by him/her. Achievement tests are usually used for admission to specific courses in the academic institutions. In these tests,grades in previous examinations are often used as indicators of achievement and potential for learning. Indian industries have now started conducting these tests to judge for themselves the level of proficiency attained rather than believing their scores in academic examinations. Achievement tests are also known by the names, proficiency tests, performance, occupational or trade tests. Achievement tests resemble those of aptitude tests. However, the difference lies in the usage of results. The line of difference between achievement and aptitude is very thin in the sense of past achievement and performance. This difference between the two can be exemplified with an example. When we ask a person, or say, a student to study the paper human resource management, then what he learns is ‘achievement’. But if we test the student to see if he would profit from certain training to the subject, it is ‘aptitude’. 3. Intelligence Tests: Intelligence tests measure general ability for intellectual performance. The core concept underlying in intelligence test is mental age. It is presumed that with physical age, intelligence also grows. Exceptions to this may be there. So to say, if a five year old child does the test for six years or above, his/her mental age would be determined accordingly. Mental age is generally indexed in terms of Intelligence Quotient (IQ) and calculated by using the following formula: IQ=

MentalAge

× 100

Actual Age

It means that the intelligence quotient is a ratio of mental age to actual age multiplying by 100(to remove decimal). IQ levels may vary because of culture and exposure. Saiyadain26 has qualitatively described various levels of IQs as below: IQ Above 130 120-129 110-119 90-109 80-89 70-79 50-59 25-49 Below 25

Verbal Description Very Superior Superior Bright Average Dull Border line defective Moron Imbecile Idiot

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Intelligence testing in industry is based on the assumption that if the organisation can get bright, alert employees quick at learning, it can train them faster than those who are less wellendowed. 4. Judgment Tests: These tests are designed to know the ability to apply knowledge in solving a problem.

Personality Tests Personality tests are also called personality inventories. These tests measure predispositions, motivations and lasting interests of the people. Personality tests are subsumed under four broad categories as given below: 1. Interest Tests: These tests are designed to discover a person’s area of interest, and to identify the kind of work that will satisfy him. Interest is a prerequisite to successfully perform some task. These tests owe their origin to the vocational efforts. The most widely used interest test is Kuder Reference Record27. It consists of three forms. The first form measures vocational interest such as mechanical, computational, artistic, literary, musical and clerical interest. Interests in personal areas such as group activities, avoiding conflicts etc., are measured by the second form of interest tests. The third form of interest test measures preference reactions to particular occupations like accountant, salesman, farmer, etc. The best known among these three forms of interest test is the Kuder Preference Record i.e. vocational test. 2. Personality Tests: These tests are also known as ‘personality inventories’. These tests are designed to measure the dimensions of personality i.e., personality traits such as interpersonal competence, dominance- submission, extroversions-introversions, self-confidence, ability to lead and ambition. The most well known names of personality tests are the Minnesota Multiphasic Personality Inventory (MMPI), FIRO, and California Personality Inventory. As reported by Morgan and King28, the MMPI measures the following ten personality dimensions: 1.

Hypochondriasis:

Exaggerated anxiety about one’s health.

2.

Depression:

Feeling of pessimism and worthlessness.

3.

Hysteria:

Various ailments such as headache which have no physical basis.

4.

Psychopathic deviation:

Antisocial and amoral conduct.

5.

Masculinity-femininity:

Measure of masculine and feminine interest, values and emotional expressions.

6.

Paranoia:

Extreme suspiciousness of other people’s motives.

7.

Psychasthenia:

Irrational thoughts and strong compulsion to repeat, meaningless acts.

8.

Schizophrenia:

Withdrawal into a private world of one’s own, hallucinations.

9.

Hypomania:

Mild excitement without any clear reason.

10. Social introversion:

Avoidance of other people.

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Under the MMPI, as many as 495 items need to be answered as ‘True’, ‘False’ and ‘Cannot Say’. The following are the examples of some representative items: (a) I am easily awakened by noise. (b) I get all the support I should. (c) I do not bother for my look. (d) I do not experience day-dream. (e) My teachers made me obey elders even when they may advise wrong. 3. Projective tests: These tests are based on pictures or incomplete items. The testee is asked to narrate or project his own interpretation on these. The way the testee responds reflects his /her own values, motives, attitude, apprehensions, personality, etc. These tests are called projective because they induce the testee to put himself/herself into the situation to project or narrate the test situation. The most widely used tests of this type are the Rorschach Blot Test29 (RBT) and the Thematic Apperception Test30 (TAT). The RBT consists of an ink blot and the testee is asked to describe what he/she sees in it. In case of TAT which is considered as the most well-known structured projective test, the testee is shown pictures and, then, is asked to make-up a story based on the pictures. 4. Attitude Tests: These tests are designed to know the testee’s tendencies towards favouring or otherwise to people, situations, actions, and a host of such other things. Attitudes are known from the responses of the testees/respondents because emotional overtones involved make it difficult to directly observe or measure attitude of the testee. Test of social desirability, authoritarianism, study of values, Machiavellianism and employees morale are the well-known examples of attitude tests.

Other Tests There are some other tests also used for personnel selection. These are briefly discussed here under: Graphology. The origin of graphology is traced back to the eleventh century when the Chinese drew attention to the relationship between handwriting and personality. It has been said that an individual’s handwriting can suggest the degree of energy, inhibitions, and spontaneity to be found in the writer, disclosing idiosyncrasies and elements of balance and control from which many personality characteristics can be inferred31. For example, big letters and emphasis on capital letters indicate a tendency towards domination and competitiveness. A slant to the right, moderate pressure and good legibility show leadership potential. Although the validity of handwriting analysis is not fool-proof, some companies use graphology tests to supplement their usual selection procedure. Polygraph Tests: This test is designed to confirm the accuracy of information given on the application blank. Hence, it is considered as a form of employment test. Polygraph is a lie detector. Polygraph tests are found useful for the organisations that are highly vulnerable to theft or swindling. Examples of such organisations are departmental stores, banks, jewellery shops, etc. Physiognomy Tests: These tests suggest a definite correlation between facial features and physiological functions and behaviour. According to these tests, structure of features are reflective of personality traits and characteristics. For example, thin lips indicate determination, broad jaws signify tenacity, and so on and so forth. Similarly, physignes indicate the following three kinds of temperament: 1.

An overly-fat person enjoys eating and also loves good life.

2.

As regards muscular built, it reflects toughness.

3.

Whereas a slight built indicates an introverted, shy, and oversensitive person.

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Advantages of Testing Irrespective of the nature of tests, as discussed earlier, companies can derive the following benefits from a well planned test: 1. Predicts Future Performance:A well designed test can predict the future performance of an individual. Thus, test can be used for hiring personnel, transfer or promotion of the personnel for higher positions. 2. Diagnoses the Situation and Behaviour: Knowing why people behave the way one does requires understanding the particular variables/situation that cause behaviour. Her again, well planned tests help understand the situation. For example, though decline in productivity could be caused by a host of factors, tests can help understand such decline due to human factors. 3. Offers Benefits of Economy of Scale: Conducting tests on the whole serves cost effective as it offers the benefits of economy of scale. This is because tests when administered to a group save on both time and cost. 4. Uncover What not Covered by Other Devices:One important advantage of conducting tests is that they uncover qualifications and talents of the testee that cannot be detected by application blanks and interviews. 5. Serve as Unbiased Tools: Based on reliability and validity norms, tests do also serve as unbiased tools of selection process. 6. Quantify the Test Results: Above all, tests being quantifiable, yield themselves to scientific and statistical analyses. Thus, tests also save basis for research in personnel issues and matters. Valid job-related tests will also pay off in increasing ability to identify in advance those employees who will perform most effectively in the organisation.

Developing a Test Programme Developing a test programme is never simple. It requires careful planning, experiment, technical knowledge, etc. Services of experts in psychology and psychometrics and use of statistical techniques are also requisitioned. The main steps generally involved in developing a sound test programme are following: (i) Deciding the Objectives ofTesting Programme: Developing a test praogramme starts with deciding the objectives it has to achieve. The objectives of the test programme may be hiring, promoting and counselling of people. Initially, test programme may be designed for a few jobs and then may be gradually expanded to cover all jobs in the organisation. (ii) Analysing Jobs: Jobs are duly analysed to identify as to which human traits and skills are necessary for effective performance of jobs. (iii) Choosing Tests to Measure Characteristics: Several tests i.e. ‘Battery of Tests’ are chosen to measure different characteristics. The tests may be chosen keeping in view such factors as reliability, validity, ease of administration, level of difficulty, and the cost involved in different tests. The choice of the tests is generally based on certain parameters like experience, previous research and guesswork. (iv) Administering the Tests: Once the tests are chosen, then these are administered on the applicants under consideration to measure the predetermined skills and traits. (v) Establishing Criteria of Job Success:Success criteria are laid down in terms of output in both quantity and quality, attendance record, rate of accidents, rate of promotion, professional achievement, etc.

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(vi) Analysing the Results of Tests: At last, the test scores secured by the applicant are carefullyanalysed in the light of success criteria. Based on this, the final decision is taken either to select the applicant for further processing or rejection.

Limitations of Tests Tests suffer from certain limitations. Hence, while applying tests for selection of candidates, the following guidelines should be observed: (i) Tests should be used as supplements rather than as substitute for any method of selection. (ii) Tests are better at predicting failure than success. They often determine which applicants will not or cannot perform a job satisfactorily instead who can or will perform in effective and efficient manner. (iii) Tests are not precise measures of one’s skills and traits but only samples of one’s total behaviour So to say, tests with highest scores do not necessarily mean better choices for a job than those with lower scores. (iv) Tests should be validated in the organisation in which these are administered. Here, validity means the degree to which a test actually measures what it is meant to measure. (v) In order to make the test scores comparable, tests should be administered under standard conditions to all applicants tested for a particular job32. (vi) Tests should be designed, administered, interpreted and evaluated only by trained and competent persons. (vii) The candidates should be provided with samples of tests or answering queries so as to warm up them before the test is administered. The following chart 7.2 gives job proficiency validity data for various types of jobs33. Chart 7.2 : Validity of Various Tests as Predictive of Job Proficiency

Types of Tests

Job

Intellecutal Ability

Spatial and Mechanical Ability

Perpetual Accuracy

Motor Ability

Personality Traits

1. 2.

Exclusive Supervisor

Moderate Moderate

Moderate + Moderate

Moderate Moderate

3.

Clerical

Moderate

Low

Moderate

Low Low/ Moderate Low

4. 5.

Sales Protective Service Vehicle Operator Trade & Crafts Industrial

Low Moderate

Low Low +

Low Low +

Low Low

Low/ Moderate Moderate + Low

Low

Low +

Moderate

Moderate

Moderate

Moderate

Low/ Moderate Moderate

Moderate

Moderate

Moderate

Low/ Moderate Moderate

Low/ Moderate High +

6. 7. 8.

Moderate Low

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Low Predictability = 20 Moderate Predictability = .20 – .35 High Predictability = .35 – .50 High = .50 +

7.3.4

Selection Interview

The next step in the selection process is ‘employment interview’. Interview is the widely used selection method. It is a face-to-face interaction between interviewee and interviewer. If handled carefully, it can be a powerful technique in having accurate information of the interviewee otherwise unavailable. At the same time, if the interview is not handled carefully, it can be a source of bias, restricting or distorting the flow of communication. Different scholars have defined ‘interview’ differently. According to Scott and others34, “an interview is a purposeful exchange of ideas, the answering of questions and communication between two or more persons”. Bingham and others35 define an interview as a ‘conversation with a purpose”. Thus, interview can be defined as an attempt to secure maximum amount of information from the candidate concerning his/her suitability for the job under consideration. It tries to achieve an accurate appraisal of the applicant in terms of his/her educational qualification, training, family background, previous work experience and judge the applicant’s certain qualities like manners, appearance, conversational ability, meet other people pleasantly, etc.

Objectives of Interview In the selection process, interview serves the following objectives: 1.

Verifies the information obtained through application form and tests.

2.

Helps to obtain additional information from the applicant otherwise not available.

3.

Gives the candidate necessary facts and information about the job and the organisation.

4.

Helps establish mutual understanding between the company and the candidate and build the company’s image.

According to Richard Calhoon36, employment interview serves the following three objectives: First, it is the only way to see an applicant in action – how he looks, his manner, his bearing. Second, it is the only way to witness how he interacts and how he responds, his way of thinking, the effect of his personality on others. Third, it is perhaps the best way to get at the ‘will do’ features of a performance– motivation, initiative, stability, perseverance, work, habits and judgments.

Types of Interviews Four types of interviews for selection have been identified. These are: 1. Preliminary Interview: The interviews conducted to screen the applicants to decide whether further detailed interview will be required are called preliminary interviews. The candidate is given freedom by giving job details during the interview to decide whether the job will suit him . One of the drawback associated with the preliminary interview is that it might lead to the elimination of many desirable candidates in case interviewers do not have much and proper experience in evaluating candidates. The positive argument, if any, for this method is that it saves time and money for the company. 2. Patterned Interview: In this interview, the pattern of the interview is decided in advance. What kind of information is to be sought or given, how the interview is to be conducted, and how

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much time is to be allotted to it, all these are worked out in advance. In case interviewee drifts, he/she is swiftly guided back to the structured questions. Such interviews are also called standardised interviews. 3. Depth Interview: As the term itself implies, depth interview tries to portray the interviewee in depth and detail. It, accordingly, covers the life history of the applicant along with his/her work experience, academic qualifications, health, attitude, interest, and hobbies. This method is particularly suitable for executive selection. Expectedly, depth interview involves more time and money in conducting it. 4. Stress Interview: Such interviews are conducted for the jobs which are to be performed under stressful conditions. The objective of stress interview is to make deliberate attempts to create stressful or strained conditions for the interviewee to observe how the applicant behaves under stressful conditions. The common methods used to induce stress include frequent interruptions, keeping silent for an extended period of time, asking too many questions at a time, making derogatory remarks about the candidate, accusing him that he is lying and so on. The purpose is to observe how the candidate behaves under the stressful conditions – whether he looses his temper, gets confused or frightened. However, stress-inducing must be done very carefully by trained and skilled interviewer otherwise it may result in dangers. Emotionally charged candidates must not be subjected to further stressful conditions. The candidate should be given sufficient chance to cope with such induced stress before he leaves.

Limitations of Interview Research studies37 have firmly established that, among all selection methods, interview has been the most researched and carefully documented method. However, interview suffers from some limitations also. 1.

Interviewers may not have a clearly defined technique developed. This results in lack of validity in evaluation of the candidate.

2.

There is always variation in offering scoring points to the candidate by the interviewers38.

3.

Interview can help judge the personality of the candidate but not his ability for the job.

4.

A single characteristic of the candidate found out on the basis of interview, may affect the judgment of the interviewer on other qualities of the applicant. This is called ‘halo effect’.

5.

The biases of interviewers may cloud the objectivity of interview.

6.

Finally, interview is a time consuming and expensive device of selection.

The above listed limitations or defects in interview underline the need for observing certain guideline to make interviews more effective.

Guidelines for Effective Interviewing Below are given some guidelines if observed can make interview more effective: 1.

The interview should have a definite time schedule known to both the interviewers and the interviewee.

2.

Interview should be conducted by the competent, trained and experienced interviewers.

3.

The interviewers should be supplied with specific set of guidelines for conducting interview.

4.

The interviewers should ensure an element of privacy for the interviewee.

5.

A resume for all the candidates to be interviewed should be prepared and the same be made available to the interviewers before the interview starts.

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6.

The interview should not end abruptly but it should come to close tactfully providing satisfaction to the interviewee.

7.

The interviewers should show their sensitivity to the interviewee’s sentiments and also sympathetic attitude to him/her.

8.

The interviewers should also evince emotional maturity and a stable personality during the interview session.

Some major findings from research studies on the interview seem worth mentioning: 1.

Structured interview are more reliable than unstructured interviews.

2.

Interviewers are influenced more by unfavorable than by favorable information.

3.

Interrater reliability is increased when there is a greater amount of information about the job to be filled.

4.

A bias is established early in the interview, and this tends to be followed by either a favorable or an unfavorable decision.

5.

Intelligence is the trait most validly estimated by an interview, but the interview information adds nothing to test data.

6.

Interviewers can explain why they feel an applicant is likely to be an unsatisfactory employer but not why the applicant may be satisfactory.

7.

Factual written data seem to be more important than physical appearance in determining judgments. This increases with interviewing experience.

8.

An interviewee is given an more extreme evaluation (positive/negative) when preceded by an interviewee of opposing value (positive/negative).

9.

Interpersonal skills and motivation are probably best evaluated by the interview.

10.

Allowing the applicant time to talk makes rapid first impressions less likely and provides a large behavior sample.

11.

Nonverbal as well as verbal interactions influence decisions.

12.

Experienced interviewers rank applicants in the same order, although they differ in the proportion that they will accept. There is a tendency for experienced interviewers to be more selective than less experienced ones.

7.3.5

Refrence Checks

The reference check as yet another step in the selection process is the selection process is used for the purpose of verifying information and also obtaining additional feedback on an application. The candidate is asked to supply two-three names of persons i.e., referees who know him/her personally. Previous employers, University Professors, neighbours and friends can act as references. However, references are treated as a mere formality and are hardly used to influence selection decisions. The obvious reasons are: 1. References are normally those who speak well about the candidate. 2. Referee employer may give favourable opinion about the candidate to get rid of them. 3. Sometimes referee either does not know much about the candidate or does not want to divulge the truth about the candidate because it might adversely affect the selection or promotion of the concerned candidate.

7.3.6

Physical Examination

The last tool used in the selection process is physical examination. The main purpose of condducting physical or medical examination is to have proper matching of job requirement with the

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physical ability of the candidate. Among various objectives of a physical test, the major ones are to detect if the individual is carrying any infectious diseases, to identify health defects of an individual for undertaking certain works detrimental to his/her health and to protect companies from employees filing compensation claims for injuries and accidents caused by pre-existing ailments. However, with regard to physical examination, there are few matters of concern. The pre-placement physical examination often fails to detect complicated diseases because of two reasons. Firstly, test is cursory. Secondly, not enough is known about some ailments. Added to this is growing automation which requires less physical strengths for jobs. Moreover, a sound physical condition is no guarantee against accidents. This, then, underlines concern for safety.

7.3.7

Final Selection

The last step in the selection process is the final selection of the candidate for a job. The candidates who have cleared all the above hurdles are finally selected and a letter of job offer is issued to them. The job offer i.e., appointement letter contains the details like pay-scale, allowances and other terms and conditions of the job. It also contains when and whom he should report for joining the duty. When he/she reports for joining, he/she needs to be placed in a particular section or division and introduced to the job and organisation. Placement and Induction are separately discussed, in detail, in the next chapter.

7.4 SUMMARY This summary is organised by the learning objectives given on page...68: 1.

Selection is the process of choosing the most suitable candidates from among the applications for jobs.

2.

The need for scientific selection is appreciated by its impact on work performance and employee cost.

3.

The selection process involves steps such as preliminary interview, application blank, selection tests, selection interview, reference checks, physical examination and final selection.

4.

The candidates who clear all the steps involved in selection process are finally selected for particular jobs.

KEY TERMS (from here) Application Blank

Reliability

Graphology

Selection

Interview

Test

Halo Effect

Validity

REVIEW AND DISCUSSION QUESTIONS 1. What do you understand by selection? Explain in brief the steps involved in selection procedure. 2. Discuss various types of employment tests normally taken by the industrial organisations. 3. What are the major problems of the interview as a selection device ? What can management do to reduce some of these problems? 4. Discuss the importance and limitations of psychological tests in employee selection.

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5. How will you develop a test programme? Discuss the precautions that you should observe in the case of psychological tests. 6. How valid are the data obtained from the polygraph? When might you want to use the polygraph test? 7. You are working as the Personnel Manager in the Hindustan Paper Corporation, Jagi Road, Assam. The mill asks you to appoint management trainees for its production and personnel departments. What sources will you explore and how will the trainees be selected? 8. Write notes on: (a) Psychological Tests (b) Stress Interview (c) Application Blank (d) Personality Tests (e) Reference Check 9. “ Selection is virtually a kind of elimination process”. Comment. (MBA, Gauhati University, May 2000)

REFERENCES 1. Dale Yoder: Personnel Management and Industrial Relations, Printice-Hall of India, New Delhi, 1972, p.229. 2. David A. Decenzo: Personnel/Human Resource Management, Printice-Hall of India, New Delhi, 1996, p.147. 3. Koontz and O’Donnel: Principles of Management, McGraw-Hill Book company, New York, 1972, p. 418. 4. Thomas H. Stone: Understanding Personnel Management, CBS College Publishing, 1989, p.173. 5. Ian Beardwell and Len Holden : Human Resource Management (A Contemporary Perspective), Macmillan India Ltd., New Delhi, 1996, p.175. 6. Thomas H. Stone: op. cit., 1989, p.175. 7. Thomas F. Cawsey and William C. Wedley: Labour Turnover Costs: Measurement and Control, Personnel Journal, February 1979, pp. 90-95. 8. H.W. Goheen and J.N. Mosel: Validity of Employment Recommendation Questionnaire in Personnel Selection, Personnel Psychology, No. 2, 1958, pp. 481-490, Also H.W. Goheen and J.N. Mosel : Validity of Employment Recommendation Questionnaire II — Comparison with Field Investigation, Personnel Psychology, No. 12, 1959, pp. 297-301. 9. A.Hafez: An Analysis of Application Blanks, Indian Journal of Applied psychology, Vol. 3 No. 1, 1966, pp. 36-42. 10. J. C. Naylor and N.L Vincent: Prediction Female Absenteeism, Personnel Psychology, No. 12, 1969, pp. 81-84. 11. R.S Das: A Study of Application Blanks as a Predictor of Work Efficiency: Decision, Vol. 5., No. 2, 1978, pp. 135-140. 12. K.K Anand: Selection for Management Education , Indian Institute of Management, Ahmedabad, 1971. 13. Arun Monappa and Mirza S.Saiyadain Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, Second Edition, 1996, p. 144.

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14. Mirza S. Saiyadain: Human Resource Management, Tata McGraw- Hill Publishing company Limited, New Delhi, 1988, pp. 105-106. 15. Lee J. Groonbach: Essentials of Psychological Testing, Harper & Row, New York, 1960, p. 21 16. Milton M. Blum: Industrial Psychology and Its Social Foundations, Harper and Row, New York, 1956, p.257. 17.

C.B Mamoria : Personnel Management, Himalaya Publishing House, Bombay, Twelfth Edition, 1994, pp. 236-237.

18. Wendell French: The Personnel Management Process, 1974, p. 281. 19. William C. Byham: The Uses of Personnel Testing, McGraw Hill Book Co. , New York, 1966, p. 7. 20. Mirza S. Saiyadain: op, cit, 1988, p. 105. 21. Indian Statistical Institute: Collected Reports on Follow - up Studies, Psychometric Research and Service Unit, Calcutta, 1976. 22. D. L Amin: An Experiment on the Selection of Weavers on the Basis of Their Manual Dexterity– Standardization of Weavers Test, Indian Journal of Psychology, Volume 27, 1952, pp. 105—109. 23. R.S.Das: Development and Validation of Aptitude Test for Card Punch Operators, Indian Statistical Institute, Calcutta, Report No. 58, 1959. 24. M.L Blum and J.C. Nylor: Industrial Psychology: Its Theoretical and Social Foundations, Harper & Row, New York, 1968. Also see, Ernest J. McCormick and Daniel Ilgen: Industrial Psychology, Printice Hall, Inc., Englewood Cliffs, N.J. 7th Edition, 1980, Chapters 8-9. 25. C.T. Morgan and R. A. King: Introduction to Psychology, McGraw Hill, New York, 1971. 26. Mirza S. Saiyadain: op. cit., 1988, p.118. 27. G.F. Kuder: Research Handbook for the Kuder Occupational Pr eference Record, Science Research Associates, Chicago, 1957. 28. C.T. Morgan and R. A. King: op. cit., 1971. 29. J.E. Bell: Projective Techniques, Longmans Green, 1948. 30. H.A. Murray: Explorations in Personality, Oxford University Press, 1938. 31. Jitendra M. Sharma and Harsh Vardhan: Graphology: What Handwriting can Tell You about an Applicant, Personnel, March-April 1975, pp. 57-63, and Ulrich Sonnerman and John R.Karnam: Handwriting Analysis – A Valid Selection Tool? Personnel, November-December 1962, P.12. 32. V.S.Shanthmani and A. Hafeez: Study of the Use of Psychological and Other Tests in Industry, Indian Administrative and Management Review, 1975, vol.7 No.1, pp.-13-15. 33. Edwin. E. Ghiselli: The Validity of Aptitude Tests in Personnel Selection, Personnel Psychology, Winter1973, pp. 461-477. 34. C.Scott and Spriegel: Personnel Management, Principles, Practices and Points of View, 1977, P. 85. 35. Walter Vingham and V. Moore Bruce: How to Inteview? 1941, p.1. 36. Richard Calhoon: Managing the Personnel, 1964, P. 151. 37. W. R. Spriegel and V. A. James: Trends in Recruitment and Selection Practices, Personnel, 1958, 35, pp.52-58. 38. P.C. Pant: Interviewing : A Tool for Selection and Placement, Indian Management, 1990, 29(7), pp. 16-18.

8 PLACEMENT, INDUCTION AND SOCIALISATION Learning Objectives After studying this chapter, you should be able to: 1.

Define placement in an organisation.

2.

Explain the objectives of induction programme.

3.

Describe the benefits induction offers.

4.

Discuss the contents of an induction programme.

5.

Identify the phases of the induction programme.

6.

List the elements that make an induction programme effective.

7.

Define socialisation and identify the stages of the socialisation process.

Once a candidate has been selected, he/she needs to be placed on a suitable job. In fact, placing the right person on the right job is as important as selecting right person. The person put on a suitable job needs to be made familiar with his/her job, the organisation and the other employees through induction or orientation so as to enable him/her to contribute the maximum. This chapter is, therefore, devoted to a detailed discussion on placement, induction, and socialisation.

8.1 WHAT IS PLACEMENT? Placement is understood as assigning jobs to the selected candidates. Assigning jobs to employees may involve a new job or different job. Thus, placement may include initial assignment of job to new employee, on transfer, promotion or demotion of the present employees. In this section, placement refers to the assignment of jobs to new employees only. Placement arising out of transfers, promotions, and demotions are discussed in Chapter 13, later in this book. Placement involves assigning a specific job to each one of the selected candidates. However, placement is not so simple as it looks. Instead, it involves striking a fit between the requirements of a job and the qualifications of a candidate. Pigors and Myers1 have defined placement as “the determination of the job to which an accepted candidate is to be assigned, and his assignment to that job. It is a matching of what the supervisor has reason to think he can do with the job demands (job requirements), and what he offers in the form of pay rolls, companionship with others, promotional possibilities, etc.”. The importance of placement lies in the fact that a proper placement of employees reduces employees turnover, absenteeism, accidents and dissatisfaction, on the one hand, and improves their morale, on the other. It has been customary in most of the organisations to put employees intially on a probation period with a view to adjudge their suitability for the job in the organisation. The probation period may vary from organisation to organisation ranging from one to two years. Having found the employees’ performance satisfactory during the probation period, their jobs are regularised. 87

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8.2 INDUCTION 8.2.1

Concept of Induction

Introduction of a new entrant into any existing group of people has been a common feature we come across in our every day life. Recall, the bride on joining to your family was introduced to your family members and manners. Remember your own joining to your present Department of Business Administration. On joining the Department, you may have been told about the Department’s rules and regulations, the procedure for academic activities such as sessional tests, assignments, seminar presentations, summer training, semester examination, papers to be taught with the names of the teachers, etc. You were probably introduced to your seniors by organising ‘freshers welcome’. Similarly, when a person joins a new job, he/she also needs the same type of introduction to his/her job and the organisation. This introduction is called ‘induction’. Induction is also known as ‘orientation’ and ‘indoctrination’. A new entrant joins an organisation as a stranger to his co-workers, job and organisation. This causes the initial anxiety for the new entrant. It culminates at times to surprise resignation by the new employee. Hence, arrangements need to be made to make the integration of the new employee into the organisation as smooth and as free of anxiety as possible. Induction helps do so. Induction is welcoming a new employee to the organisation. In other words, it is a well orchestrated event to socialise the new entrant with the people and the work environment in a particular organisation2 . According to Michael Armstrong3, “Induction is the process of receiving and welcoming an employee when he first joins a company and giving him basic information he needs to settle down quickly and happily and start work”. R.P. Billimoria4 defined induction as “a tehnique by which a new employee is rehabilitated into the changed surroundings and introduced to the practices, policies and purposes of the organisation.” In short, induction is, therefore, the process of welcoming, indoctrination and socialisation of new employee to his/her job and organisation.

8.2.2

Objetives of Induction

When a new entrant joins an organisation, he/she is an utter stranger to the co-workers, workplace and work environment. As such, he/she may feel insecure, shy and nervous. The first few days may be all anxious and disturbing ones for the new entrant. Particularly when a new entrant comes from rural area, he/she finds himself/herself completely at sea in an industrial town and city. Then, induction helps reduce such anxities and dispels doubts and nervousness from the mind of the new entrant. Therefore, an induction programme is designed to achieve the following objectives: 1.

To reduce the initial anxiety all new entrants feel when they join a new job in a new organisation.

2.

To familiarize the new employees with the job, people, work-place, work environment and the organisation .

3.

To facilitate outsider - insider transition in an integrated manner.

4.

To reduce exploitation by the unscrupulous co-workers.

5.

To reduce the cultural shock faced in the new organisation.

8.2.3

Benefits of Induction Programme

A formal induction programme may provide the following benefits to the new comer and the organsation:

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1.

A well-designed induction programme reduces anxiety, nervousness, absenteeism and employee turnover.

2.

Induction helps minimize the reality or cultural shock new employees undergo on joining a new organisation.

3.

Effective induction also helps integrate the new employees into the organisation and fosters the feeling of belongingness to the new organisation.

4.

Induction also binds the newcomer and the present employees in a team.

B.P. Billimoria5 has appreciated the benefits of induction in these words: “Induction has a greater significance in a developing country like India, where the percentage of illiteracy is very high. The worker finds himself completely at sea when by force of circumstances he has to shift from rural surroundings into an industrial environment. It is no use trying to push a handbook of certified rules and regulations into his hands and expecting him to turn out into a loyal and efficient employee. He needs a short and simple induction conducted by some one who speaks his own language. This will go a long way in reducing turnover and, above all, in preventing a worker from the likelihood of falling a prey to subversive elements which thrive on creating labour unrest by misrepresenting employees to illiterate employees”.

8.2.4

Contents of Induction Programme

The induction programme may be informal or formal. These are discussed one by one. Informal Induction. This is an unplanned induction programme. This may be simply an introduction to the new entrant about the job and organisation. Such type of induction programme is generally carried out by the medium and small-scale units. Usually, informal induction programme needs to be brief – lasting for one hour or so. Informal induction programme itself may be in the following two versions: (i) Supervisory System. In this system, the immediate job supervisor conducts the induction programme for the new entrant. The supervisor briefs the new comer about the job, the department, introduces to the colleagues, and takes him round the sections/divisions which are related to his job. (ii) Buddy or Sponsor System. In the ‘Buddy System’ the immediate supervisor assigns the responsibility of induction of the new entrant to an old employee. The old employee acts as friend, philosopher and guide to the new comer. In order to introduce the new comer to the job and the organisation, the guide, i.e., the old employee arranges meetings with other persons and departments and also supplies him with relevant documents/literature regarding rules, regulations and other details of the organisation.

Formal Induction Formal induction is a planned programme carried out to integrate the new entrant into the organisation. This is usually carried out by the large size organisation. A comprehensive induction programme is carefully designed to introduce the new entrant to all about his job, colleagues and organisation. Accordingly, the contents of the formal induction programme cover the aspects ranging from the mission, vision, rules and regulations of the organisation to job related particulars like salary, benefits, service conditions, safety and welfare measures, etc. A formal induction programme, thus, includes the following contents: 1. Brief history of the organisation. 2. Organisational mission, vision, objectives and philosophies. 3. Policies and procedures of the organisation. 4. Rules and regulation of the organisation.

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5.

Organisational structure and authority relationship.

6.

Terms and conditions of job including remuneration, working hours, holidays, promotional avenues, etc.

7.

Welfare measures like subsidised canteen, transport, health and recreation facilities, etc.

8.

Safety measures.

All the contents of the induction programme are arranged into the three phases which are discussed subsequently. Formal induction programme is carried out by the HR specialists through leaflets, lectures, seminars and conduct tours for a couple of days/weeks. The induction may spread over periods of time ranging from a few days to a few weeks even months. Go through the following example of the induction programme carried out at TISCO. It will help you better understand the contents of a Formal Induction Programme.

Induction at TISCO* The formal induction in the TISCO was carried out since late 1960s. The objective of induction was to acquint the new employee with his surroundings, explain to him the rules and safety measures, etc., and give him an induction of the education, training and welfare activities sponsored by the company. The induction programme consists generally of the following: 1. Introduction to the Company: As a first step in the programme, new entrants in batches of not more than 15 are told about the Founder and the hisotry of the Company’s development, its organisations and functions, its various products and its personnel policies. The Safety Officer of the Safety & Accident Prevention Services gives a talk on safety and demonstrates the correct use of various safety appliances. 2. Briefing on Conditions of Service:The salient features of the Works Standing Orders, Gratu ity and Provident Fund rules, medical, housing, educational and welfare facilities, etc., are explained. A brief talk is also given in respect of wages, overtime, bonus and other remunerations. The rules regarding seniority, leave, acting and promoting procedures, etc., too, are covered by the talk. 3. Introduction to the Officers of the Department and Visit to the Works Location and Environment: After the new entrants are educated on the subjects indicated above at the Employment Bureau, they are sent to the department concerned where they are introduced to the supervisors in charge of the various sections and the Personnel Officer. They are then taken to the place of work and shown various important places such as the Check Houses, Watch Houses, Rest Rooms, Toilet, etc. 4. Introduction on the Job: The new entrants are given a brief description of the jobs they are supposed to perform, of the location of their work and the way to approach the jobs, Breakdown signals, fire alarm and other safety precautions are explained. In addition, the method of recording attendance is also indicated to them.

8.2.5

Phases of Induction Programme

A carefully designed induction programme consists of the following three phases: 1.

General Induction

2.

Specific Induction

3.

Follow-up Induction

A brief description of these follows: *

A. D. Singh: Man Management in T ata Steel, The Tata Iron and Steel Co. Ltd., Jamshedpur, 1973, pp. 72-80.

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General Induction: This first phase of induction is conducted by the HR department. The focus of the induction is to expose the new entrant to the organisation by explaining him the mission, objectives, history and philosophy of the organisation. The new employee is also briefed about his service conditions, pay and perks, promotion procudure, personnel policies and grievance handling mechanism practised in the organiosation. This phase of induction inculcates pride for the employee to work in the organisation. The period of induction, depending on the organisation, may vary from a few days to few weeks. Specific Induction: This induction is given by the new employee’s supervisor. The focus is on the overall exposition of the new employee to his job. Accordingly, the employee is introduced to the job, shown place of work and around the premises, introduced to his co-workers and briefed about the procedures and methods, custom and routines, rules and regulations regarding his job. This training/ induction helps the new employee adjust with his work environment. The induction may last for few weeks or even months. Follow-up Induction: The main objective of the follow-up induction is to verify whether the new employee is getting himself adjusted with the work and organisation or not6. This induction is given by the employee’s supervisor or a qualified specialist on industrial psychology. While giving induction training, the employee’s suggestions on adequacy or otherwise of the already conducted induction programmes and on any other related aspects, if any, are duly taken into consideration to make the induction more and more effective. Such feedback can also be used to assess the requirements of guidance and counselling for the new entrants. The duration of follow-up induction may vary from some weeks to few months.

8.2.6 How to Make an Induction Programme Effective? Giving induction to the new employees is essential but is not so simple. Only carefully designed and implemented induction programmes are observed effective. Following are some of the requisites of an effective induction programme: 1. Receiving New Employees: The new employees need to be duly received by the organisation. This inculcates a feeling in the new entrants that they are required in the organisation. Such a feeling serves as a corner stone to be interested to integrate into the organisation. 2. Determining the New Employees’ Need for Information:The central element that guides the designing of an induction programme is to decide first “What do the new employees need to know now?” Many a times, the new employees are given information which are not immediately required but the required one is not given. Such information lack tends to make the new comer confused about the job and the organisation. Therefore, it is important to decide the vital information a new entrant needs to receive on his joining the organisation. 3. Determining How to Present the Information:Having being decided what information employees wants, the next important thing to be decided is how to present the same to the new employees. Obviously, the required information needs to be presented to the new employees in the right form and manner to have its maximum impact on the employees. 4. Delivering Induction Training by the Right Instructor: Much of the effectiveness of an induction programme depends on who conducts the induction training. This is because induction training cannot be given by anyone, but by the right instructor/trainer only. Possession of the required skill, knowledge and attitude are considered to be the requisites of a right instructor. Therefore, the induction programme needs to be conducted by the right trainer only. If required the trainer be given induction training before he/she conducts the induction training for the new entrants to the organisation. 5. Evaluating the Induction Programme:Like all other training programmes, whether or not an induction programme is effective is determined by evaluating the programme. This is necessary to

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know to decide whether to continue the programme in future also or not or whether the programme needs any improvement in future. In fact, it is the evaluation of the induction programme that makes the organisation know whether the amount incurred in induction programme remains as an expenditure or has turned into an investment7. There are various methods employed to measure the effectiveness of training programmes. These are discussed, in detail, in the Chapter 10. Any discussion on induction will remain incomplete without a mention about ‘socialisation’. Therefore, before we close this chapter, a small mention about ‘socialisation’ too is given here.

8.3 SOCIALISATION Some people consider induction and socialisation as synonymous. However, two are different from each other. In fact, induction is only a part of socialisation. Induction is confined to the new recruits only, whereas socialisation covers transfer and promotion as well.

8.3.1

Concept of Socialisation

In simple words, socialisation is the process of adaptation. Different thinkers have defined socialisation differently. For example, Feldoman8 has defined socialisation as “Acquisition of work skills and abilities, adoption of appropriate role behaviours and adjustment to the norms and values of the work group”. In the opinion of Maanen and Schein9, “Socialisation can be conceptualised as a process made up of three stages: pre-arrival, encounter and metamorphosis”. Thus, socialisation can be defined as a process of adaption that takes place as individuals attempt to learn the values and norms of work roles.

8.3.2

Phases of Socialisation Process

The socialisation Process involves the following three phases: 1.

Pre-arrival

2.

Encounter

3.

Metamorphosis

It is interesting to note that these phases show striking similarity with phases of behavioural modification theory propounded by Kurt Lewin10, i.e., unfreezing, changing and refreezing. A brief description of the phases of socialisation follows: Pre-arrival: The pre-arrival phase explicitly recognizes that all the new recruits arrive the organisation with a set of values, attitudes, expectations and learning. In other words, pre-arrival refers to all the learning that occurs before a new member joins the organisation. For example, an MBA graduate knows from the Professors what business is like, what to expect in a business career and acquire the kind of attitudes that will help fit in the organisation. He also comes to know about the organisation and the job during the selection process. Based on these pre-arrival knowledge, the individual forms some expectations of organisation. Encounter: Upon entry into organisation, the new member enters the encounter stage. The role playing starts here. The member starts comparing expectations, the image of the organisation which he had formed during pre-arrival phase with reality. If expectations and reality concur the encounter is smooth. But seldom it concurs. When the two differ, stress and frustration set in. What follows thereafter is a mental process of adjustment. In the process of adjustment, the individual tries to replace his/her own values and norms with those of the organisation. At the other extreme, the member simply can not reconcile to those values and norms of the organisation and gets disillusioned and quits the job.

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Metamorphosis: In this stage, the member masters the skills required to adjust with the organisation’s norms and values. This is a stage going through changes. Hence, this is called metamorphosis stage. This is, of course, a voluntary process and a conscious decision which enables the new member to become compatible with the organisation. This signals the completion of socialisation process.

8.4 SUMMARY This summary is organised by the learning objectives given on page....87: 1.

The act of putting a slected candidate on a specific job is called placement.

2.

Induction is aimed at integrating the new comer into the organisation.

3.

Reduction in anxiety, nervousness, absenteeism, turnover, and improvement in employee morale are the main benefits induction offers to the employee and the organisation.

4.

The contents of an induction programme include organisation, job, service conditions, amenities and facilities to the employees of the organisation.

5.

A formal induction programme consists of three phases, namely, general induction, specific induction and follow-up induction.

6.

Welcome to new employees, determination of employees’ need for information, proper presentation of information, induction by the right instructors and evaluation of induction are prerequisites of an effective induction programme.

7.

Socialisation is the process of adaption to new values, norms and attitudes. The socialisation process consists of three stages: pre-arrival, encounter and metamorphosis.

KEY TERMS Attitudes

Norms

Encounter Stage

Placement

Environment

Pre-arrival Stage

Indoctrination

Socialisation

Induction

Values

Metamorphosis Stage

REVIEW AND DISCUSSION QUESTIONS 1. What do you mean by placement? Explain its significance for an organisation. 2. What is induction? What are its purposes? 3. “If employees are properly selected, there should be no need for an induction programme”. Comment. 4. What benefits can induction provide for an employee and organisation? 5. Explain the contents an effective induction programme should contain. 6. If you were the incharge of induction in an organisation, tell how you would orient a new management trainee. 7. Identify a social group that you are familiar with and describe its socialisation process for new entrants. 8. “Selection is a substitute for socialisation.” Do you agree or disagree? Discuss.

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REFERENCES 1. Paul Pigors and Charles Myres: Personnel Administration: A Point of View and a Method, McGraw- Hill Kagakusha Ltd., Tokyo, 1973, p. 285. 2. Arun Monappa: Managing Human Resources, Macmillan India Limited, New Delhi, 1997, p. 114. 3. Michael Armstrong: Personnel and the Bottom Line, Institute of Personnel Management, London, 1989, pp. 136-179. 4. R. P. Billimoria: Induction in Industry, In : Readings in Personnel Management, The Indian Institute of Personnel Management, Orient Longman Ltd., New Delhi, 1970, p. 94. 5. R. P. Billimoria: Ibid, 1970, p. 95. 6. John H. Bernardian and Joyce E. A. Russell: Human Resouce Management – An Experimental Approach, McGraw- Hill, New York, 1993, p. 317. 7. Michael Meighan: Induction Training: Effective Steps for Investing in People, Kogan Page Limited, London, U.K., 2000, pp. 7-11. 8. Daniel C. Fildman: The Multiple Socialisation of the Organisational Members, Academy of Management Review, April 1981. 9. Van Maanen and Edgar H. Schein: Towards a Theory of Organisational Socialisation, In : Barry M. Staw (Ed.): Research and Organisational Behaviour, Greenwitch Conn. JAI Press 1979, pp. 214-216. 10. Kurt Lewin: Field Theory in Social Science,Harper and Row, New York, 1951.

SECTION – 3

DEVELOPMENT 9. 10. 11. 12. 13.

Career Planning and Development Employee Training Executive Development Organisation Development Internal Mobility and Separations

9 CAREER PLANNING AND DEVELOPMENT Learning Objectives After studying this chapter, you should be able to: 1.

Define career, career planning and succession planning.

2.

Identify major stages involved in a career.

3.

Delineate the process involved in career planning.

4.

Describe various actions taken for a career development programme.

5.

Discuss various actions needed to be undertaken for effective career management.

Organisations recruit and select employees to achieve their objectives of production and profit maximization. On the other hand, employees join organisations to fulfil their work related expectations and desires. Both organisational requirements and employee expectations are never constant but changing. For example, the traditional views that every employee would jump at the chance for a promotion, that competent people would somehow emerge within the organisation to fill vacancies that arose, or that a valuable employee would always be a valuable employee are no longer true. On the other hand, organisations’ capacity to meet the employees’ unique expectations are limited by organisational constraints. As such, managers are now confronted with the new and unexpected complexities in their efforts to effectively utilize their human resources. This has created a situation of conflict in the organisations. If this conflict is not resolved properly, the organisations will not be able to get the best out of their employees. Such a situation calls for matching the employee expectations with the organisational requirements. This is done through career planning and development. In the following pages, the emergent need for career planning, the concepts of career, career planning and succession planning will be discussed followed by a discussion on career process, career development and career management.

9.1 CONCEPTS OF CAREER AND CAREER PLANNING What Is A Career? A career can be defined as all the jobs held by a person during his working life. It consists of a series of properly sequenced role experience leading to an increasing level of responsibility, status, power, and rewards. According to Flippo1, “a career is a sequence of separate but related work activities that provide continuity, order, and meaning in a person’s life”. This is the objective view of a person’s career. However, there is also a subjective element in the concept of career in the sense that changes in attitudes, motivation and values occur as a person grows old. In both the perspectives, the focus is on the individual. Career, thus, represents an organised, well-timed and positive move taken by a person across time and space. It must be noted here that a person’s carrer is shaped by many factors, e.g., education, experience, performance, parents, caste links and some occasional luck. Similarly, while some people like creative personnel and artists may deal independently with shaping their careers, there are others those employed by somebody do not have much scope for their own pursuits and, in turn, career. 97

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What Is Career Planning? Career planning can be defined as a systematic process by which one decides his/her career goals and the path to reach these goals. For example, one young man decides upon an academic career and establishes the following sequence of positions. (1) Ph. D. degree by age 26, (2) Lecturer by 27, (3) first book published by 30, (4) Reader by 35, (5) Professor and the head of the department by 40, (6) dean of the school by 45, and (7) Vice Chancellor of a university by 55. From an organisation’s view point, career planning stands for the forward looking employment policies of it which take into account the career of individual employees involved in various tasks. It unites organisational human resource planning with individual career needs. Individual career goals and career path in conformity with individual capabilities and aspirations are matched with the manpower planning in a human resource developemtn programme. This is necessary to properly motivate the people to indentify themselves fully with the organisation, and to ensure expected level of organisational commitment. It also develops people for managerial succession which is discussed a little later in this chapter. In brief, career planning is a managerial technique for mapping out the entire career of employees from the employment stage to the retirement stage. It involves discovery, development, planned employment and reemployment. Key Terms in Career Planning. Before we proceed further, a mention of the key terms commonly used in connection with career planning seems pertinent. Career Goal: The future positions one strives to reach in his career. Career Path: The sequential and progressive path or line through which one moves toward his/ her career goal. Career Anchors: These are the basic drives acquired by an individual during the socialisation process which urge him to take up a career of a certain type. Career Progression: Making progress in one’s career through a series of right moves in the form of promotions. Mentoring: A process wherein a senior employee serves in an informal way as a teacher, guide, friend, philosopher and confidante to the new employee in the organisation. Career Planning: This is the process by which an employee selects career goals and the path to these goals. Career Development: The personal improvements one undertakes to achieve a personal career plan. Career Management: This is the process of designing and implementing goals, plans and strategies to enable the organisation to satisfy employee needs while allowing individuals to achieve their career goals. Career Anchors: Longitudinal researches conducted by the psychologists have indicated that during the socialisation process, certain attitudinal syndromes are formed early in life. These syndromes are composed of a combination of needs, values, and talents and serve to anchor the person to one or a few related type of careers throughout his life. Knowledge of these anchors helps in planning career development. This is precisely the reason why a person desires to be a doctor or engineer or administrator and alike in his/her life. In a sense, jsut as boats put down anchors to keep them from drifting too far, individuals put down anchors to stabilise their career choices. Five career anchors identified are: 1. Managerial Competence: People having such anchors are characterised by an overriding interest in managerial positions that offer opportunities for higher responsibility, decision making and control and influence.

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2. Technical-Functional Competence: People having a strong technical - functional career anchor seem to make career choices based on their technical or functional knowledge of the work, such as engineering and accounting. They like to become experts/specialists rather than become general managers. 3. Security: People driven by such career anchors like to ensure security of career through compliance with organisation’s prescriptions. 4. Creativity: Such people are characterised by an overriding interest to do something new that could be identified as theirs. Such people start a new venture, work in research lab and pilot some business venture. They choose a career less for making money than identifying them by creating something new. 5. Autonomy-Independence: People having such career anchors seek a career that provides freedom of action and independence. Freelance writers and consultants belong to this category.

Need for Career Planning The need for career planning is felt to : (i) Attract competent person and retain them in the organisation. (ii) Provide suitable promotional opportunites. (iii)

Map out careers of employees suitable to their ability, and their willingness to be trained and developed for higher positions.

(iv)

Ensure better utilization of managerial reserves within an organisation.

(v) Reduce employee dissatisfaction and turnover. (vi) Improve employee morale and motivation by matching their skills to job requirements. (vii) Provide guidance and encouragement employees need to fulfil their potentials. (viii) Achieve higher productivity and organisation development.

Succession Planning Organisations run on eternal basis. The survival and thrive of any organisation on continuous basis requires a succession of persons to fill key positions. This is done through “succession planning”. Succession planning can be defined as an executive inventory report indicating what individuals are ready to move into higher positions in the organisation. In an organisation, positions at higher levels fall vacant due to various reasons like retirement, resignation, promotion, transfer, death, etc. Therefore, the very purpose of succession planning is to identify, groom, develop and make the people ready to occupy higher level jobs as and when they fall vacant. Succession may be from both internal and external sources. Succession from internal sources is advantageous to the organisation as well as to the internal employees. This is so because while organisation can buy employees loyalty and commitment, employees feel belongingness, and shared feelings of development along with the organisation. In order to groom internal employees to assume higher responsibilities in future, some professionally run large organisations ask their managers and supervisors to identify the internal employees having potentialities to replace them in jobs should the need arise. However, it is necessary to allow inflow of new blood also, i.e., succession through outside talent in certain cases like when competent and qualified people are not available internally, when major expansion, diversification and growth plans are in offing. Experiences suggest that complete dependence on either internal or external sources is not advisable to any organisation. What is often advisable in this regard is a judicial balance between the two sources should be maintained. According to Biswajeet Pattanayak3, the succession planning involves the following core activities :

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(i) Analysis of the demand for executives, managers and professionals by level, function and skill. (ii) Audit of existing executives and inventory of likely future supply from both internal and external sources. (iii) Planning individual career paths based on objective estimates of future needs and drawing on reliable appraisal and assessment of potential. (iv) Undertaking career counselling in the context of future requirements for executives and managers. (v) Accelerated promotion schemes with development targeted against the future needs of the organisation. (vi) Training and development activities to groom people for future roles. (vii) Planned recruitment to fill short-term vacancies and provide people for development to meet future needs. (viii) The actual process by which jobs are filled includes recruitment procedure, internal appointment procedure, methods of assessment, internal search mechanism and often, use of computer-based information systems.

9.2 CAREER STAGES Just as human beings pass through certain life-cycle stages from birth to death, so does a person also on joining an organisation passes through a series of stages in his career4. Viewed from this angle, there are five stages that every individual goes through during his/her career. Exploratory Stage: As the term itself denotes, it is a stage in which a person explores, possible career options for oneself and it happens usually in mid-twenties when one makes transition from education to earn i.e., work. Experiences suggest that several factors like the careers of the parents, their interests, their aspirations for their children, and their financial resources shape the children’s future career options. Since this stage occurs prior to employment, it has least relevance for the organisation. Establishment Stage: This stage begins with choosing a job, or say, career, for oneself. This stage is marked by the first experiences on the job, acceptance and evaluation by peer groups. In this stage, one tries to make his/her mark and in the process commits mistakes, learns from mistakes, and gradually assumes increased responsibilities. However, one does not reach the summit or peak productivity at this stage. Putting it differently, this stage is like going uphill, making lot of efforts, spending lot of time and energy all the while. Mid Career Stage: This is a stage marked by improved performance, level off or starting deterioration. This is the stage when one is no longer seen as a learner. Hence, mistakes committed are viewed seriously and invite serious penalties. At this stage in a career, one reaches to a plateaued-career and is expected to make moves. For many, this is a time of reassessment, job changes, adjustment of priorities, or pursuit of alternative life styles. In one case, an executive at the age of 40 moved to journalism and was quite successful. Several such cases of career movement abound in the society. Late Career Stage: This stage is usually a pleasant stage for those who continued to grow during the mid-career stage. Based on one’s good performance during the earlier stage, one now enjoys playing the part of the elder statesman and basks in the respect given by the junior and younger employees. During this stage, the people do not have to learn but to suggest and teach others how to go about in their jobs. But, for those who have either stagnated or deteriorated during the mid-career stage, the late career stage brings the reality for them that they are no longer required in the organisation and, therefore, it is better for them to direct themselves to retire.

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Decline Stage: This is the final stage in one’s career to retire from one’s job or career. Impending retirement scares everyone but more to those who have sparkling career earlier. This is so becasue these persons have to step out of the limelight and give up a major component of their identity. On the contrary, decline stage is less painful for modest performers or failures. Their frustration associated with work is left behind. On the whole, decline stage is a difficult stage for anyone to confront. Nonetheless, some planning for retirement can ensure smooth transition from working life to retired-life. In India, many organisations have started to conduct training programmes for their retiring employees. For example, the Indian army regularly organizes resettlement courses for its personnel who are about to retire. Now all these stages are depicted in Figure 9.1. Exploration

Establishment

Late Career

Decline

Performance

Mid-Career

25

35

50

60

70

Age (in Years) Fig. 9.1 : Stages in Career Development

Adapted from : D.E. Super and D.T. Hall : Career Development : Exploration and Planning, Annual Review of Psychology, 1978,.

9.3 CAREER PLANNING PROCESS Employees join organisations to fulfill their career goals and aspirations, on the one hand, and organisations provide them opportunities available with them, on the other. The difference between the employees aspirations and organisational opportunities, if any, gives rise to a situation of conflict between the two. If the conflict, or say, incongruence is allowed to persist, employees experience dissatisfaction and, in turn, withdraw themselves from being actively engaged in the productive pursuits. The same underlines the need for career planning, as discussed earlier. The career planning is a process to assist the employees to achieve a better match between their career goals and the opportunities available in the organisation. The career planning as a process involves the following steps: 1. Analysing Employee Needs and Aspirations:Sometimes, most of the employees do not know their career anchors and aspirations. Organisations also assume the career goals and aspirations of

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employees which need not be in tune with the reality. Therefore, first of all, an analysis of the employee career anchors, aspirations and goals must be done through objective assessment. This assessment is based on personnel inventory. Since most employees do not have a clear idea of their career anchors and aspirations, they, therefore, need to be provided as much information about these matters as possible informing what kind of work would suit the employee most considering his/her skills, experience and aptitude into account. 2. Analysing Career Opportunities: Once career aspirations and goals of employee are known, there is a need to analyse various career opportunities available to offer under prevailing career paths in the organisation. Career paths indicate career progression. Here also, since many employees may not be aware of their own career progression path, this needs to be made known to them. Sometimes, organisations may offer career progression at a particular level for both young direct recruits and own older employees through promotions. Recognizing varying kinds of career anchors and aspirations of the two types of employees, organisations need to outline career paths striking a balance between those of internal employees with experience but without professional degree and those new recruits with excellent professsional degree but lacking experience. 3. Identifying Congruence and Incongruence: At this stage, a mechanism for identifying congruence between employee career aspirations and organisational career system is developed. This helps identify specific areas where mismatch or incongruence prevails. This is done through relating different jobs to different career opportunites. Such a mechanism of match and mismatch between career aspirations and opportunities enables the organisation to develop realistic career goals, both long-term and short-term. 4. Action Plans and Periodic Review: Having identified the mismatch, now it is necessary to formulate an alternative strategy to deal with the same. Some of the strategies adopted by several organisations include the following: (a) Changes in career system by creating new career paths, new incentives, new rewards by redesigning jobs for lateral movement. (b) Change in the employee’s hopes and aspirations by creating new needs, new goals and new aspirations. (c) Seek new basis of integration through problem solving, negotiations, compromises, etc. FEEDBACK

Individual needs and aspirations

Organizational needs and opportunities

Personal counselling and Assessment

Individual development

Synthesizing

Complementing

Personal planning and career information

Formal Training and development programmes

Fig. 9.2: Career Planning Process

Placement on career path

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After initiating these strategies, it is also necessary to review the same every now and then. Such a review will enable the organisation to know whether the plans are contributing to effective utilization of human resources by matching employee aspirations to job needs. This will also help the employee know in which direction he/she is moving and what kind of skills he needs to face the emerging and challanging organisational situations. Alpin and Gester 5 have suggested a framework of career planning process aimed at integrating the individual and organistional needs. This is presented in Figure 9.2.

9.4 CAREER DEVELOPMENT Strictly speaking, career plans are of no use without career development programmes. As mentioned earlier, career development consists of actions undertaken by the individual employee and the organisation to meet career aspirations and job requirements. For this, a properly designed career developement programme needs to involve the following main actions:

Career Need Assessment In fact, career is highly personal and extremely important element of one’s life. Hence, there is a need for selection of a right career for oneself. It is important but is not so easy. Just as there is considerable confusion among many university students studying management like you as to proper choice of major subject, so is in case of many employees as to the type of work that would suit them best. Here lies the role of human resource manager to assist the employee in his/her career decision making process by providing as much information as possible about the employee to the employee. There are a number of evaluation instruments available to test aptitude, abilities, attitudes, etc. to have a fair idea of the career needs of people. For example, life planning workbooks can be used to help employees develop and select their career goals6. While doing so, employees are asked to consider whether they value prestige, independence, money or security, or whether they prefer to lead follow approach of life. In recent years, formal assessement workshops have become quite popular where small groups of employees are subjected to psychological testing, simulation exercises and depth interviewing. These are conducted by the experts/specialists who assist employees make decisions about their career goals. The objective of these assessment workshops is not that of selecting future promotees, but rather to help employees do their own career planning.

Career Opportunities Realizing that employees have definite career needs, it becomes obligatory on the part of organisation to chart specific career paths and make the same known to the employees. As pointed out earlier in Chapter 5, job analysis and job design provide the fundamental information required to chart career paths in an organisation. Having charted the career paths or career opportunities, it is important to publish them in a booklet form which can be made available to the employees. The availability of such information will help employees plan their own career movement and progression.

Need-Opportunity Alignment When employees have assessed their career needs and have become aware of organisational career opportunities, the next step in the career development programme is one of alignment 7. For this, organisation needs to design such developmental programmes as will help the employees align their career needs with organisational opportunities. Various developmental programmes such as performance appraisal, management by objectives (MBO), career counselling, job rotation, etc., can be used for ensuring an effective alignment of employee’s career needs with career opportunities available in the organisation. The developmental programmes are seen as relevant not only for today’s job, but for the future job also.

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In case, appropriate career opportunities are not available for some employees in the organisation, they may be assisted by the organisation in finding suitable positions outside. Doing so is useful because otherwise such employees will fall prey to dissatisfaction which benefits none. What makes career development effective?: The effectiveness of a career development programme depends on the following8: (a) Employees believe that their supervisors care for their career development. (b) There is awareness about the individual strengths and weaknesses and an appreciation of organisational constraints. (c) Career plans are developed with necessary support system to provide a fair and equal opportunity to all concerned within and among different job families. In order to take advantage of career development, it needs to be properly managed. Hence, one last mention about ‘career management’ seems pertinent before we close this chapter.

9.5 CAREER MANAGEMENT Career managment involves both organisational actions and individual initiatives with an objective to strike a balance between needs and opportunities given the changes therein whether foreseen or not. A career management includes both individual career planning and organisational initiatives to have a balance between career goals and organisational needs. As a matter of fact, the two strategies complement and reinforce each other in the process. To put simply, individual employees will not be willing to respond to opportunities provided by the organisation if they have not planned well their career progression. Reverse will also be true. In the absence of organisational opportunities, efforts made for individual career planning will not be effective. Bernardin and Russel9 have developed a model to integrate organisational opportunities with career goals or needs of employees. This is shown in Figure 9.3. Individual Career Planning    

Career Development

Assess needs Analyse career opportunities Set career goals Develop action plans Organisational Career Planning

   

Assess human resource requirements Career paths for each person Integrate career goals and organisational needs Initiate career development efforts

       

How individuals can reach the top? How organisations can help? Self-assessment tools Individual counselling Information services Assessment programmes Development programmes Programmes for special groups

Fig. 9.3: The Career Management Model

9.6 SUMMARY This summary is organised by learning the objectives given on page ...97: 1.

A career is a sequence of positions occupied by a person during the course of his/her life time.

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Career planning is a process of identifying strengths, weaknesses, specific goals and jobs that individuals like to occupy. Succession planning refers to an inventory indicating which individuals are ready to move into higher positions in the company. 2.

A career consists of five stages, viz., exploration, establishment, mid-career, late - career and decline.

3.

Career planning process includes activities like analysing employee needs and aspirations, analysing career opportunities, identifying congruence and incongruence, and action plans and periodic review.

4.

Career development is a three-step process including career need assessment, career opportunities, and need-opportunity alignment.

5.

Career management refers to a set of activities including those of both the individual employee and organisation aimed at coping with changes in career plans, whether caused by organisational requirements or individual employee’s needs and aspirations.

KEY TERMS Career

Career Path

Career Anchors

Career Planning

Career Development

Management by Objectives

Career Goal

Plateauing

Career Management

Succession Planning

REVIEW AND DISCUSSION QUESTIONS 1. What is meant by the term ‘career’ ? Outline the process of career planning clearly. 2. Distinguish between: (a) Career Planning and Manpower Planning. (b) Career Planning and Succession Planning. 3. What is career development? Explain the steps involved in it. 4. “Career development is a waste of money for a company. All it does is raise employees’ expectations and then, frusterated, they quit.” Do you agree or disagree? Discuss. 5. What type of information would you seek from the human resource department to help you develop your own career plan if you were just starting with a large multinational corporation?

REFERENCES 1. Edwin B. Flippo : Personnel Management, McGraw-Hill Book Company, New York, 1984, p. 248. 2. Edgar H. Schein : How Career Anchors Hold Executives to Their Career Path, Personnel, Vol. 52, No.3, May-June 1975, pp. 11-24. 3. Biswajeet Pattanayak : Human Resource Management, Printice-Hall of India Private Limited, New Delhi, 2002, p. 111. 4. Edgar H. Schein : The Individual, the Organisation, and the Career : A Conceptual Scheme,Journal of Applied Behavioural Science, Vol.7, 1971, pp. 401-426.

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5. J. C. Alpin and D. K. Gester : Career Development : An Integration of Individual and Organisational Needs, Personnel, March-April, 1978, p.24. 6. H. A. Shepard and J. A. Hawley : Life Planning : Personal and Organisational, National Training and Development Service, Washington D. C., 1974. 7. E. H. Schein: Career Dynamics : Matching Individual and Organisational Needs, AddisonWesley, Reading, Massachussetts, 1978. 8. C. S. Venkata Ratnam and B. K. Srivastava : Personnel Management and Human Resources,Tata McGraw-Hill Publishing Company Limited, New Delhi, 1996, p.144. 9. H. J. Bernardin and J.E.A. Russel : Human Resource Management, Mc Graw Hill, New York, 1993, pp. 340-357.

10 EMPLOYEE TRAINING Learning Objectives After studying this chapter, you should be able to : 1.

Define training and distinguish between training, development and education.

2.

Appreciate the need for employee training.

3.

Explain why employee training is important.

4.

Indentify the major steps involved in training programmes.

Organisations run on long-term basis also termed as ‘enternal basis’ adapting with changing conditions. Hence, they need human resources inter alia at present and future. The process of human resource management (HRM) starts with planning, as seen in the previous section, for how many and what kind of people will be needed at different points of time in the organisation. Therefore, once employees have been recruited and selected, the next step involved in the HRM process is to transform them to meet the future requirements of the organisation. Such transformation of employees is done by means of training and development. Based on skill requirements for job performace, employees required in an organisation are broadly classified into two categories, viz., operatives and supervisory/managerial. Operatives perform routine and repetitive type of jobs. We shall discuss issues involved in training at operative level in this chapter. How an organisation can develop its supervisory and managerial employees will be the subject matter of our next Chapter 11.

10.1 CONCEPT OF TRAINING What is meant by training? Training is the process of teaching the new and/or present employees the basic skills they need to effectively perform their jobs. Alternatively speaking, training is the act of increasing the knowledge and skill of an employee for doing his/her job. Thus, training refers to the teaching and learning activities carried on for the primary purpose of helping members of an organisation to acquire and also to apply the required knowledge, skill and attitudes to perform their jobs effectively. According to Edwin B. Flippo 1, “ training is the act of increasing the knowledge and skills of an employee for doing a particular job.” Michael Armstrong 2 points “ training is the systematic modification of behaviour through learning which occurs as a result of education, instruction, development and planned experience”. In the opinion of Michael J. Jucious3, “Training is any process by which the attitudes, skills and abilities of employees to perform specific jobs are improved.” Thus, it can be concluded that training is a process that tries to improve skills, or add to the existing level of knowledge so that the employee is better equipped to do his present job, or to mould him to be fit for a higher job involving higher responsibilities. In other words, training is a learning experience that seeks a relatively permanent change in an individual that will improve his/her ability to perform his job. 107

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Difference between Training, Development and Education Some people consider the three terms namely, training, development and education as synonymous, i.e., meaning the same thing. But, all the three terms mean different things as explained hereunder.

Training The meaning of training has just been explained.

Development Compared to the term ‘training’, the term ‘development’ has broader scope and aim to develop people in all respects. Accordingly, development covers not only activities/skills which improve job performance, but also those activities which bring about growth of the personality, help individuals progress toward maturity and actualisation of their potential. Thus, development enables individuals to become not only good employees but better men and women also. Clearly, development is an ongoing continuous process, while training is a one-shot deal. In ultimate sense, development refers to behavioural modification of people through continuous learning practices. Development relates to non-technical organisational functions such as problem solving, decision-making and relating to people.

Education Like the term ‘development’, the term ‘education’ is also wider in scope and broader in purpose when compared to training. Education is the (life-long) process of increasing the general knowledge and understanding of people about the total environment. Thus, education is person and theorybased. Its main purpose is to improve the conceptual understanding of the people about a subject or theme or environment. Education is imparted through schools or colleges or universities, through the contents of programmes aimed at improving the knowledge and understanding of the people about their environment. Having gone through the meanings of the three terms, education is not found much different from development. However, training is found quite different from development in four ways as stated below: (i) What is learned: (ii) Who learns; (iii) Why such learning takes place; and (iv) When learning occurs? These differences can be stated as follows: Learning Dimensions

Training

Development

What?

Technical and mechanical operations.

Theoretical and conceptual ideas.

Who?

Non-managerial or operative personnel.

Managerial/supervisory personnel.

Why? When?

Specific job related purpose. Short-term.

General knowledge. Long-term.

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10.2 NEED FOR TRAINING Training is the act of improving one’s knowledge and skill to improve his/her job performance. Training is job-oriented. It bridges the gap between what the employee has and what the job demands. For that matter, imparting training to employees working in all organised sectors of human activity is no longer a matter of debate. As a matter of fact, of late, the need for training has been recognized as an essential activity not only in the business organisations, but also in academic institutions, professional bodies and the government departments. For example, attending one orientation and two refresher courses has been made cumpulsory for the University/College teachers with an objective to improve their knowledge and skill for improving their job (teaching) performance. Several conditions have contributed to make the organisations realize and recognize the need for imparting training to their employees. Venkata Ratnam and Srivastava 4 have listed these conditions as follows: (i) Sub-optimal performance of organisations in government, public and private sectors. (ii) The ever widening gap between planning, implementation and completion of projects. (iii) Technological change necessitating acquisition of new knowledge, ability and skills. (iv) Increasing qualitative demand for managers and workmen. (v) Increasing uncertainties and complexities in the total environment necessitating flexible and adaptive responses from organisations. (vi) Need for both individuals and organisations to grow at rapid pace. (vii) To meet challenges posed by the global competition. (viii) To harness the human potential and give expression to their creative urges. (ix) To enable employees to move from one job to another. (x) To bridge the gap between what employee has in terms of knowledge and skill and what his/ her job actually demands. In view of the above needs, employees need training to be imparted in the following areas:

Areas of Training Knowledge: Training aimed at imparting knowledge to employees provides for facts, information and principles related to his/her job. In general, training imparted in the knowledge area considers three aspects, namely, job context, job content and quality of work. Technical Skills: The training in this area aims at teaching the employees the physical acts or actions like operating a machine, working with a computer, using mathematical tools to take decisions, etc. It is somewhat like induction training. Social Skills: The training in this area is broader in scope embracing many aspects. This category of training aims at the development of individuals and team work. Accordingly, employees are imparted training to acquire and sharpen such behavioural and human relations skills that help improve inter-personal relationship, better team work and effective leadership. Techniques: Training in this area involves teaching employees the manners how to apply knowledge and skills to dynamic situations. Attitudes: This involves orientation or induction programmes that help change the employees attitudes favourable toward the achievement of organisational goals. Through training programmes, employees attitudes are moulded to render support for the effective completion of company activities and inculcate the spirit of better co-operation and greater loyalty among the employees. Experience: It is not and cannot be taught or imparted in the classroom. It is gained by putting

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knowledge, skills, techniques and attitudes into use over a period of time in different work situations. Experience makes one perfect.

10.3 IMPORTANCE OF TRAINING The following two Chinese proverbs highlight the importance of the employee training: “Give a man a fish, and you have given him meal. Teach man to fish, and you have given him livelihood.” “If you wish to plan for a year sow seeds, if you wish to plan for ten years plant trees, if you plan for life-time develop men.” The importance of employee training can best be appreciated with the help of various advantages it offers to both employees and employers. These are explained under the following heads: 1. Better Performance: Training improves employee’s ability and skills and, in turn, improves employee’s performance both in quantity and quality. Better or increased employee performance directly leads to increased operational productivity and increased organisational profits. Improvements in employee performance/productivity in developed countries5 lend support to this statement. 2. Improved Quality: In formal training programmes, the best methods of performing jobs are standardised and then taught to employees. This offers two-fold benefits. Firslty, unifromity in work performance helps improve the quality of work or service. Secondly, better informed, or say, trained workers are less likely to make operational mistakes. 3. Less Supervision: A trained worker is self-reliant. He knows his work and way to perform it well. Therefore, his work requires less supervision. The supervisor can devote his time on more urgent works. 4. Less Learning Period: A well planned and systematically organised training programme reduces the time and cost involved in learning. Training enables to avoid waste of time and efforts in learning through trial and error method6. 5. High Morale: Training not only improves the ability and skill of employees, but also changes employee attitude toward positive. Higher performance, job satisfaction, job security and avenues for internal promotion lead to high morale among the employees. high morale, in turn, makes employees more loyal to the organisation. 6. Personal Growth: Training improves employee’s ability, knowledge and skills and, thus, prevents employee’s obsolescence. This makes employees growth-oriented. 7. Favourable Organisational Climate: The aforesaid advantages combinedly lead to an improved and favourable organisational climate characterised by better industrial relations and disciplines, reduced resistence to change, reduced absenteeism and turnover of employees, and improved stability of organisation. Thus, it may be observed that the importance of training can be imbued with multiplicity of justifications. In fact, a systematic and effective training is an invaluable investment in the human resources of an organisation. Therefore, no organisation can choose whether or not to train employees. The only choice left to organisation is whether training shall be haphazard, casual and possibly misdirected or whether it shall be made a carefully planned part of an integrated programme of human resource management. Hence, the real problem for an organisation is how to design an effective training programme. This we discuss in the following section.

10.4 STEPS IN TRAINING PROGRAMMES The beginning of the modern day concept of training could be traced far back to the Stone Age when people used to transfer knowledge in particular activity through signs and deeds to others7. It

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was only during the industrial revolution the formal and vocational training was started to instruct the apprentices about the operation of machines. Since then, there is no looking back in this regard. Today, training has become the most important organisational activity not only in the business organisations but in the educational institutions also. It’s a fact that many organisations have realized the need for training, created infrastructure and provided financial support. However, the results of many training programmes have been far less than the desired ones. Researchers8 opine that this is so mainly because of non-alignment of training programmes with the overall human resource developement (HRD) strategies of the organisations. Then questions is how to achieve such alignment?. According to them, this can be achieved only when training activities are carried out in a systematic manner. A systematic and integrated approach to training should consist of various interrelated components as shown in Figure 10.1 ORGANIZATIONAL ANALYSIS





TASK/ROLE ANALYSIS   MANPOWER ANALYSIS  

Identification of Organizational objectives/needs/growth potential and resources Identification of knowledge, skills and attitudes required

Identification/definition of target population and performance analysis STATEMENT OF TRAINING NEED  Identification of gap between existing and required level of  knowledge, skills and attitudes  Isolate problem areas amenable to resolution through training SETTING TRAINING OBJECTIVE  In terms of behavioural changes   In terms of output/results DEVELOP MEASURES OF JOB PROFICIENCY  DEVELOP TRAINING POLICY, PLAN, PROCEDURES, RECORDS  PLAN AND DESIGN TRAINING PROGRAMMES  Course construction   Arrange resources CONDUCT TRAINING PROGRAMMES  Individual   Group  On-the-job FOLLOW UP AND EVALUATION  Carry out evaluation at various phases against the training  objectives set  Develop follow-up measures for monitoring VALIDATE  Against measures of job proficiency  ENSURE FEEDBACK OF RESULTS  REVISE IF NECESSARY Fig. 10.1 : A Systematic Approach to Training

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The various activities involved in developing training programmes as listed in Fig. 10.1, can be broadly classified into five steps as follows: 10.4.1.

Identification of training needs

10.4.2.

Setting training objectives

10.4.3.

Designing training methods

10.4.4.

Administration of training programmes

10.4.5.

Evaluation of training

In the following pages, we will discuss them in greater detail.

10.4.1 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 organisation’s demands and that of the individual employee’s. Many methods have been proposed for identifying training needs of the employees. For example, Sinha 9 has listed in rank order the following five methods of identifying training needs: 1.

Views of the line manager

2.

Perofrmance 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.

Organisational analysis

2.

Task analysis

3.

Man analysis

These are discussed in seriatim. Organisational 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 dificiencies and mechanisms that would be needed to make adjustments in those identified deficiencies. Generally, organisational analysis includes the following steps: (i) Analysis of Objectives: Organisational 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, 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 organisational objectives are analysed, 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

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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 organisational 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) Organisational Climate Analysis: The organisational 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 variation. Yet, data on the relevant aspects such as production, meeting deadlines, quality of performance, personal data such as work behaviour, 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,11 a detailed study of jobs and skill analysis is absolutely necessary. The training accordingly imparted would help the employee adjust to their job requirements.

10.4.2 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 organisation. However, while setting training objectives, only employee’s growth should not be taken as an end. Recognizing employees growth a means to organisational growth, training objectives need to be intergrated 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 socialisation 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.

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(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. Kalra13 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.

10.4.3 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 can not use all types of training methods for the reasons like cost involved and also their relevance to organisational 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

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 neceessary 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.

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(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 persepective 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 descripation 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 organisational problems which is a written description for discusion 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 mathod of training is based on this realization that, on many occassions 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 adminstrative problems and are asked to take decisions on these within aspecified 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.

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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 usualy 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. (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 TGroups, laboratory training and encounter groups. (The “T” is for training.). The objective of sensitivity training is to increase participants’ insights into their behaviour and the behaviour 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 popularised by Thomas Harris of U.S.A. It is a tool of improving human relations and interactions, and of promoting rationale and mature behaviour. It identifies three main aspects of human personality : Parent (taught behaviour). Adult (thought behaviour), Child (felt behaviour). Its basic proposition is that people have to behave as adults, although sometime parent and child behaviour is also useful depending upon the situations and the individual’s personal need/ goal. Adult behaviour is characterised by objectivity, problem-solving orientation, mutual respect and understanding. Parent behaviour takes the form of authoritarianism, protective and patronising instances. Child behaviour 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 behaviour particularly when they are involved in inter-personal relationships. Development of positive thinking, imporvement in inter-per-

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sonal 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. have conducted a study and measured the effectiveness of various training methods on several dimensions in rank order. This is shown in Table 10.1. Table 10.1 : Ratings of Training Directors on Effectiveness of Alternative Training Methods for Various Training Objectives Teaching Method

Knowledge Acquisition

Changing Attitudes

Problem Solving Interpersonal Skills Skills

Mean Mean Mean Mean Mean Rank Rank Case study Conference (discussion) method Lecture (with questions) Business games Movie films Programm ed instruc tion Role Play ing Sensitivity training (T group) Television lecture

Mean Rank

Mean Mean Rank

Participant Accpetance Mean

Knowledge Retention

Mean Rank

Mean

Mean Rank

3.56

2

3.43

4

3.69

1

3.02

4

3.80

2

3.48

2

3.33

3

3.54

3

3.26

4

3.21

3

4.16

1

3.32

5

2.53

9

2.20

8

2.00

9

1.90

8

2.74

8

2.49

8

3.00 3.16

6 4

2.73 2.50

5 6

3.58 2.24

2 7

2.50 2.10

5 6

3.78 3.44

3 5

3.26 2.67

6 7

4.03

1

2.22

7

2.56

6

2.11

7

3.28

7

3.74

1

2.93

7

3.56

2

3.27

3

3.68

2

3.56

4

3.37

4

2.77

8

3.96

1

2.98

5

3.95

1

3.33

6

3.44

3

3.10

5

1.99

9

2.01

8

1.81

9

2.74

9

2.47

9

Source : Stephen J. Carroll, Jr., Frank T. Paine, John O. Ivancevich, “The Relative effectiveness of Training Methods–Expert Opinion and Reserarch”. Personnel Psychology, 1972, 25, pp. 495-509.

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

10.4.4 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

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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 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 loose 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) organised only inhouse programmes, whereas 12 per cent of organisations made exclusive use of programmes offered by external/other institutions. Saiyadain21 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. 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,

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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 organisational 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., emnployee and the organisation, without disruption of normal work.

10.4.5 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 trainning 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 organisational 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 analysed 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 behaviour, 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

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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, Bannerji25 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. Sinha26 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. These are given in the following Table 10.2 Table 10.2 : Indicators of Training Effectiveness

Qualities

Values on a 10-point scale Before

After

Personal 1. 2. 3. 4. 5.

Have confidence in subordinates Ready to accept suggestions from subordinates Polite in nature/behaviour Be a man of principles Look after the difficulties of subordinates

— 1 3 2 5

6 8 7 — —

— — — 2 4 5 3 1 2 1

10 4 4 8 10 10 6 1 1 —

— — 3 1

10 7 8 2

Professional 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Be punctual Do manpower planning Delegate his powers Have leadership qualities Be a good coordinator Have good job knowledge Be quick in decision-making Be duty conscious Have a sense of future planning Arrange for equipment and material

Human Relations 1. 2. 3. 4.

Be good in human relations Be honest to the organisation Appreciate the good work of subordinates and motivate them Be cooperative

All the studies mentioned earlier suggest that training can show visible and effective results in terms of improvment in skills, qualities and performance of trainees.

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10.5 SUMMARY This summary is organised by the learning objectives given on page...107: 1.

Training is the process of teaching new employees the basic skills they need to perform their jobs. Development differs from training in the sense that not only it improves job performance but also those aspects which bring about growth of personality and help individuals progress towards maturity and actualisation of their potential. Similarly, education differs from training in the sense that it is a life-long process of increasing the general knowledge and understanding of people about their environment.

2.

Factors like technological changes, increasing demand for skilled manpower, increasing uncertainties, global competition, sub-optimal performance of the organisation, etc., underline the need for training.

3.

The importance of training is appreciated by the role of training in improving the employee performance, quality of work, morale, personal growth, organisational climate and reducing supervision.

4.

The steps involved in a training programme, include identification of training needs, setting training objectives, designing training methods, administration of a training programme and evaluation of training.

KEY TERMS Attitude Case Study Development Education In-basket Learning

Management Games Role Play Sensitivity Training Task Training Vestibule Training

REVIEW AND DISCUSSION QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8.

What do you mean by training? Distinguish between training, development and education. What are the objectives of training? Explain the need for training in an industrial organisation. Explain the various methods of training. Briefly discuss the steps involved in conducting a training programme in a systematic way. Can training be evaluated? Why? How? “Training programmes are helpful to avoid personnel obsolescence”. Discuss. Explain whether and how the effectiveness of a training programme can be evaluated. Write notes on : (a) Management Games (b) Case Study (c) Vestibule Training (d) Sensitivity Training (e) Transactional Analysis 9. How will you identify the training needs of an industrial organisation?

REFERENCES 1. Edwin B. Flippo: Personnel Managerment, McGraw-Hill Book Company, New York, 1984 (Sixth Edition), p.200.

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2. Michael Armstrong : A Handbook of Human Resource Management, Aditya Books Private Limited, New Delhi, 1992, p. 198. 3. Michael J. Jucious: Principles of Personnel Management,Richard D. Irwin, Homewood, 1976, p.250. 4. C.S. Venkata Ratnam and B.K. Srivastava : Personnel Management and Human Resources, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1996, p. 148. 5. Bernard H. Baum, Peter F. Sorensen and W.S. Place : The Effect of Managerial Training on Organisational Control : An Experimental Study, Organisational Behaviour and Human performance, 5 (1), 1970, pp. 170-182. 6. Mirza S. Saiyadain: Human Resources Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1997, p. 217. 7. Ibid, 1997, p. 217 8. C. S. Venkata Ratnam and B. K. Srivastava: op. cit. 1996, p 149. 9. A. D. Sinha: Whither Management Development, ISTD Survey of Indian Business Practices, Calcutta, 1974. 10. W. McGhee and P. W. Thayer: Training in Business and Industry, John Wiley, London, 1961 11. Ishwar Dayal : Conceptual Framework for Determining Training Needs in an Organisation, Indian Manager, 1970, Vol. 1, No.2, pp. 21-28. 12. Ishwar Dayal: Management Training in Organisations: Text, Cases and Simulated Exercises, Printice Hall of India (Pvt.) Ltd., New Delhi,1970. 13. S. K. Kalra: Objectives of Training, Indian Manager, 1972, Vol. 3, No.3, pp. 331-337. 14. A. V. Srinivasan and B. R. Virmani : Action Learning Programmes, Lok Udyog, 1977, Vol. 11, No.1, pp. 9-18. 15. C. B. Mamoria: Personnel Management, Himalaya Publishing House, Bombay, 1996, p. 335. 16. B. F. Skinner: Contingencies of Reinforcement, Appleton-Century Crofts, East Norwalk, C.T. 1969. 17. Edwin B. Flippo: op. cit., 1984, pp. 208-209. 18. A. V. Srinivasan : Executive Development in India— A Futuristic Profile, ASCI Journal of Management, Vol. 6, No. 2, March 1977, pp. 135-146. 19. N. N. Chatterjee: Management of Personnel in Indian Enterprises : Concepts, Practices and Emerging Trends, Allied Book Agency, Calcutta, 1978. 20. A. D. Sinha: op. cit., 1974. 21. M. S. Saiyadain : Training in Public Enterprise : Problems and Suggestions, In : S. Ravishanker and R. K. Mishra (Eds.) Education and Training of Public Enterprise Personnel, Oxford and IBH Publishing Company, New Delhi, 1984. 22. S. K. Sikka : Management Training Evaluation, Indian Journal of Industrial Relations, 1985, Vol.20, No. 4, pp. 491-497. 23. K. K. Mehta : Problems of Supervisory and Managerial Training, Indian Management, 1970, Vol.9, No. 11, pp. 9-14. 24. B. L. Maheshwari : Formal Training, Skill Development and Job Performance, ASCI Journal of Management, 1981, Vol. 11, No.1, pp. 28-38. 25. K. Bannerji : Evaluation of Training : A Study of Supervisory Development, Indian Journal of Training and Development, 1981, Vol. 11, No. 4, pp. 150-155. 26. D. Sinha : Attitudinal Changes in Training Programme, Indian Journal of Training and Development, Vol. 14, No. 2, 1984, pp. 66-69.

11 EXECUTIVE DEVELOPMENT Learning Objectives After studying this chapter, you should be able to: 1.

Define executive development and state its objectives.

2.

Explain why executive development is important

3.

Delineate the process involved in executive development programme.

4.

Discuss the main executive / management development methods.

5.

Describe the method involved in evaluating executive development programme.

While discussing employee training also called ‘operative training’ in the pervious chapter 10, we mentioned that executive or management development will be the subject matter of discusssion chapter 11. The present chapter is accordingly devoted to discuss the various issues involved in executive development in an organisation. We begin with explaining the concept of executive development

11.1 CONCEPTS AND OBJECTIVES While drawing a distinction between training and development in chapter 10, we introduced, in brief, the concept of development. Based on that concept , we can elaborate it in more detail. The term ‘development’ implies overall development in a person. Accordingly, executive development means not only improvement in job performance, but also improvement in knowledge, personality, attitude, behaviourism of an executive, etc. It means that executive development focuses more on the executive’s personal growth . Thus , executive development consists of all the means that improve his/her performance and behaviour. Executive development helps understand cause and effect relationship, synthesize from experience, visualize relationships or think logically. That is why some behavioural scientists suggest that the executive development is predominantly an educational process rather than a training process. Flippo2 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”. According to S.B. Budhiraja3, former Managing Director of Indian Oil Corporation. “Any activity designed to improve the performance of existing managers and to provide for a planned growth of managers to meet future organisational requirements is called management development”. It is now clear from the above definitions of executive/management development that it is based on certain assumptions. We can derive these as follows: 1.

Executive development, being a predominantly educational process, is a continuous and life-long process. It is not like training as a one-shot programme but an on going continuous programme throughout the career of an executive or manager.

2.

Like any kind of learning, executive development is based on the assumption that there always exists a gap between what an executive performs and what he/she can. Executive development harnesses this untapped potential. 123

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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 successsion who can take over in case of contingencies as and when these arise in future.

4.

Prevent absolescence 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

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;

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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.

11.2 IMPORTANCE OF EXECUTIVE DEVELOPMENT Executives, or say, managers manage/run organisations. It is managers who plan,organise, 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 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 alongwith 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 Drucker7 opines that, “an institution that can not 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 effficiently 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 .

11.3 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.

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

6



Evaluating Development Programmes



5 Conducting Development Programmes



4

Developing Development Programmes



3 Inventory of Executive Manpower

2 Appraisal of Present Manage -rial Talent

Identifying Development Needs

1

Fig. 11.1: Executive Development Process

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.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 organisational as well as individual, i.e manager needs. While organisational needs may be identified by making organisational analysis in terms of organisation’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 Pr esent 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 an 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 tailormade 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 organised either by the organisation itself or by some outside agencies.

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

11.4 METHODS Since no single development programme can be adequate for managers, it is undertaken in a variety of methods. Various methods/ techniques of executive/management development may be classified into two broad categories as shown in the following figure 11.2 Fig. 11.2: Executive Development Methods On-the-job methods

Off -the-job methods

↓

↓

Coaching

Lecture

Job Rotation

Case Studies

Understudy Assignments

Group Discussion

Committee Assignments

Transactional Analysis Role Playing Management Games Sensitivity Training In-basket Exercise Organisation Development

These all methods, except organisation development, have already been discussed in the previous chapter10. The organisation development technique is discussed in depth separately in the next Chapter.12.

11.5 EVALUATION Since executive development programme is purposive one, hence there is a need to appraise the effectiveness of the programme. Such an exercise highlights the weaknesses, if any, of the programme and helps in determining whether the development programme should be continued in future also or how it can be improved to meet its objectives. What is programme/training evaluation after all? Hamblin8 has defined training evaluation as “any attempt to obtain information (feedback) on the effect of a training programme and to assess the value of the training in the light of that information”. In fact, evaluation of executive development/ training programme is as much important is not so easy. The reason is not difficult to seek. The impact of programme is of abstract nature and has long-term impact on both the executives/trainees and the organisation. Therefore, it is difficult to measure effect of programme in quantitative terms. At best, only qualitative improvements can be gauged. Then, the problem is how to measure even the qualitative improvements. Behavioural scientists suggest that the evaluation of the effectiveness of any executive development programme should adopt a systematic procedure so as to be more realistic. The procedure may consist of the following steps: 1.

Determination of development objectives

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2. Fixation of evaluation ctriteria 3. Collection of relevant information 4. Analysis A brief description of these follows:

Determination of Objectives Every executive development programme is conducted to meet the specific objective or objectives. The reason is that all training/development programmes do not contribute in all areas. Hence, the objectives of a programme should be set in clear terms at the first instance. The objectives so set then should govern the evaluation of the effectiveness of the particular development programme.

Fixation of Evaluation Criteria Ideally speaking, the evaluation criteria should be fixed in the light of the objectives of training/ development programme. Which are broadly classified into two categories: immediate objectives and ultimate objectives. The immediate objetives refer to learning and change in behaviour, while ultimate objectives mean increase on productivity, reduced employee turnover, and improved industrial relations. The fixation of evaluation creteria in both the cases may not be similar and same. For example, to fix an evaluation criterion for measuring intangible effects like change in behaviour is not simple. In such case, difference in the pre-training and post training behaviour of the same executive9 or difference in behaviour between a trained and untrained executive of the same level may be the evaluation criteria10. Yes, it is easy to fix evaluation creteria for tangible effects like increase in productivity. Bet, here also the fact remains that training may not be the sole factor for increase in productivity. Use of new technology and better methods of production, for example, may also have contributed to increase in productivity. Hence in order to evaluate the effectiveness of the training/ development programme, evaluation criteria should be fixed as such that can eliminate, to the extent possible, the effect of other factors on productivity.

Collection of Relevant Information Once the aspects to be measured and criteria in respect of these are fixed, next step is to collect relevant data and information to arrive at some conclussions. The type of data collection will vary in line with aspects to be measured. The sources of data collection will include organisational records, questionnaires, interviews, observations, psychological tests etc. It must be noted that the appropriateness of evaluation will depend on the collection of appropriate and relevant data .

Analysis Data collection remains meaningless till it is analysed and interpreted. At this final stage, collected data is analysed and interpreted to know the impact and effectiveness of the executive development programme. Such a knowledge is necessary for both the organisation and the employees. Having such knowledge, organisation decides whether to continue the development programme in future also or not . This is because, training involves costs. On the other hand, employees also decide whether they should undergo training or not.

Reasons for the Failure of the EDPs Not only the measuring of the effectiveness of EDP is difficult and complex, but also there are some reasons that make it ineffective or failure. Based on his study, Biswajeet Pattanayak11 has identified the following five major reasons for the failure of EDPs in India: 1. Non-alignment of EDPs with the challanges, problems and strategies of the organisations. 2. Non-suitability of programmes designed to create awareness and understanding among the executives or/and managers.

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3. Lopsided focus of programmes skewed in favour of individuals than organisations. 4. Participation of executives/ managers in the programme by chance not by choice. 5. Inability of programmes to help the participants confront with the reality. Besides, there are some other reasons responsible for failure of EDPs in India12 as given below: 1. Little or no opportunities for advancement in future for managers that makes especially middle level managers ‘frozen’. 2. Home sickness, firm ties with one’s family, community, society, etc. also inhibit executive dev-elopment through training programmes, especially outside training programmes. 3. Non-conducive relations between the superiors and subordinates becomes a stumbling block in smooth administration of the programme.

How to make the EDP Successsful? The following principles may help make the EDP successful: 1.

2. 3. 4. 5. 6. 7. 8.

The top management should accept responsibility for getting the development programme duly executed. For this, a senior executive should be made incharge to execute the programme in a proper manner. The EDP should be properly aligned with the needs of the people and organisation. Every mananger should willingly accept the responsibility to develop executives under his control and direction. Right persons for executive positions particularly at the entry level shold be entered. The objectives, coverage and type of EDP should be clearly spelled out before the commencement of the programme. The EDP should follow a realistic time schedule to develop executives to meet the present and future needs of the organisation. The EDP should be found interesting by the participants. In the absence of it, any effort made for the EDP will be just fledgling a dead horse. Lastly, feedback should be made available to the learner/executive so that he/she knows his/ her progress and can take required steps to improve himself/herself .

11.6 SUMMARY This summary is organised by the learning objectives given on page...123: 1.

2. 3. 4. 5.

Executive development or management developoment is a process which improves current and future management performance by imparting knowledge, increasing skills, shaping behaviour and changing attitudes. The main objectives of the EDP or MDP are to improve competence and performance prevant obsolescene, ensure availability of executives at present and in future, and improve human relation skills. The importance of the EDP for an organisation is that it keeps the organisation alive and run. In short, anything minus executive development in an organisation mounts to nothing. The process of the EDP involves six steps, namely, need identification, managerial appraisal, executive inventory, programme design, programme execution, and evaluation. The methods of executive development are broadly classified into two categories, viz., onthe-job methods and off-the-job methods. Evaluation of the EDP is done through the criteria like reaction, behaviour and results. The EDP produces two types of effects : tangible and intangible.

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KEY TERMS Attitude

Feed back

Career

Learning

Executive Development

Training

REVIEW AND DISCUSSION QUESTIONS 1. What do you mean by executive development? What are its objectives? 2. State the importance of executive development in the Indian context. 3. Discuss the methods of executive development. Which one you consider the most suitable for developing middle-level managers and why? 4. You are a human resource manager and your organisation has asked you to organise an executive development programme, what steps will you take to organise it? 5. “You cannot develop managers. People either have the ability to manage or they don’t”. Do you agree or disagree? Discuss. 6. What criteria would you use to determine whether a training programme is effectiveness? 7. How will you evaluate the effectiveness of an executive development programme? If it is not effective, what steps will you take to make it effective? 8. Why do EDPs fail in meeting their objectives? Give suggestions how to make the EDPs successsful.

REFERENCES 1. David A. Decenzo and Stephen P. Robbins: Personnel / Human Resource Management, Printice Hall of India Private Limited, New Delhi, 1996, p. 254. 2. Edwin E. Flippo : Personnel Management, Tata McGraw Hill Book Company, New Delhi, 1984, p.51. 3. S.B. Budhiraja : Superior-subordinate Axis, Industrial Times, August 29- September 10, 1977, p.8 4. A. Dasgupta : Business and Management in India, Vikas Publishing House, New Delhi, 1974, pp. 112-113. 5. Dale Yoder: Personnel Management and Industrial Relations , Printice Hall of India, New Delhi, 1972. 6. Tata Review: The Tata Management Training Centre, Poona, Vol. 1, No.4, December 1965, p.3 7. Peter Drucker: Managing for the Future, Butterworth- Heinenmann, London, 2000. 8. A.C. Hamblin : Evaluation and Control of Training, McGraw-Hill, New York, 1974, p.8. 9. D. Sinha : Attitudinal changes in Training Programme, Indian Journal of Training and Development, vol. 14, No.2, 1984, pp. 66-69. 10. S.K. Sikka : Management Training Evaluation, Indian Journal of Industrial Relations, vol. 20, No.4, 1985, pp. 491-497. 11. Biswajeet Pattanayak: Human Resources Training, A.H. Wheelers, New Delhi, 1998. 12. K. Prasad: Management Development at Hindustan Limited, Management Education and Training in India VMNICN, Bombay, 1997, pp. 121-122.

11 ORGANISATION DEVELOPMENT (OD) Learning Objectives After studying this chapter, you should be able to: 1.

Define OD and state its objectives

2.

Discuss the models of OD

3.

Delineate the action research model of OD

4.

Explain the major OD interventions

You know that an organisation is a system consisting of four but interacting sub-systems: structure, technology, people and task . Experiences indicate that change in any sub-system affects the other sub-systems also. It may affect the whole organisation, some parts of the organisation may be affected more, others less, some parts may be affected directly, others indirectly. How change in any part or sub-system of the organisation affects the whole organisation, Newstrom and Davis 1 have illustrated it by comparing an organisation to an air-filled balloon. When a finger (which represents external change) is pressed against a point on the balloon (which represents the organisation), the contour of the balloon visibily changes (it becomes indented) at the point of contact Here an obvious pressure, representing change, has produced an obvious deviation at the point of pressure. What is not so obvious, however, is that the entire balloon (the rest of the organisation) has also been affected and has stretched slightly . In addition, the tension against the inner surface of the balloon has increased (not, it is hoped, to the breaking point). As shown by this illustration, a safe generalisation is that the whole organisation tends to be affected by change in any part of it. The goals of an organisation generally are: survival, stability, profitability, growth and service to the society. An organisation can achieve these goals if it is able to respond to changes occuring in its internal and external environment. Organisation development (OD) as a set of techniques developed in 1960s, responds effectively to organisational changes. Just what OD is, what are the various models and interventions or techniques of OD are discussed in this chapter. Before we proceed to discuss above mentioned aspects of OD, it seems pertinent to throw light on the schools of through in OD. Essentially there are two schools of thought in OD: 1. Programme-Procedure School 2. System-Process School The Programme - Procedure School: It is an older approach of OD. According to it , OD is the effective implementation of the organisation’s policies, procedures and programmes. Thus, OD in this sense is concerned with personnel activities such as recruitment, training , career development , compensation, welfare and benefits, labour relations, etc. Presently, personnel functions are considered as partly contributor to OD. The reason is that they at best serve as the organisational maintenance or control function. The System Process School: This school is wider in scope and broader in view. The proponents of this school of thought consider organisation as a system which can be changed and developed to 131

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best achieve its goals and objectives. It focuses on overall organisational effectiveness and , thus, gives much more emphasis on work groups within and across departments rather than individuals as such. The system approach encourages openness and collaborative ways of solving problems so that the outcomes benefit both the individual and the organisation.

12.1 MEANING OF OD Different people have defined OD differently. According to Koonz et. al2, “OD is a systematic, integrated and planned approach to improve the effectiveness of the enterprise. It is designed to solve problems that adversely affect the operational efficiency at all levels”. Burke 3 has defined OD as “ a planned process of change in an organisation’s culture through the utilization of behavioural science technology, research and theory”. In the opinion of French and Bell4, “ OD is a systematic approach to organisational improvement that applies behavioural science theory and research in order to increase individual and organisational well- being and effectiveness”. Now , OD can be defined as a long-term, more encompassing change approach meant to improve individual as well as organistional well-being in a changed situation”.

Characteristics of OD The salient characteristics of OD implied in its definitions are gleaned as follows: First, OD is a systematic approach to the planned change. It is structured style of diagnosing organisational problems and opportunities and then applying expertise to them. Second, OD is grounded in solid research and theory. It involves the application of our knowledge of behavioural science to the challenge that the organisations face. Third, OD recognizes the reciprocal relationship between individuals and organisations. It acknowledges that for organisations to change, individuals must change. Fourth, OD is goal oriented. It is a process that seeks to improve both individual and organisational well- being and effectiveness. Fifth, OD is designed to solve problems.

Objectives of OD The main objectives of OD are to: 1.

Improve organisational performance as measured by profitability, market share, innovativeness, etc. 2. Make organisations better adaptive to its environment which always keeps on changing. 3. Make the members willing face organisational problems and contribute creative solutions to the organisational problems. 4. Improve internal behaviour patterns such as interpersonal relations, intergroup relations, level of trust and support among the role players. 5. Understand own self and others, openness and meaningful communication and involvement in planning for organisational development. Douglas McGregor who was working in the Union Carbide, is considered one of the first behavioural scientists to systematically talking about and advocating for the implementation of OD for organisational improvement. OD as a subject is relatively new. Notwithstanding, it is becoming increasingly popular and visible in USA, UK, Japan, Norway, Sweden and even in India. In India, OD is in scene since 1968. Since then, many public and private sector organisations like HAL, HMT, IDPL, LIC, SAIL, TELCO and TISCO have been applying the interventions of OD to solve the organisational problems.

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12.2 MODELS OF OD Among the modes of OD developed by the behavioural scientists, the following three models are very popularly discussed in organisational behaviour. They are: 1. Kurt Lewin’s Unfreezing, Changing and Refreezing Model, 2. Greiner’s Equential Models, and 3. Leavitt’s System Model These are discussed in seriatim. Lewin’s Model: Lewin’s model is based on premises that before actually introducing a change, organisation needs to be prepared for change, motivated to change and established and integrated the change into behaviours of organisation5. Accordingly, Lewin has nomenclatured these steps as unfreezing, changing and refreezing. A brief description of these follows. Unfreezing: No change occurs in a vaccum of no prior perspective. To the extent the new perspective differs from the old one, the old one then implies doubting of its own existence. This necessitates unlearning of old things in order to learn new things. The same is called unfreezing. Unfreezing involves encouraging individuals to discard old behaviours by shaking up the equilibrium that maintains status quo. Thus, unfreezing implies creating the need for change, motivating people for change and minimising resistance to change. Changing: Having unlearned his past experience, the individual is ready for new behaviour and a change in persepective. Efforts are made to substitute new attitudes, values and behaviours for old ones. This implies transition from old behaviour to experimentation with new behaviour. Refreezing: In this final step, new attitudes, values, and behaviours are established as the new status quo. For this, the new ways of operating are cemented in and reinforced. This implies stabilizing and integrating the change by reinforcing the new behaviours and intigrating them into formal and interpersonal relationships and in one’s personality. Larry Griener’s Model: According to Griener6, change occurs in terms of certain sequential stages. The external stimulus pressurises the management of organisation to initiate change process. The management in response to stimulus is motivated to take actions to introduce change in organisation. Following the actions, the various change stages occur in a sequential manner such as diagnosis of the problem, invention of a new solution, experimentation with new solution and reinforcement from positive results. Greiner’s these OD sequential stages are shown in figure 12.1. Phase 1 Stimulus Pressure on the on top power management structure

Reaction of the power structure

Arousal to take action

Phase 2

Phase 3

Phase 4

Intervention the top

Diagnosis of problem areas

Inventation of new solution

Reorientation to internal problems

Recognition of specific problems

Commitment to new course of action

Phase 5 Experimentation with new solution

Search of results

Phase 6 Reinforcement from positive result

Acceptance of new practices

Fig. 12.1: OD Sequential Stages Source: Larry E. Griener, “ Patterns of Organisation Change” in Dalton Lawrence & Griener: Organisational Change and Development, Homewood III. Richard D. Irwin.1970

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Leavitt’s Model. Leavitt’s OD Model7 is founded on the interactive nature of the various subsystems in a change process. In an organisational system, there are four interacting sub-systemstasks, structure, people and technology. Due to their interacting nature, change in any one of the sub-systems tends to have consequences for the other sub-systems also. Change in any one of the sub-systems can be worked out depending upon the situation. How the various sub-systems interact with each other in a change process is depicted in the following figure 12.2 People

Task

Structure

Technology

Fig.12.2: Leavitt’s Interactive Model of OD

12.3 ACTION RESEARCH MODEL OF OD What is action research? It is a research with a purpose to facilitate the present to reach the future. French and Bell8 have defined action research as follows: “Action research is the process of systematically collecting research data about an ongoing system relative to some objective, goal or need of that system, feeding these data back into the system, taking action by altering selected variables within the system based both on the data and on hypothesis, and evaluating the results of actions by collecting more data”. Thus, action research refers to searching of actions with an objective to help the organisation achieve its goals. Action research involves continuous series of activities to be undertaken in the organisation to find a solution for the problem. Viewed from this perspective, action research is viewed as a process of OD. Various activities involved in action research process of OD are presented in Figure 12.3 Key Executive Perception Key Executive Perception of the Problem (s)

Consultation Behavioral Consultation with with Behavioral Scientist Consultant Scientist Consultant

Data DataGathering gatheringand andPreliminary Preliminary Diagnosis byby thethe Consultant Diagnosis Consultant

Joint Problem Problem Diagnosis Joint Diagnosis

Joint Action Planning Planning Joint Action

Data DataGathering Gatheringafter afterAction Action

Feedback to to the the Client Client Group Group Feedback Again Again

Rediagnosis Rediagnosis

New New Action Action Planning Planning

New Action

New NewData DataGathering Gatheringasasa aResults Resultsof of the New theAction New Action

Feedback KeyClient Client FeedbacktothetheKey or Client GroupGroup or Client

Action Action

Fig. 12.3: OD as Action Research Project Source: W. French. “Organisation Development Objectives, Assumptions and Strategies,” California Management Review, 12 (1269). P.26.

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It is clear from Figure 12.3 that action research model of OD has certain cyclical and continuous steps. It starts with the perception of the problem in the organisation. This sets stage for intervention by some behavioural consultant to diagnose the problem. The consultant may be an internal or external one, but needs to be unbiased, realistic and objective in diagnosing the problem. Data collection is the first step in problem diagnosis. The required data may be collected either by interview method or questionnaire method or a combination of both. Once the data is collected, the consultant discusses these data with executives to diagnose the problem. Having identified and diagnosed the problem, the next activity in the action research is to prepare the organisation for appropriate intervention techniques. Feedback based on data discussion is then made available to larger number of executives to solicit their comments on it. Then, a planned action is devised but is kept confined to a specific system only. Once the devised and suggested intervention action is implemented, it becomes necessary to evaluate its effectiveness. In case, the intervention turns out to be ineffective, again data is collected, discussed and revised action or intervention is searched out, carried out and evaluated. This process goes on and on till the organsational goal is achieved effectively.

12.4 OD INTERVENTIONS* How to bring about OD? The answer is through OD interventions. Interventions are the set of structural activities in which selected organisational units, be individual or their groups, engaged with a task or a sequence of task. Goals are related directly or indirectly to organisational improvement. For this, an umpteen number of alternative OD intervention methods exist. One way of classifying these methods, for the convenience of readers, is by the target of change. In practice, the target of change may be the individuals, their groups within the organisation, or organisation itself. OD interventions aimed at these three targets are discussed in seriatim.

Individual-Focused Interventions OD interventions that are targeted toward individuals include skill training, job redesign, role negotiation and carrer planning. Sensitivity Training: Also called T-group training or laboratory training, sensitivity training is designed to help individuals understand how their behaviour affects others. Members are brought together in a free and open environment in which participants discuss themselves . The discussion is loosely directed by a professional behavioural scientist called “facilitator. The facilitator intervenes only to help move the group forward. The objective of sensitivity training is to increase sensitivity toward others. The outcome of such training should, therefore, help employees understand others better, become aware of their own feelings and perceptions, and improve communication. Skill Training: Skill training refers to increasing the job knowledge, skills and abilities that are necessary to do a job effectively. Skill training is imparted either in formal classroom setting or on the job. The need for imparting skill training is aroused due to the rapid changes that organisations face. The job knowledge, therefore, needs to be continuously updated to keep pace with rapid change. The objective of training is to enable a worker to be more effective on the job. For example, while new workers can be trained to achieve levels of output attained by experienced older workers, existing workers can be retained to improve their output at par. Job Redesign: As an OD intervention, job redesign alters jobs to improve the fit between individual skills and the demands of the job. We have already discussed job redesign in Chapter 14. Examples of job redesign interventions include job enlargement, job enrichment, job simplification, *

Adapted from S.S. Khanka: Organisational Behaviour, S. Chand & Company Private Ltd., New Delhi, 2002 (Second Edition) pp. 263-266).

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and job rotation. These job redesign methods are used as OD techniques for realigning task demands and individual capabilities, or for redesigning jobs to fit new techniques or organisation structures better. Role Negotiation: Sometimes, group members have differing expectations of one another within the working relationship. . Role negotiation is a simple technique whereby individuals meet and clarify their psychological contract. In doing this, the expectations of each party are clarified and negotiated. The outcome of role negotiation is improved understanding between the members. Career Planning: Career Planning refers to matching an individual’s career aspirations with the opportunities available in the organisation. In other words, it involves activities offered by the organisation to individuals to identify strength, weaknesses, specific goals that they would like to occupy. Career planning activities benefit both individuals and organisations. Counselling sessions are held to help employees identify their skills and deficiencies in their skills. The organisation then can plan its training and development programmes based on this information to improve individual’s skills required for assuming higher responsibilities. Such a process may help the organisation identify and also nurture the talented employees for potential promotion.Career planning, in detail, is already discussed in Chapter 9. Management Development Training: Management development encompasses a host of techniques designed to enhance a manager’s skills on the job. Training for management development generally focuses on four types of learning: verbal information, intellectual skills, attitudes and development. One way to achieve development is through the use of action learning. i.e., an integration of classroom learning with on-the-job experiences. Action learning enables managers to know about themselves through the challenges of their comrades. Simulation, business games, role playing, and case studies are other techniques that provide active learning for the participants.

Organisation and Group-Focused Interventions OD intervention methods aimed at changing the organisation itself or changing the work-groups within the organisations include survey feedback, management by objectives, quality of work life, team building, and process consultation. These are discussed briefly: Survey Feedback: Widely used intervention method whereby employee attitudes are solicited using a questionnaire is known as Survey feedback. The questions included in the questionnaire intend to diagnose the problems within the organisation and to identify areas or opportunities for change. The data so generated is perceptual and attitudinal in nature. The data is tabulated and distributed to employees. These data then become the springboard for identifying problems and clarifying issues that may be creating difficulties for people. Generally “feedback” of results is given only to the group which generated the data. Thus, once the problems are diagnosed, necessary corrective measures are taken to resolve the organisational problems. After sometimes, a second survey is conducted to measure improvement in the situation. Management by Objectives (MBO): Management by objective (MBO) involves joint goal setting between employees and managers. The MBO process includes the setting of initial objectives, periodic progress reviews, and problem solving to remove any obstacles to goal achievement. All these steps are joint efforts between managers and employees. Viewed as an OD intervention, MBO meets three needs, First, it clarifies what an organisation expects of its employees, Second, it provides knowledge of results, an essential ingredient in effective job performance. Third, MBO provides an opportunity for coaching and counselling by the manager. The outcomes of MBO as an OD intervention are improvement in the levels of performance, meaningful communication and increased participation in decision making. The success of MBO in affecting organisational results hinges on the linking of individual goals of the organisation11.

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Quality of Work Life (QWL): Like other behavioural terms, there have been divergent views as to what really QWL is. According to one view12, QWL consists of a whole parcel of terms and notions all of which really belong to an umbrella of QWL. QWL as an umbrella concept encompasses literally dozens of specific interventions that have a common goal of humanizing the workplace. Davis and Newstorm 13 have perceived a wide range of QWL activities as open communication, equitable reward systems, a concern for employee-job security and participation in job design. The International Labour Office (ILO)14 has listed the following interventions of QWL: 

Hours of Work and arrangements of working time.



Working organisation and job content.



Impact of new technologies on working conditions.



Working conditions of women, young workers, older workers and other special categories.



Work-related welfare services and facilities.



Shopfloor participation in the improvement of working conditions.

Any comprehensive list of QWL programmes would encompass job redesign, participative management, and involving unions, education, training and legislative measures15. The overriding purpose of these interventions is to change the climate at work so that a better quality of work life is created.

Team Building You know organisation are made up of people working together to achieve a common end. People require to work in groups. Hence, there is a need in OD for team building. Team building as an OD intervention is designed to improve the effectiveness of a work group. It usually begins with defining the goals and priorities of the group. Following four areas in team building are critical to the success of the interventions: 1.

Team building should develop effective communication between the members.

2.

Team building should encourage members interaction and also mutual interdependence.

3.

Team building should emphasize team goals.

4.

Team building should stress flexibility. It should exemplify effective and ineffective teamwork.

Team building , though a relatively new intervention, is a very popular OD intervention. A research study indicated that human resource managers considered team building the most successful OD intervention16. Further, team building also helps improve group process. Process Consultation: In reality, no organisation operates perfectly. When managers sense that there is room for improving their unit’s performance, but do not know how to improve it, the process consultation comes to their rescue. Pioneered by Edgar Schein17, process consulation is an OD method that helps managers and employees improve processes that are used in organisations. The distinguishing feature of process consultation approach is that an outside consultant is used to assist usually a manager to perceive, understand and act on process events with which he or she must deal . The process consultant does not solve the organisation’s problem. Rather, he or she acts as a guide or coach who advises on the process to help the clients or managers solve their own problems. The role of the consultant is to help employees help themselves. The processes most often targeted are communication, conflict resolution, decision making, group interaction, and leadership . The steps involved in process consultation are entering the organisation , defining the relationship, choosing an approach, gathering data and diagnosing problems, intervening, and gradually leaving the organisation.

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Having described various OD methods, we come to recognize that the organisation development methods or interventions are just means to an end. Interventions themselves do not drive change, business needs do. The OD methods are merely vehicles for moving the organisations and its employees in a more effective direction.

Factors influencing Choice of an OD Intervention How to select a particular OD intervention to fit the best in the situation? Selection of an OD intervention is influenced by the following three factors. 1.

Applicability

2.

Feasibility

3.

Acceptability

Applicability: Applicability means the potential of a given intervention to yield desired results. This is possible when an intervention is capable enough to address the real problem and hold good promise of solving it. One way to ascertain applicability of an intervention is to examine the likely positive and negative consequences associated with it. What follows from above is the need for evaluating one’s client system with great care and concern before actually introducing any intervention. Feasibility: Feasibility means the suitability of an intervention to suit to the client system. In other words, ones needs to evaluate whether an intervention can actually be affectively introduced in a given type of client system. Acceptability: Whatever applicability and feasibility an intervention carries has no use unless it is acceptable to the client system. It means an intervention needs to be accepted by its client system to yields desired results. Experience shows that an intervention is likely to be less acceptable unless sufficient preparatory work has been done before introducing it.

Salient Issues in OD The salient issues involved in OD are subsumed as follows: 1. 2. 3. 4. 5. 6. 7.

The OD effort should begin at the top of the organisation i.e., management level and then should permeate down to the lowest level of organisation. Whoever be the client, be a particular target group or the total organisation, it has its implications for OD effort. The identification of change to be introduced depends on the nature and type of problem the organisation is facing. Diagnostic studies help identify the needed change in the organisation. The consultant helps the client understand how to better help oneself. The OD techniques can be implemented at individual level, and the organisational level depending upon where the change is to be brought. No one OD technique is appropriate for different types of problems. Hence, the intervention techniques appropriate to problems at hand should be applied. Both relevance and value of OD effort depend on its outcome. Therefore, OD efforts need to be evaluated on an objective basis.

12.5 SUMMARY This summary is organised by the learning objective given on page....131: 1.

OD is a systematic, integrated and planned approach meant to improve individual as well as organisational well-being in a changed situation. The main objective of OD is to improve the overall effectiveness of the organisations.

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2.

The popular methods of OD are Kurt Lewin’s method, Greiner’s method and Leavitt’s model.

3.

Action research process includes steps like problem identification , data collection, problem analysis, action plan formulation and implementation, and feedback.

4.

Sensitivity training, job redesign, career planning, survey feedback, MBO, QWL, team building, and process consultation are the major OD interventions. The selection of an OD intervention is influenced by the factors like applicability, feasibility, and acceptability.

KEY TERMS Action Research

Organisation Development

Career Planning

Quality of Work life (QWL)

Interventions

Sensitivity Training

Job Redesign

Team Building

Management by Objectives (MBO)

REVIEW AND DISCUSSION QUESTIONS 1. Define OD and what are the objectives of OD? 2. What are the steps involved in organisation development process? How does diagnosis help in understanding organisational problems? 3. Examine some of the models of OD. Which do you think would be more appropriate for Indian industries? 4. What is OD intervention? Discuss some of the techniques of OD intervention oriented to ‘task’ and ‘people’. 5. What is action reasearch? What are its processes and how does it help in making an orgnisation more effective? 6. “Organisation development involves the development of the organisation in the light of its future requirement” Do you agree with this statement? Give reasons.

REFERENCES 1. John W. Newstrom and Keith Davis: Organisational Behaviour: Human Behaviour at Work, Tata McGraw- Hill Publishing Company Limited, New Delhi, 1998. 2. H. Koonz, C.O. Donnell and H. Weihrich: Management, McGraw- Hill. Kogakusha Ltd, Tokyo, 1972. 3. W . Warner Burke: Organisation Development: A Normative View, Addison Wesley, Reading, Mass, 1987. 4. W.L. French and C.H. Bell : Organsation Development: Behavioural Science Interventions for Organsation Improvement, N.J. Printice-Hall, Englewood Cliffs., 1990. 5. Kurt Lewin : Frontiers in Group Dynamics: Concept, Method and Reality in Social Equilibria and Social Change, Human Relations, Vol.1, June 1947. 6. Larry E. Griener: Patterns of Organisation Change, In : Dalton, Lawrence and Griener (Eds): Organisational Change and Development, Richard D. Irwin, Homewood III, 1970. 7. Harold Leavitt: New Perspectives in Organisation Research, John Wiley & sons, New York, 1964. 8. Wendell L. French and Cecil H. Bell: Organisation Development, Printice Hall, Englewood Cliffs N.J., 1981, p.14.

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9. J. Campbell and M.D. Dunnette : Effectiveness of T- Group Experiences in Managerial Training and Development, Psychological Bulletin, No.70, 1968, pp. 73-103. 10. B.L. Maheshwari: MBO: Concepts, Methods on the Experiences,Tata Mc Graw- Hill publishing Company Ltd., New Delhi, 1980. 11. T.V. Rao and D. F. Pereira : Recent Experiences in Human Resources Develpment, Oxford & IBH, New Delhi, 1986 12. Sangeeta Jain: Quality of Work Life, Deep Publications, New Delhi. 1991, p.17. 13. Keith Davis and John Newstrom: op. cit, 1998, p.387. 14. International Labour Organisation: Recommendations from the National Seminar on Improving Quality of Working Life, Productivity, Vol. 22, No.4, 1982, pp. 79-83. 15. J.P. Singh: Improving Quality of Working Life in the Indian Context, Productivity, Vol. 22, No,4, 1982, pp. 13-20 16. S. Ramnarayan : T.V. Rao and Kuldeep Singh (Eds): Organisation Development (Interventions and Strategies), Response Books (A Division of Sage Publications), New Delhi, 1998. 17. Edgar H. Schein: Process Consultation: Its Role in Organisation Development, AddisonWesley, Reading, Mass, 1988.

13 INTERNAL MOBILITY AND SEPARATIONS Learning Objectives After studying this chapter, you should be able to: 1. Appreciate the purpose of promotion and how it is affected. 2. Justify the need for employee transfer in an organisation and outline a good transfer policy. 3. Discuss the need for or causes of demotion and declineate a good demotion policy 4. Review the key forms of separation. Just as human lives swing between two poles, viz., movement and settlement, so do employees also. Employees move within an organisation, laterally or vertically, for a variety of reasons. Following are the main reasons for employees movement within an organisation:  To improve the effectiveness of the employees to the organisation.  To satisfy both employee and organisational needs.  To provide for career and succession planning.  To effect changes in jobs and organisational structure.  To ensure discipline and make organisational rewards contingent on employee performance. The lateral or vertical movement of employees within the organisation is called ‘internal mobility’. It may take place in the form of promotion, demotion and transfer each of which are briefly discussed here one by one. Some employees separate themselves from the organisation for reasons like better prospects, retirement, termination, etc. This is called employee separation, which is also discussed separately later.

13.1 PROMOTION

Promotion is vertical movement of an employee within the organisation. In other words, 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. There can be ‘dry promotion’ also where an employee is assigned to a higher level job without increase in pay. An example of ‘dry promotion’ is a University Professor made Head of the Department with no increase in salary. Promotion has an in-built motivational value as it elevates the authority, power and status of an employee within an organisation. It is considered good personnel policy to fill vacancies in a higher job through promotions from within because such promotions provide an inducement and motivation to the employees and also remove feelings of stagnation and frustration.

Types of Pr omotion 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 141

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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.

13.1.1 Purposes

The following are the purposes or objectives of promotion: 1. To recognize an employees skill and knowledge and utilize it to improve the organisational 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. 7. To increase sense of belongingness. 8. To retain skilled and talented people. 9. To attract trained, competent and hard working people. 10. To impress the other employees that opportunities are available to them too if they also perform well. According to Dale Yoder 1, “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.”. It is clear that promotion benefits both employees and the employer. However, it needs to be made with a great caution because wrong promotion may invite implications of one type or other for the organisation. So to say, promotion is a double-edged weapon. Hence, every organisation needs to evolve and implement a suitable promotion policy for its employees. The following section deals with the same.

13.1.2 Policy

The following characteristics make a promotion policy as sound and good policy: 1. It must provide equal opportunities for promotion across the jobs, departments, and regions. 2. It must be applied uniformly to all employees irrespective of their background. 3. It must be fair and impartial. 4. The basis of promotion must be clearly specified and made known to the employees. 5. It must be correlated with career planning. Both quick (bunching) and delayed promotions must be avoided as these ultimately adversely affect the organisational effectiveness. 6. Appropriate authority must be entrusted with the task of making final decision. 7. Promotion must be made on trial basis. The progress of the employee must be monitored. In case, the promoted employee does not make the required progress, provision must be therein the promotion policy to revert him/her to the former post. 8. The policy must be good blending of promotions made from both inside and outside the organisation. Promotion can be made on various bases. Following are the major ones:  Seniority i.e., length of service  Merit, i.e., performance  Educational and technical qualification  Potential for better performance  Career and succession plan  Vacancies based on organisational chart  Motivational strategies like job enlargement.  Training

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As a matter of fact, no single basis of promotion is acceptable and applicable to all organisations. Every basis has its strengths and weaknesses. For example, while promotion on the basis of seniority gives satisfaction to the senior employees, it causes frustration to the talented ones. Similarly, promotion based on merit motivates competent employees to work hard while trade unions oppose it on the justification of its subjectivity. In India, promotion in the government departments is made on the basis of seniority of the employees. In case of private organisations, merit is generally used as a basis for promoting employees. Here, the promotion policy is to promote the best one available.

13.2 TRANSFER A transfer refers to lateral movement of employees within the same grade, from one job to another. According to Flippo 2, “a transfer is a change in the job (accompanied by a change in the place of the job) of an employee without a change in responsibilities or remuneration”. Transfer differs from promotion in the sense that the latter involves a change of job involving increase in salary, authority, status and responsibility, while all these remain unchanged/stagnant in the case of former. Also, transfers are frequent and regular whereas promotions are infrequent, if not irregular. Transfer may be initiated either by the company or the employee. In practice, the company may transfer the employee to the place where he/she can prove more useful and effective. Similarly, employee may initiate transfer to a location where he/she is likely to enjoy greater satisfaction. Transfer could be permanent, temporary or ad hoc to meet emergencies. Usually, permanent transfers are made due to changes in work load or death, retirement, resignation, etc. of some employee. As regards temporary transfer, it arises mainly due to ill health, absenteeism, etc. of some employee. Transfer decisions may be perceived as negative or positive depending upon an individual’s personal preferences, needs and aspirations. For example, an organisation may consider transfer from Guwahati regional office to Delhi head office as positive and reward because it will enable the employee to broaden his/her knowledge and work experience. On the contrary, the employee may look down upon it as it breaks ties with his people and community in Guwahati. Sometimes, transfers are used as an instrument for victimizing the employees by management. Realizing it, provisions are made by constituting labour courts to set aside transfer orders proved as management strategy to victimize employees. In order to make transfers useful for employee and the company, some organisations have clear agreements with trade unions for the transfer of unionized staff especially on promotions. There are some public sector organisations like Minerals and Metals Trading Corporation (MMTC) who have entered into agreements with employees for creating two cadres of officers, namely, Local Officers and All India Officers wherein promotions to and within the former are less accelerated than in the latter, but do not entail transfer.

13.2.1 Need

The need for making transfer is left for various reasons as listed below: 1. To Meet Organisational Needs: Changes in technology, volume of production, production schedule, product line, quality of products, organisational 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 superiour. 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.

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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.

13.2.2 Policy

Transfer involves costs as well. Therefore, every organisation should have a just and impartial transfer policy for its employees. Transfers should then be affected according to such policy only. In fact, a good and fair transfer policy serves as a guide-post to the manager in affecting transfers as and when required in the overall interest of the organisation. A good transfer policy should satisfy the following requirements: 1. Specify the circumstances under which transfers will be made. These should be in writing and should be communicated to the employees. For example, defence personnel and government employees are subjected to transfer once in three years. The employees in these organisations know when they are due for a transfer and are prepared for it. 2. Specify the basis for transfer i.e., whether transfer will be made on the basis of seniority or skill and competency or on any other basis. 3. Decide the authority which would handle transfers. 4. Intimate the fact of transfer to the person concerned well in advance. 5. Specify the jobs to which transfers will be made and duties and salary on assumption of new jobs should also be clarified. 6. Clarify whether transfer is permanent or temporary. 7. Indicate whether transfers can be made within a department or between departments or between units. 8. Not to be made frequent and not for the sake of transfer only. However, one should not expect for a uniform transfer policy in all the organisations. Depending on the type, kind and size of the organisation, transfer policy is subject to vary from organisation to organisation. In any case, a good transfer policy should be consistent with the overall objectives of the organisation.

13.2.3 Types

Employee transfers may be classified into following types: 1. Production Transfer: Such transfers are made when labour requirements in one division or branch is declinning. 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.

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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.

13.3 DEMOTION

Demotion is just the opposite of promotion. It is the downward movement of an employee in the organisational hierarchy with lower rank/status and pay. According to D.S. Beach3, “Demotion is the assignment of an individual to a job of lower rank and pay usually involving lower level of difficulty and responsibility”. Demotion affects the status, pride, career and income of the employee. Research studies 4 report that an employee who is demoted suffers from more severe jolt than it does when a junior employee supersedes him/her. It is used as a punitive measure in case of serious breaches of duty on the part of an employee. It is often a preliminary to a dismissal. Since demotion causes an insult and emotional jolts, it should be, therefore, used very tactfully and only in case of absolute necessity.

13.3.1 Causes

Demotion may be caused by several factors which may be beyond an employee’s control. Following are the important ones: 1. Incompetence: When a promotee is found unable to meet the challenges posed by the new higher job, he may be demoted to jobs suitable to him to correct errors in promotion. It often happens in organisations that employees promoted on the basis of seniority and past experience are unable to adjust and cope with changes in technology, methods and practices. In other words, such promotees cannot meet the raised expectations substantially. 2. Adverse Business Conditions: At times, circumstances and conditions like recession and other crisis may necessitate a business to combine departments and eliminate jobs. In fact, this feature is very much in sight and is on increasing also. In case of lay-offs and bumping process, junior employees may be retrenched and senior employees may be required to accept lower level jobs,until normalcy is restored. However, such a demotion is not a black mark against an employee. 3. Disciplinary Measures: Demotion is also used as a disciplinary measure against erring employees. It is a penalty imposed on employee for violation of company rules of conduct. Since demotion affects employee job satisfaction and morale, it should be used with a pinch of care and concern and that too when it is absolutely necessary. In order to use demotion properly, there must be an appropriate demotion policy.

13.3.2 Policy

As stated earlier, demotion affects employee’s morale, job satisfaction and relationship with the employer. It may also turn the employee into mental wrecks. While effecting demotion in the organisation, therefore, the management should be extremely careful not to place itself on the wrong side of the fence. Yoder et. al.5 have suggested that a systematic policy on demotion should contain the following five points: 1. A clear and reasonable list of rules should be framed, violation of which would subject an employee to demotion. 2. This information should be clearly communicated to employees. 3. There should be a competent investigation of any alleged violation. 4. Once violations are proved, there should be a consistent and equitable application of the penalty, preferably by the immediate supervisor. 5. There should be provision for review.

13.4 SEPARATIONS

As studied in the previous section, the function of human resource management starts with procuring employees from the society for their use in the organization. Hence, it stands logical to return those employees to the same society when they are no more required in the organisation. In this section, we shall review the prominent processes of separation.

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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 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 ‘roleless 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 organise 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 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’.

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Layoff 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. 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 laidoff 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 slow down, 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 products7. 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. Wilful 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.

13.5 SUMMARY This summary is organized by the learning objectives given on page…141: 1. Promotion is advancement of an employee from one job level to a higher one involving increased salary, status and responsibility. Promotion is affected to recognize competent employee, boost his morale, build loyalty, retain talented employees and encourage employees to perform well.

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2.

3.

4.

Transfer is an employee’s lateral movement within the same grade from one job to another. Employees are transferred to satisfy both organisational and employee needs, make their better use, adjust workforce, punish the employee, etc.. A good transfer policy is characterized by features like clarification of circumstances and bases of transfer, authority handling transfer, nature and frequency of transfer, etc.. Demotion is downward movement in job hierarchy with lower pay, authority and responsibility. Factors such as incompetence, adverse business conditions, disciplinary measures, etc. cause demotion. These causes should be communicated to the employees. A demotion policy should have provision for review also. Separation is a situation when the service agreement of an employee with his/her employer organisation comes to an end and employee leaves the organisation. Retirement, resignation, layoff, retrenchment and dismissal have been the common forms of employee separation.

KEY TERMS Attrition Demotion Dry Promotion Internal Mobility Job Rotation Morale Lay off

Promotion Resignation Retirement Retrenchment Separation Transfer

REVIEW AND DISCUSSION QUESTIONS

1. Why is it necessary to make an employee move from one job to another within the organisation? 2. What is meant by promotion? Justify the need for employee promotion Distinguish promotion from transfer. 3. What causes transfer? List the salient features of a good transfer policy. 4. Define demotion. Explain why it is needed. 5. Briefly review the ways/forms by which employees separate themselves from the organisation they are serving. 6. Distinguish between: (a) Promotion and Transfer (b) Dismissal and Retrenchment

REFERENCES

1. Dale Yoder: Personnel Management and Industrial Relations, Printice Hall of India, New Delhi, 1977, p. 95. 2. Edwin B. Flippo: Personnel Management, Mc-Graw Hill, New York, 1984, p. 239. 3. D. S. Beach: Personnel: The Management of People at Work, Macmillan & Company, New York, 1975. 4. Government of India: Report of the National Commission on Labour, New Delhi, 1969, pp. 67-79. 5. Dale Yoder, H. G. Heneman, J.C. Turnbull and C. H. Stone: Handbook of Personnel Management and Labour Relations, McGraw-Hill, New York, 1958. 6. Edwin B. Flippo; op. cit. 1984, p. 547. 7. Shyam L. Kaushal: Downsizing: Boon or Bane, Pratibimba, Volume 2, No.1, January-June 2002, pp. 27-33.

SECTION – 4

MAINTENANCE AND RETENTION 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

Job Evaluation Wage and Salary Administration Incentives and Benefits Motivation: Concepts and Application Employee Empowerment Workers’ Participation in Management (WPM) Employee Health and Safety Social Security Employee Discipline Employee Grievances Industrial Relations (IR) Industrial Disputes (ID) Trade Unionism Collective Bargaining Performance and Potential Appraisal

14 JOB EVALUATION Learning Objectives After studying this chapter, you should be able to: 1. Define job evaluation and list its objectives. 2. Outline the procedure involve in job evaluation. 3. Enumerate the various advantages job evaluation offers. 4. Point out the drawbacks job evaluation suffers from. 5. Discuss the major methods of job evaluation. 6. Describe The essentials of a successful job evaluation programme. Once the selected candidate is placed on a job, as discussed in the Section II, he/she needs to be duly compensated for the job he/she performs. This is inter-alia necessary for maintaining good employee-employer relations. Indisputably, due compensation to a job must be in accordance to its worth. Job worth is ascertained through job evaluation. Different jobs in an organisation need to be valued to ascertain their relative worth so that jobs are compensated accordingly and an equitable wage and salary structure is developed in the organisation. Hence, the need for job evaluation. This chapter is, therefore, devoted to discuss the various aspects of job evaluation. Let us begin with understanding the meaning of job evaluation.

14.1 CONCEPT OF JOB EVALUATION 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. Below are given some important definitions of job evaluation: According to the International Labour Office (ILO) 1, “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”. The British Institute of Management defines job evaluation as “the process of analysis and assessment of jobs to ascertain reliably their negative worth using the assessment as the basis for a balanced wage structure”. In the words of Kimball and Kimball 3, “Job evaluation is an effort to determine the relative value of every job in a plant to determine what the fair basic wage for such a job should be”. Wendell French 4 defines job evaluation as “a process of determining the relative worth of the various jobs within the organisation, so that differential wages may be paid to jobs of different worth. The relative worth of a job means relative value produced. The variables which are assumed to be related to value produced are such factors as responsibility, skill, effort and working conditions”. Now, we may define job evaluation as a process used to establish the relative worth of jobs in a job hierarchy. This is important to note that job evaluation is ranking of job, not job holder. Job holders are rated through performance appraisal which is discussed later in chapter 28. Job evaluation assumes normal 151

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performance of the job by a worker. Thus, the process ignores individual abilities of the job holder. Job evaluation provides basis for developing job hierarchy and fixing a pay structure. It must be remembered that job evaluation is about relationships, and not absolutes. That is why job evaluation cannot be the sole determining factor for decides pay structures. External factors like labour market conditions, collective bargaining and individual differences do also affect the levels of wages in organisations. Nonetheless, job evaluation can certainly provide an objective standard from which modifications can be made in fixing wage structure. The starting point to job evaluation is job analysis. No job can be evaluated unless and until it is analysed. How job evaluation is different from job analysis, job description and job specification is given in the following Table 14.1. Table 14.1 : Difference between Job Evaluation and Job Analysis and Job Description and Job Specification Job Evaluation A technique used to establish the relative worth of jobs in a job hierarchy.

Job Analysis A process of examining the various components of a job and the circumstances in which it is performed.

Job Description It is a description of the duties, scope and responsibilities associated with the job.

Job Specification The minimum acceptable qualifications that a job incumbent must possess to perform the job successfully.

14.2 OBJECTIVES OFJOB 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 5, “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 procedures 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.

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.

14.3 PROCEDURE OFJOB 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

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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 informations 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.

4.

1.

Choose scheme

2.

Plan the programme

3.

Analyse jobs

Internal evaluation

5.

6.

Design structure

7.

Grade jobs

External evaluation

8. Develop maintenance procedures Fig. 14.1: Job Evaluation Programme

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 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 regrading the existing jobs in the light of changes in their responsibilities and market rates.

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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.

14.4 ADVANTAGES OF JOB EVALUATION According to an ILO publication 8, job evaluation offers the following advantages: 1.

Job evaluation being a logical process and objective technique helps in developing a 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 strucutre.

6.

In the modern times of mechanisation, 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.

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 specialisations. 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.

14.5 DRAWBACKS OF JOB EVALUATION In spite of many advantages, job evaluation suffers from the following drawbacks/limitations: 1.

Job evaluation is susceptible because of human error and subjective judgement. While there is no standard list of factors to be considered for job evaluation, there are some factors that cannot be measured accurately.

2.

There is a variation between wages fixed through job evaluation and market forces. Say Kerr and Fisher 9, the jobs which tend to rate high as compared with the market are those of junior, nurse and typist, while craft rates are relatively low. Weaker groups are better served by an evaluation plan than by the market, the former places the emphasis not on force but on equity”.

3.

When job evaluation is applied for the first time in an organisation, it creates doubts in the minds of workers whose jobs are evaluated and trade unions that it may do away with collective bargaining for fixing wage rates.

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4.

Job evaluation methods being lacking in scientific basis are often looked upon as suspicious about the efficacy of methods of job evaluation.

5.

Job evaluation is a time-consuming process requiring specialised technical personnel to undertake it and, thus, is likely to be costly also.

6.

Job evaluation is not found suitable for establishing the relative worth of the managerial jobs which are skill-oriented. But, these skills cannot be measured in quantitative terms.

7.

Given the changes in job contents and work conditions, frequent evaluation of jobs is essential. This is not always so easy and simple.

8.

Job evaluation leads to frequent and substantial changes in wage and salary structures. This, in turn, creates financial burden on organisation.

14.6 METHODS OFJOB 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: Table 14.2 : Ranking of University Jobs Ranking Order

Pay Scale

Professor/Registrar

Rs. 16,400–Rs. 22,400

Reader/Dy.Registrar

Rs. 12,000–420-18,300

Lecturer/Asst. Registrar

Rs. 8,000–275-13,500

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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 betwen 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 authorised 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. 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.

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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 analysing 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.

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 minimised, i.e. the system cannot be easily manipulated.

3.

Being the systematic method, workers of the organisation favour 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 management11.

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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:

Key Jobs

Base Rate (Daily)

Mental Require ments

Electrician

60

13

Welder

50

Mechanist

80

5.

Physical Require ments

Skills

Working Conditions

Responsibility

12

5

12

18

10

19

5

4

12

25

5

23

24

3

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 determing 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.

Now, all the four methods are summarised as follows: Scheme Factor Comparison

Characteristics Jobs graded by reference to market rate data and direct comparisons with jobs at or near the same level within the organization.

Advantages Realistic, practical, straightforward and quick.

Disadvantages Market rate information may be difficult to obtain or inaccurate.

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Ranking

Whole job comparisons are made to place them in order of importance.

Easy to apply and understand.

No defined standards of judgement-differences between jobs are not measured.

Job Classification

Job grades are defined and jobs are slotted into the grades by comparing the whole job description with the grade definition.

Simple to operate and standards of judgement are provided in the shape of the grade definitions.

Difficult to fit complex jobs into one grade without using excessively elaborate grade definitions.

Point Ranking

Separate factors are scored to produce an overall points score for the job.

The analytic process of considering separate defined factors provides for objectivity and consistency in making judgements.

Complex to install and maintain-judgement is still required to rate jobs in respect of different factors.

14.7 ESSENTIALS OFA JOB EVALUATION PROGRAMME We have seen that each method of job evaluation is a mixed blessing with advantages and disadvantages. So to say, no method is completely fool proof. In such case, the organisation may try to adopt a job evaluation method blending all merits of different methods of job evaluation. Otherwise, the chances of success of any job evaluation method are doubtful. We suggest the following essentials that may help make a job evaluation programme successful: 1.

2. 3. 4. 5. 6. 7.

8. 9.

Before launching a job evaluation programme certain issues need to be decided beforehand: employees to be covered; job evaluators—internal or external; consultation of employees and existence of suitable atmosphere for launching of job evaluation programme. An accurate and comprehensive job analysis, job description and job specification should be done. The management’s aim in relation to the job evaluation programme should be made clear to all those concerned. There should not be any hidden agenda. All the relevant internal and external factors should be taken into account before arriving at the final shape of the programme. The supervisors should have the complete and concrete knowledge of the programme. They should be in the position to explain the programme to their people and also how it works. The details of the administration of the plan should be made simple to avoid employees doubts, fears and apprehensions about the plan. Efforts should be made to provide maximum transparency in preparation and implementation of the programme. One way to ensure it is encouraging employees participation in the programme. The every stage of programme should be given wide publicity through employee publications, notice boards, departmental meetings and even letters to employees’ homes. The programme must have the full approval and support from the top management and acceptance of the trade unions.

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10. Job evaluation should rate the job, not the job holder. 11. Factors to be considered for job evaluation should be clearly defined. 12. Job grades should not be extended to a large number as these make the evaluation inflexible because of the narrow coverage of the job description. 13. Changes, if any, in the evaluation method be carried out before the programme is installed. 14. Separate pay structures should be maintained for major groups of employees such as factory workers, office workers and salesmen. 15. The scheme should be administered by the industrial relations staff. 16. Finally, the better the state of industrial relations in the organisation, the easier it is to effectively introduce job evaluation programme. Once a job is evaluated, or say, ranked, the next step is to convert this measurement into a salary bracket. In other words, it implies simply breaking up the total salary structure into sub-divisions corresponding to the number of classes of job arrived at through job evaluation. However, several other factors also need to be looked into before a right type of salary structure is evolved. These are dealt with in the subsequent Chapter 15.

14.8 SUMMARY This summary is organised by the learning objectives given on page... 151 : 1.

Job evaluation is a technique used to determine the value of each job in relation to all jobs within the organisation. Its main objective is to determine the relative worth of different jobs in an organisation to serve as a basis for developing a rational wage and salary structure.

2.

The preliminary stage, planning stage, analysis stage, internal evaluation stage, external evaluation stage, design stage, grading stage and maintaining stage are the main steps involved in job evaluation programme.

3.

The main advantages job evaluation offers are to help in developing an equitable and consistent wage and salary structure and, thus, to eliminate wage differentials within the organisation.

4.

The biggest drawback of job evaluation is the absence of any standard factors of job. This makes the job evaluation subjective.

5.

The four basic methods of job evaluation are ranking method, grading method, point method and factor comparison method.

6.

Accurate job analysis, fair and clear intention of management, knowledgeable supervisor, transparency, wide publicity, approved by management and accepted by workers unions, etc. are considered as essentials of successful job evaluation programme.

KEY TERMS Benchmark Job Job Job Analysis Job Description

Job Evaluation. Job Grade. Job Specification

REVIEW AND DISCUSSION QUESTIONS 1. What is job evaluation? What are the objectives of job evaluation? 2. State very briefly the distinguishing features of job analysis, job description, job specification and job evaluation.

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3. Discuss the advantages of job evaluation. Does job evaluation have any limitations? What are these? 4. Discuss the procedure involved in the evaluation of jobs. 5. Briefly explain various methods of job evaluation. 6. “Job evaluation is the ranking of job not the job holder.” Comment. 7. Distinguish between ranking method and grading method of job evaluation. 8. Describe the use of job evaluation in practice. 9. What makes a job evaluation programme successful? 10. Write notes on the following: (a) Point Method (b) Factor Comparison Method (c) Limitations of Job Evaluation (d) Ranking Method (e) Grading Method

REFERENCES 1. I.L.O : Job Evaluation—Studies and Reports, New Series, No. 56, Geneva, 1960, p.8. 2. British Institute of Management: Job Evaluation—A Practical Guide, London, 1951, p.77. 3. D.S. Kimball and Junior Kimball: Principles of Industrial Organisation, Vakils Preffer & Simon Pvt. Ltd., Bombay, 1971, p. 433. 4. Wendell French: The Personnel Management Process, Houghton Muffin & Co., 1974, p.315. 5. J.K. Louden and T.C. Newton: Job Analysis, French and Wagnalls Company, New York, 1948, p.23. 6. Michael Armstrong:A Handbook of Human Resource Management, Aditya Books Private Limited, New Delhi, 1990, pp. 176-177. 7. IIPM: Personnel Management in India, Kolkata, 1973. 8. ILO: Job Analysis, New Delhi, 1970, pp. 99-100. 9. Clark Kerr and Lloyd Fisher: Effect of Environment and Administration on Job Evaluation, In: P. Pigors and C.A. Myers (Eds.): Readings in Personnel Administration, McGraw-Hill Book Company, 1952, p.390. 10. David A. Decenzo and Stephen P. Robbins: Personnel/Human Resource Management, PrinticeHall of India Private Limited, New Delhi, 1996, p.428. 11. Wayne F. Cascio: Applied Psychology in Personnel Management, Reston Publishing Company, Reston, Va, 1978, p.150.

15 WAGE AND SALARY ADMINISTRATION Learning Objectives After studying this chapter, you should be able to: 1.

State the underlying objectives of wage and salary administration

2.

List the principles that govern wage and salary administration.

3.

Delineate the process involved in wage/salary administration.

4.

Discuss the various methods of wage payment.

5.

List the theories of wages.

6.

Highlight the main provisions of wage legislations in India.

7.

Discuss the causes and rationale of wage differentials.

8.

Examine the salient features of executive/managerial remuneration in business organisations.

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. There are other aspects of compensation which an employee looks for, such as promotion, words of praise, job satisfaction, job content, creativity, and so on. It is, in fact, difficult to outline and explain all aspects of compensation at one place. Therefore, this chapter mainly deals with wage and salary administration. Some other aspects of compensation will be dealt subsequently in the next Chapter 16. Wages and salary have their bearings on employee performance and, in turn, organisational performance. Therefore, services rendered by workers to organisation have to be adequately paid. Various theories of wages have been propounded in the past to look into this issue. Yet, none have been able duly cover all aspects of the issue. Dunn and Rachell have classified the central questions of wage theory as follows: 1.

Why is the general wage level what it is?

2.

What causes the wage structure to be what it is?

3.

Why do these rates and structures vary widely between organisations and geographical regions?

Based on these, deciding how and what workers in an organisation should be paid is what is covered under ‘wage and salary administration,. Accordingly, in the present chapter, we shall discuss the components of wage and salary administration, theories of wages, wage fixation and differentials. A controversial topic—executive compensation will also be examined towards the end of the chapter.

15.1 OBJECTIVES OFWAGE AND SALARY ADMINISTRATION 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/ 162

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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:

Organisational Objectives The compensation system should be duly aligned with the organisational 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 organisational 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 favouritism from creeping in when wage rates are assigned.



Enhances employee morale and motivation.

Collective Objectives The objectives include: 

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.

Beach2 has listed the five objectives of wage and salary administration: 

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.

15.2 PRINCIPLES OFWAGE AND SALARY ADMINISTRATION The main principles that govern wage and salary fixation are three: 1.

External Equity

2.

Internal Equity

3.

Individual Worth.

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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 ensures 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. 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 measurement3.

15.3 COMPONENTS OF WAGE AND SALARY ADMINISTRATION 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 4 classification of the compensation management, we have for the purposes of our analysis considered two broad components of wage and salary administration. These are: 15.3.1 Determination of Wages and Salary 15.3.2 Wages/Salary Structures Both are now discussed one by one.

15.3.1 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 organised 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

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Lantham 5 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 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 employees6. 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

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availability of jobs are scare, 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 Monappa7, the following factors determine the level of wage/salary in the organised sector of the Indian industry.

Wage Influencing Variables Organized sector of the Indian industry (including plantations and mines) Stage 2 Stage 1 Collective Local Individual workmen bargaining accepted rates (influence of unions) Tribunals Govt laws courts wage board Mutually decide on the wage to the job

Price for the job Philosophy of the management towards wages

Employer

Employee's wage and components Capacity to pay

Region-cum-industry settlement

Internal pricing through job evalution Intermixture of these variables in a particular organizational context results in the wage structure in a particular plant.

Note. Stage 1: Self-contained model where external influence is marginal; and Stage 2: Depicting the interplay of external and internal influence

15.3.2 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 an 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:

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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.

2.

Based on above, draw up salary grade structure ranging from the lowest limit to the highest limit alongwith the width of salary gaps betwen 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 an 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.

Broadbanding

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 characterised 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 alongwith 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. Broadbanding. Broadbanding means a process reducing salary grades to a limited ones. In other words, broadbanding 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 broadbanding of grades is more popular in industrial organisations employing huge number of employees. For example, Toyota has broadbanded 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 8. The main advantage of broadbanding is that it injects greater flexibility into employee compensation. It is especially sensible where firms flatten their hierarchies and organise around self-managing teams.

15.4 METHODS OF WAGE PAYMENT Before we discuss the methods of wage payment, let us first know what wages means. In the widest sense, wages means any economic compensation paid to the employer under some contract to his workers for the services rendered by them. Based on the needs of the workers, capacity of the employer to pay, and the general economic conditions prevailing in a country, the committee on Fair

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Wages (1948) and the 15th session of the Indian Labour Confernece (1957) propounded certain wage concepts such as minimum wage, fair wage, living wage and need based minimum wage. While the first three types (concepts) of wages were defined by the Committee on Fair Wages, the last one was defined by the 15th session of the Indian Labour Conference. These definitions are considered here one by one. Minimum Wage: A minimum wage is a compensation to be paid by an employer to his workers irrespective of his ability to pay. The Committee on Fair Wage 9 has defined minimum wage as “the wage must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the workers. For this purpose, minimum wage must provide some measures of education, medical requirements and amenities”. Living Wage: A living wage is one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter but a measure of frugal comfort, including education for his children, protection against ill-health, requirement of essential social needs and a measure of insurance against the more important misfortunes, including old-age10.” Thus, a living wage represents a standard of living. A living wage is fixed considering the general economic conditions of the country. Fair Wage: Fair wage, according to the committee on Fair Wage11, is the wage which is above the minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum wage; the upper limit is set by the capacity of the industry to pay. The concept of fair wage is essentially linked with the capacity of the industry to pay. The fair wage depends on considerations of such factors as: (i) the productivity of labour, (ii) the prevailing rates of wages in the same or neighbouring localities, (iii) the level of the national income and its distribution, and (iv) the place of the industry in the economy of the country. Need-Based Minimum Wage: The Indian Labour Confernece12 in its 15th session held in July 1957 suggested that minimum wage should be need based and should ensure the minimum human needs of the industrial worker, irrespective of any other consideration. The need-based minimum wage is calculated on the following basis: (i) The standard working class family should be taken to consist of 3 consumption units for the earner; the earnings of women, children and adolescents should be disregarded. (ii) The minimum food requirements should be calculated on the basis of the net intake of 2,700 calories, as recommended by Dr. Akroyd, for an average Indian adult of moderate activity. (iii) The clothing requirements should be estimated at a per capita consumption of 18 yards per annum which would mean an average worker’s family of 4, a total of 72 yards. (iv) In respect of housing, the norms should be the minimum rent charged by the Government in any area for houses provided under the Subsidised Housing Scheme for low income groups. (v) Fuel, lighting and other miscellaneous items of expenditure should constitute 20 per cent of the total minimum wage. However, the Minimum Wages Act, 1948 did not define minimum wage. While employers go by the definitioin given by the Committee on Fair Wages, 1948, expectedly Trade Unions like to consider the need based minimum wage concept.

Methods of Wage Payment There are two basic methods of wage payment, i.e., payment by time and payment by results (PBR). The latter one is also known as the incentive wage system which is discussed in detail in the next Chapter 16.

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Payment By Time: This is the age-old and most prevalent method of wage payment. In this method, the employee is paid on the basis of time worked such as per day, per week, and per month rather than output. This is the main differnece between this system and the incentive system. The wage rate is predetermined by negotiation, by reference to local rates, or by job evaluation. This method is useful when a worker has to do unstandardized job. This is generally the method adopted for white collar clerical and managerial jobs. The advantage of payment by time rate for an employee is that earnings are predictable and steady. This breeds a sense of security by assuring employee a fixed packet. The employee also does not need to argue with wage fixer about his/her remuneration. However, the disadvantage of time rate is that it does not provide any motivation of a direct incentive relating the reward to the effort. Payment By Results (PBR): Under this method, the wage/pay of an employee is paid on the basis of the number of items an employees produces in the organisation, rather than considering the job done by the employee at a given time 13. This may be through the following two systems: 1.

Straight Piece-Work

2.

Differential Piece-Work System

Straight Piece Work: Under this method, wage payment is made to employees at a uniform rate per unit of production. In other words, in this system, employee is paid a flat price (in money) for each unit or piece completed, or paid for time allowed to complete the particular task. This method of wage payment is more appropriate where production is of repititive character and can easily be divided into similar units of production. Differential Piece-Work System: In this method, wage is paid in relation to output. The rate of wages per unit of production decreases with increase in production. But, wage rate per hour still increases, of course, not in proportion to the increased output. This method is applicable where efforts can be related to production and work is standardised, repetitive, and measurable. Balance Method: This method is a combination of time wage and piece wage methods. In this method, a workeris paid a fixed wage based on the time rate with a provision of piece wage method How? This is just like minimum rent with a provision of shortworking recoupment in case of royalty. If a worker produces less quantity in a period, he is given wages as per time rate and excess payment over piece rate is treated as credit. This credit is compensated in the period when he/she produces more than time rate wages. Thus, he is given time wage whether he produces more or less than it, i.e., time wage. This will be more clear from an example. Suppose, the time wage is Rs. 500 per week and the piece wage rate is Rs.10 per unit. As per his production, his wages during the 4 weeks in a month will be as shown in Table 15.1: Table 15.1: Wages Under Balance Method

Week I II III IV

Time Wage (Rs.) 500 500 500 500

Production (Units)

Piece Wage(Rs.)

Credit (Rs.)

Debit (Rs.)

Balance (Rs.)

54 48 50 51

540 480 500 510

40 — — 10

— 20 — —

40 20 20 30

This method ensures the worker the receipt of a fixed amount as wage in all cases. From workers point of view, this method has relevance in work situation where work flow is flexible/irregular such as docks. This method is also known as ‘debt method’.

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The National Commission on Labour (NCL) has identified differnet methods of wage payment by employee contribution. This is borne out by Table 15.2. Table 15.2: Methods of Wage Payment vis-a-vis Employee Contribution

Kind of Contribution

Method of Payment For Normal Contribution

1. 2.

Time Skill

3.

Effort

4. 5.

Ideas Responsibility

6.

Working condition Cooperation

7. 8.

Continued service

Basic wage + fixed allowance Basic wage based on job evaluation + allowance Basic wage based on job evaluation + allowances Suggestion rewards Basic wage based on job evaluation + allowances Basic wage based on job evaluation + allowances Continued payment of basic wage + allowances Time scale increment in basic wage

For Extra Contribution Overtime wages Higher basic wage + allowance through promotion Incentive bonus and merit increments — Higher basic wage + allowances through promotion Higher basic wage + allowances Incentive bonus Promotion and fringe benefits

Source: National Commission on Labour: Report of the Study Group of Productivity and Incentives,New Delhi., 1988,. p. 40.

15.5 THEORY OF WAGES How much and on which basis wages should be paid to the workers for services rendered by them has been a subject matter of great concern and debate among economic thinkers for a long time. This has given birth to several wage theories, i.e. how wages are determined. Out of them, some important theories of wages are discussed here.

Wages Fund Theory This theory was developed by Adam Smith (1723–1790). His theory was based on the basic assumption that workers are paid wages out of a pre-determined fund of wealth. This fund, he called, wages fund created as a result of savings. According to Adam Smith, the demand for labour and rate of wages depend on the size of the wages fund. Accordingly, if the wages fund is large, wages would be high and vice versa.

Subsistence Theory This theory was propounded by David Recardo (1772–1823). According to this theory, “ The labourers are paid to enable them to subsist and perpetuate the race without increase or diminution14”. This payment is also called as ‘subsistence wages’. The basic assumption of this theory is that if workers are paid wages more than subsistence level, workers’ number will increase and, as a result, wages will come down to the subsistence level. On the contrary, if workers are paid less than subsistence wages, the number of workers will decrease as a result of starvation death, malnutrition, disease, etc. and many would not marry. Then, wage rates would again go up to subsistence level. Since wage rate tends to be at subsistence level at all cases, that is why this theory is also known as ‘Iron Law of Wages’. The subsistence wages refers to minimum wages.

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The Surplus Value Theory of Wages This theory was developed by Karl Marx (1849-1883). This theory is based on the basic assumption that like other article, labour is also an article which could be purchased on payment of its price i.e., wages. This payment, according to Karl Marx, is at subsistence level which is less than in proportion to time labour takes to produce items. The surplus, according to him goes to the owner. Karl Marx is well known for his advocation in the favour of labour.

Residual Claimant Theory This theory owes its development to Francis A. Walker (1840-1897). According to Walker, there are four factors of production or business activity, viz., land, labour, capital, and entrepreneurship. He views that once all other three factors are rewarded what remains left is paid as wages to workers. Thus, according to this theory, worker is the residual claimant.

Marginal Productivity Theory This theory was propounded by Phillips Henry Wicksteed (England) and John Bates Clark of U.S.A. According to this theory, wages is determined based on the production contributed by the last worker, i.e. marginal worker. His/her production is called ‘marginal production’.

The Bargaining Theory of Wages John Davidson was the propounder of this theory. According to this theory, the fixation of wages depends on the bargaining power of workers/trade unions and of employers. If workers are stronger in bargaining process, then wages tends to be high. In case, employer plays a stronger role, then wages tends to be low.

Behavioural Theories of Wages Based on research studies and action programmes conducted, some behavioural scientists have also developed theories of wages. Their theories are based on elements like employee’s acceptance to a wage level, the prevalent internal wage structure employee’s consideration on money or’ wages and salaries as motivators.

15.6 WAGE LEGISLATIONS IN INDIA Government has enacted various legislative measures from time to time to protect the interest of workers and also to emphasise the obligations on the part of management in this regard. We shall briefly discuss the main measures in this regard as contained in the four legislations.

The Payment of Wages Act, 1936 The Primary Objective of the Act is to ensure that wages are paid properly and regularly and prevent the exploitation of workers by malpratices like nonpayment or short-payment, or payment in cash15 . The Act is applicable to all those employed in factories/establishments declared as factories under section 85 of Factories Act, 1948 and drawing less than Rs. 1,600 per month. The Act provides for the wage period one month-and the mode of payment, i.e., cash on a working day which should be paid before the seventh for organisations with less than a thousand employees and by the tenth for larger organisations. The Act also stipulates the rate of payment for overtime work and penal deductions for participation in illegal strikes. An employer can also levy a fine on employee only after due notice is given.

The Minimum Wages Act, 1948 The main purpose of the Act is to avoid exploitation of workers by underpaying them for their efforts. Though the central legislation, but it is implemented by both the Central and State Governements in their respective spheres.

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The Act does not define ‘minimum wages’. The definition given by the Fair Wages Committee, 1948, which is already discussed earlier in this chapter, is considered for legal interpretation. Nonetheless, it takes into account the bare minimum that is needed to keep a man’s “body and soul” together. The Act provides for setting up a tripartite body consisting of representatives of employers, trade unions, and the government, to advise and assist in fixing and revising minimum wage rates. The minimum wages can be fixed by hour, day, month or such other large period. As per the amendments made to the Minimum Wages Act, 1948, the minimum wages fixed once needs to be revised at intervals not exceeding 5 years, taking into consideration the Variable Dearness Allowance (VDA). The rate of minimum wages in the central sphere presently varies from Rs. 14.50 per day to Rs. 33 per day16.

The Payment of Bonus Act, 1965 The issue of bonus has been the main bone of contention between the employees and the employers. This spate of industrial disputes to the bonus issue was sought to be ended with the passage of the Bonus Act17. The main purpose of Bonus Act is to provide for the payment of bonus to persons employed in certain establishments and for matters connected there with. The Act also extends to all factories as defined in Section 2 (m) of the Factories Act, 1948 and to all other establishments in which 20 or more persons are employed on any day during an accounting year. The Act is applicable to employees whose earning is Rs. 2,500 p.m. (w.e.f. 2-5-93) basic plus dearness allowance and who have worked in the unit for not less than 30 working days in a year. The Act also sets the formula for calculating the allocable surplus/profit from which bonus is to be paid. The minimum bonus is to be paid has been raised from 4 percent to 8 1/3 per cent (w.e.f 25.9.75). Of Course, by a process of collective bargaining, the workers through their representative union, can negotiate for more than what the Bonus Act Provides. But, the minimum bonus has to be paid to the employees even if there is a loss. In such case, bonus is treated as a ‘deferred wage’.18 The Act has been under attack of criticism mainly on the issue of bonus quantum and the formula used for calculating the allocable surplus for bonus.

The Equal Remuneration Act, 1976 The basic purpose of this Act is to provide for the payment of equal wages/remuneration to men and women doing the same or similar work and thus, avoid sex descrimination in the matter of remuneration. The Act stipulates stringent punishments for contravention of the provisions of the Act. This Act is in consonance with the recommendations made by the International Labour Organisation (ILO) Convention (No. 100), Industrial Courts, Labour Tribunals, and the Minimum Wages Committee and the Fair Wages Committee for ‘Equal pay for equal work’.

15.7 WAGE DIFFERENTIALS As there are individual differences, so are wage differentials also. An organisation offers different jobs, thus, differentials in wages for different jobs are inevitable. Wage differentials are also known as inter-industry, inter-firm, inter-area or geographical differentials. Wage differentials may be due to following causes: Occupational Differences: Occupations in an organisation widely differ from one another in terms of skill requirement and the extent of requirement and the extent of responsibility. Accordingly, wages vary from occupation to occupation. Such differences in occupations induce people/workers to undertake more challanging jobs, encourage workers to develop their skills by way of education and training. It is varying skill requirement for different occupation that shapes the manpower planning in an organisation-be it an industrial organisation or educational institution. Inter-firm Differentials: There are wage differentials of workers in different plants in the same area and occupation. Factors like differences in quality of labour employed by different firms, imper-

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fections in the labour market and differences in the efficiency of equipments and supervision result in inter-firm wage differentials17. Added to these are differences in technological advance, managerial efficiency, financial capability, firm’s age and size, availability of raw material, power and transport facilities also account for differences in wages among firms. Regional Differences: Not only wages differ among occupations, but these also differ in case of workers working in the same occupation at different geographical regions. These differences are the result of working conditions prevalent in different regions of the country. For example, the Central Government employees serving in the remote and disturbed areas like the North Eastern States of India are paid additional remuneration in the form of the Remote Area Allowance’. Some times, such wage differentials are used to attract people to serve in particular regions. Inter-Industry Differences: These differences in wages surface in case of workers working in the same occupation and the same area but in different industries. These differences are the result of varying skill requirements, level of unionisation, nature of product market, ability to pay, the stage of development of an industry, etc. Personal Wage Differences: These differences arise because of the differences in the personal characteristics (age or sex) of workers working in the same unit and occupation. Though provision of ‘equal pay for equal work’ is certainly there, but it is still not the reality. Instances are there when woman worker is paid less than her male counterpart for doing the same job. Of course, there are other reasons also which cause wage differentials between male and female workers. After all, what is the rationale behind wage differentials? There are two views about it. One, in view of the principles of socialistic pattern of society in which the object of the representative Government is to minimise inequalities in incomes and distribution of wealth. Two, wage differentials are justified given the wide differences in demand and supply of jobs alongwith wide variations in job requirements like skill, ability, aptitude, knowledge, experience and so on. That wage differentials ensure full employment of the national resources is yet another justification given in support of wage differentials.

15.8 EXECUTIVE /MANAGERIALREMUNERATION The objective of remuneration is to duly compensate employees for the services rendered by them. Therefore, employers need to pay a fair and satisfactory remuneration to their employees. Fair remuneration depends on one’s ability and performance. That is precisely the reason remuneration/ wages vary from emplyee to employee, as seen earlier, mainly due to differences in ability and performance of employees. As managerial jobs require more qualification, skill, and knowledge and involve more responsibilities, they need greater incentives to ensure the greater commitment to their jobs. In view of this, the manager’s remuneration cannot be decided on a general basis as for the rank and file workers. In case of the managerial remuneration, certain fringe benefits are given solely to the managers as added incentives to duly compensate for their skills and performance. For example, the United States Compensation Institute’s Phonex plan uses as many as 28 compensatory benefits/ incentives to the managers20. Various criteria have been evolved to compensate the executives and managers. One such criterion suggested by a US Agency called the Hay Group, is based on three factors, namely, accountability, problem-solving and know-how. There are others who determine the managerial compensation depending on the market value of the job, its relationship to other positions in the organisation, and the person’s value to the organisation based on performance and experience21. As regards executive compensation in India, it is mainly based on three important factors: job complexity, employers’ ability to pay and executive human capital. Each of these factors themselves depend on other factors. For example, the complexity of the manager’s job will depend on the size of the company in terms of

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employees, sales volume, assets’ growth, number of units, etc. On the whole, the managerial remuneration in India is based on performance and efficiency.

15.9 SUMMARY This summary is organised by the learning objectives given on page...162: 1.

The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system to obtain, retain and motivate people of required skill in an organisation.

2.

The wage and salary administration is based on three principles, namely, external equity, internal equity and individual worth.

3.

There are two components of wage and salary administration. (i) Determination of wages and salary, (ii) Wage/salary structure.

4.

Payment by time and payment by performance/results (PBR) are the commonly used methods of wage payments.

5.

Theories of wages include wages fund theory (by Adam Smith), subsistence theory (by David Recardo), surplus value theory (by Karl Marx), residual claimant theory (by Francis A. Walker), marginal productivity theory (by Phillips Henry Wicksteed), bargaining theory of wages ( by John Davidson), and behavioural theories.

6.

In order to protect the interest of workers, the lagislations enacted by the Government of India are payment of wages act, 1936; minimum wages act, 1948; payment of bonus act, 1965; and equal remuneration act, 1976.

7.

Wage differentials are the result of occupational differences, inter-firm differentials, regional differences, inter-industry differences, and personal differences.

8.

Unlike the remuneration of the rank and file workers, the executive/managerial remuneration is decided in a manner to duly compensate the ability, increased responsibility and performance of the executives/managers in an organisation.

KEY TERMS Broadbanding

Occupation

Compensation

Payment by Results

Fair Wage

Productivity

Job Evaluation

Salary Progression

Living Wage

Wages

Minimum Wage

Wages Structure

REVIEW AND DISCUSSION QUESTIONS 1. What is meant by remuneration/compensation? What are the basic objectives and principles of wage and salary administration? 2. What do you mean by wage structure? Outline the components of wage structure. 3. What is the difference between time wage and piece wage methods? When is, in your opinion, one suitable? 4. Are wage differentials justified? Comment. 5. Give a note on managerial remuneration.

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REFERENCES 1. J.D. Dunn and F.M. Rachel: Wage and Salary Administration: Total Compensation Systems, McGraw-Hill, New York, 1971, p.21. 2. D.S. Beach: Personnel: The Management of People at Work, 1977, p.642 3. Report of the Third Central Pay Commission, Government of India, Ministry of Finance, New Delhi, 1973. 4. D.W. Belcher: Wage and Salary Administration, Printice Hall, New Jersey, 1962, p.18. 5. E. Lantham: Administration of Wages and Salaries, Harper & Row, New York, 1963, p.52. 6. D.W. Belcher and I.J. Atchison: Equity Theory and Compensation Policy, Personnel Administration, Vol. 33, No. 3, 1970, pp. 22-23. 7. Arun Monappa: Industrial Relations, Tata McGraw Hill, New Delhi, 1985, p. 69. 8. Gary Dessler: Human Resource Management, Printice-Hall of India Private Limited, New Delhi, 1998, pp. 438-439. 9. Report of the Committee on Fair Wages, Government of India, New Delhi, 1948. 10. Ibid. 11. Ibid. 12. Proceedings of Indian Labour Conference, Indian Labour Conference, New Delhi, July, 1957. 13. Gopalji: Personnel Management in Indian Industries, Ashish Publishing House, New Delhi, 1985, p.197. 14. Quoted by C.B. Mamoria: Personnel Management, Himalaya Publishing House, Nagpur, 1996, p.498 15. B.R. Sheth: Indian Labour Laws, a Supervisor Should Know, All India Management Association, New Delhi, 1974. 16. Amendment to Minimum Wages Act, 1948, Financial Express, Bombay edition, may 17, 1993. 17. B.R. Sheth: op.cit, 1974. 18. Arun Monappa and Mirza S. Saiyadain: Personnel Management, Tata McGraw Hill Publishing Company Limited, New Delhi, 1997, p. 255. 19. P.R.N. Sinha: Wage Determinants and Wage Differentials, pp. 172-173. 20. Quoted by V.S.P. Rao: Human Resource Management, Excel Books, New Delhi, 2000, p. 292. 21. RE. Sibson: Compensation ,American Management Association, New York, 1974.

16 INCENTIVES AND BENEFITS Learning Objectives After studying this chapter, you should be able to: 1.

Explain the basic concept of incentive with rationale behind it and also discuss the chief incentive schemes.

2.

Define benefits, give its rationale and mention the benefits often provided by organisations to their employees.

3.

Suggest measures that can help make incentives and benefits more effective.

You have just studied, in the preceding Chapter 15, the need for and significance of a rational compensation plan. You also know that the very concern of a human resource manager is to extract the best and maximum results from his/her employees and also to retain them. However, compensation alone does not serve this purpose. Instead, in order to enthuse employees to contribute their best, something in addition to compensation also needs to be done. Provision for incentives and benefits is based on the same premise. Incentives and benefits are also known as supplementary compensation1. In this chapter, we shall examine the important dimensions of the rationale of incentives and benefits, their types, and measures how to make these more effective.

16.1 INCENTIVES 16.1.1 Basic Concept 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 preferrable 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 benefits2. Here, our discussion relates to financial incentives also known as ‘wage incentives’. The term incentive has been defined differently by different authors. We produce here a few of these definitions. According to the National Commission on Labour3, “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”. Burak and Smith4 have defined incentive as, “ An incentive scheme is a plan or programme to motivate individuals for good performance. An incentive is most frequently built on monetary rewards (incentive pay or a monetary bonus), but also may include a variety of non-monetary rewards or prizes”. According to Venkata Ratnam and Srivastava,5 “A wage incentive scheme is a method of payment for work of an acceptable quality produced over and above a specified quantity or standard”. 176

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Now, we can define incentive as a system of payment under which the amount payable to a person is linked with his output. Such a payment is also called ‘payment by results’ (PBR). Thus, PBR refers to a method which provides for the “direct linking of workers earnings to a measure of their performance”. The main features of incentives gleaned from the above definitions are listed as follows: 1. Incentives are based on a standard of performance for the job. 2. Incentives are measurable in monetary terms. 3. Incentives are meant to motivate workers for better and more performance. 4. Incentives have direct linking to performance. 5. Incentives vary from person to person and from time to time for the same person. An incentive scheme is usually based on three assumptions: 1. The belief that money is a strong motivator. 2. That the relationship between effort and reward can be systematically established. The relationship so based leaves no doubts in the minds of the concerned employees. 3. The feedback to the employees is immediate and direct.

16.1.2 Rationale As regards the rationale behind incentives, controversy prevails over the issue. There are some people who regard incentive schemes as beneficial to both the employees and the employer. There are also some others who consider incentive schemes as irrational. In view of this, it seems pertinent first to analyse both the views separately in some details. It will help us form our opinion about the usefulness or otherwise of incentive schemes for an organisation. Incentives are beneficial: Incentives, i.e., money motivates employees to work more6. Besides, these also help attract and retain employees in the organisation. Incentives bear multiple effects. These lead to increase in production, productivity, economy of scale, revenue, profit, etc. For employers, the need for a vigorous supervision is reduced. As a consequence, there is cut in supervision cost. The position of supervisors changes from that of being “watch dogs” to that of managers of “machines and materials.” Employee absentecism and turnover also gets reduced. With increased production, employees also get more remuneration, bonus, etc. This improves their levels of living and, in turn, productivity2. Such a positive cycle goes on and on. Research studies also support these points. The cross-country experiences gained in experiences indicate that the practice of payment by results was related to increased output, higher earnings, and lower costs7. Such stories abound in India also. In a survey8 conducted by the National Productivity Council (NPC) pointed out that 70 per cent of reporting companies had wage incentive plan. The scheme, on an average, seemed to have achieved increases in output which ranged between 30 per cent and 50 per cent and increases in earnings from 25 per cent to 45 per cent. In his study, Suri9 showed that in majority of the jobs investigated, wage incentive schemes succeed in raising productivity, increasing earnings and reducing direct labour costs. The progressively increasing productivity and falling costs as a result of incentives in the Chittaranjan Locomotive Works since 1954 also support the positive impact of incentives on production and productivity of an organisation. Incentives are irrational: Some people consider incentive scheme just rosy, far from reality. They utilize incentives by putting forward their argument that money being an external factor to the job fails to motivate people. In their opinion, people derive motivation out of their work, i.e., job satisfaction. Their views are in consonance with Herzberg’s two factor theory10 which states that money (pay and incentives) does not act as hygiene factor, i.e., motivator, but it acts only as maintenance factor.

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The experience gained across the world also lends support to the fact that incentive schemes play a dubious role so far as increase in production is concerned. How? The apprehension expressed is that even if incentives help increase output at all, these tend to distort quality in the garb of quantity. This costs much for an organisation. Not only that, increase in output may also generate tensions among its claimants. Such a case will, then, call for the sound and effective administration of incentive schemes, on the one hand, and indepth understanding of human relations, on the other11. Both have never been simple tasks.

Then, what is the final view? There is no denying the fact that people work for money. Then, it can safely be said that money, i.e., incentive motivates people to work more. In fact, the arguments put forward by the critics against incentive schemes do not belittle the novelity of the schemes. The criticism relates to the application of these schemes which become good or bad in the hands of users only. Therefore, incentives are welcome. It is this realization only that the Study Group of the National Commission on Labour12 has also recommended that under our conditions, a wage incentive is concerned with an effective utilization of manpower which is the cheapest, quickest and surest means of increasing productivity. The only practicable and self-sustaining means of improving manpower utilization is to introduce incentive schemes and stimulate human efforts to provide a positive motivation to greater output”.

16.1.3 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 penalises 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. 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. Emersson Efficiency Plan: Under this scheme, both standard work and day wage are fixed. Bonus is paid on the basis of worker’s efficiency. A worker becomes entitled to get bonus only when his/her efficiency reaches to 67%. The rate of bonus goes on increasing till he achieves 100% 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.

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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 alongwith 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 nomenclatured 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 equipments, 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 betwen performance duration and incentive, i.e. reward should not be unduly lengthened, otherwise it may dampen employee motivation14. Therefore, it has been suggested that incentives should be given to the employees at least on a monthly basis.

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 organisational 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.

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(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 organisational 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 copartnership 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 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 characterised 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 organisational performance, the research studies17 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.

16.2 BENEFITS 16.2.1 Concept 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

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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. In simple words, benefits means membership-based non-financial rewards given to employees. The few definitions on benefits will help us understand the meaning of benefits in a better manner Belcher 18 defined benefits as “any wage cost not directly connected with employees productive effort, performance, service or sacrifice”. Cockman19 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”. At the organisation level., the ILO has defined fringe benefits as follows: “Wages are often supplemented by special cash benefits, by the provision of medical and other services, or by payments in kind that form part of the wage for expenditure on the goods and services. In addition, workers commonly receive such benefits as holidays with pay, low-cost meals, low-rent housing, etc. Such additions to the wage proper are preferred to as fringe benefits”. We may now define fringe benefits as the extra benefits provided to employees over and above regular base pay and direct variable compensation related to output, i.e., financial incentives. Or say, benefits are non-wage benefits offered by the employer to the employees. They represent costexpense to the employer and cost-saving to the employee. Benefits differ from incentives in the sense that these are non financial and membership-based. In other words, while incentives are paid to specific employees whose work (performance) is above standard, benefits are available to all employees based on their membership in the organisation. The catchword ‘fringe benefits’ initially used to denote the employee benefits is no longer merely ‘fringe’ as such. Now, these so called fringe benefits form a substantial part of the expenditure incurred on wage and salary administration. For example, according to an estimate,21 the money value of fringe benefits may usually account for 40%, if not more, of the employee remuneration in certain large organisations. This is precisely the reason why ‘fringe benefits’ are now nomenclatured by some people as ‘employee benefits and services’. Here also, some thinkers have tried to draw a line of distinction between benefits and services. According to them, the word ‘benefits’ applies to those items for which a direct monetary value to the employee can be ascertained. Holiday pay, pension, medical insurance, etc., are examples of such benefits. The word ‘services’, on the other hand, refers to such items whose value in monetary term cannot be ascertained. The examples of such items are housing, medical examination, legal aid, athletics, etc. However, both terms, viz., benefits and services have been used as interchangeable or synonymous.

16.2.2 Rationale Why benefits? Do these motivate employees to higher performance? The answer is often no, The underlying reason for this is the membership based nature of benefits, i.e., benefits are offered to all employees regardless of their performance. As per the motivation theories, provision of benefits acts as maintenance only and does not stimulate employees to work more. There is evidence that the absence of adequate benefits and services can contribute to employee dissatisfaction and increased absenteeism and turnover22. In fact, in this lies the rationale behind offering benefits and services. Like incentives, the main rationale behind offering benefits and services is to attract and retain efficient contented employees23. Also, there may be a different rationale or objective related to the nature of each benefit. For example, attendance bonus may be offered to encourage punctuality and regularity in attendance and, in turn, reduce the incidence of absenteeism. Nutritious food may be provided to

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certain employees to offset deficiency caused by certain work conditions. Accelerated promotion may be provided to employees with a purpose to enhance competency and skill, etc.. In fact, the rationale for instituting an employee benefit scheme are several. These all can be classified as paternalistic or humanistic consideration, statutory requirements, concern for security, tax considerations, and competitive considerations. It is a good benefits package why some job seekers choose certain organisations.

16.2.3 Types of Benefits Various benefits provided to the employees may be classfied on different bases. One classfication may be in terms of statutory and voluntary benefits. Various benefits provided to employees under these two categories are discussed hereunder. 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, dependant’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 dependants are eligible for compensation.

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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, subsidised 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. U.S. Chamber of Commerce24 has classified employee benefits into five categories as follows: 1.

Legally - requirerd 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.

Chrismas Bonus. Before we close this chapter, one last mention how to make incentives and benefits more effec-

tive.

16.3 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 programmes 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 persepective. That inflexibility breeds stagnation needs to be recognised.

4.

Employees should be involved in the process of devising incentive and benefit packages.

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 administred one.

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16.4 SUMMARY This summary is organised by the learning objectives given on page... 176: 1.

Incentives are the extra payment for superior performance, These are called ‘payments by results’ (PBR). The rationale behind incentives has been to stimulate human efforts to higher performance. Various incentives offered to employees are classified into two broad categories, viz., Individual Incentive Schemes and Group Incentive Schemes.

2.

Benefits are membership-based non-financial rewards given to employees. The rationale behind benefits is to attract and retain efficient employees. Various benefits provided to employees are grouped as statutory (legalised) benefits and voluntary benefits.

3.

Measures such as aligning incentives and benefits with the employee requirements, flexibility in perspective, employee involvement in devising benefit schemes, providing only appropriate benefits, etc., may make incentives and benefits more effective.

KEY TERMS Co-partnership

Profit Sharing

Fringe Benefits

Scanlon Plan

Incentive

Scientific Management

Industrial Democracy

REVIEW AND DISCUSSION QUESTIONS 1. What do you mean by incentive? What is the rationale behind offering incentives to the employees? 2. Discuss the incentives often offered to employees by the Indian organisations. 3. How will you define fringe benefit? Appreciate the need for and significance of fringe benefits. 4. “Given the increase in the cost of fringe benefits, these are no longer as fringe” How do you explain the statement? 5. Suggest some measures to make incentive and benefit programmes more successful.

REFERENCES 1. Edwin B. Flippo: Personnel Management, McGraw-Hill Book Company, 1984, P. 331. 2. C. S. Venkata Ratnam and B. K. Srivastava: Personnel Management and Human Resources, Tata Mcgraw-Hill Publishing Company Limited, New Delhi, 1996, p.192. 3. National Commission on Labour: Report of the Study Group on Productivity and Incentives, 1969, p. 39. 4. Elmer H. Burack and Robert D. Smith: Personnel Management— A Human Resource Systems Approach, John Wiley, New York, 1982, p. 343. 5. C. S. Venkata Ratnam and B. K. Srivastava: op. cit., 1996, p. 192. 6. Haire Mason, Edward Ghiselli and Lyman Porter: Psychological Research on Pay: An Overview, Industrial Relations, Vol.3, October 1963, p. 3. 7. International Labour Organisation: Payment by Results, 1951, pp. 54-92. 8. Government of India: Report of the National Commission on Labour, p. 92. 9. G. K. Suri: Initial Impact of a Wage Incentive Scheme on Productivity: An Investigation, Indian Journal of Industrial Relations, Vol.6, No. 2, October 1970. In another case study of wage

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incentive scehmes in the cotton textile industry, Somani found that the introduction of wage incentive scheme resulted in a better use of labour and improvement in labour productivity materially. (See G. D. Somani: A Case Study in Cotton Textiles, Productivity, June-July, 1961, pp. 424-426. 10. Frederick Herzberg: Work and the Nature of Man, World Publishing, Cleveland, 1966. 11. N.R. Sheth: Social Implications of Wage Incentive Schemes, Indian Journal of Industrial Relations, Vol.2, No.4, April 1967, p. 461. 12. National Commission on Labour: Report of the Study Group on Productivity and Incentives, 1968, p. 92. 13. International Labour Organisation: Payment by Results, Oxford & IBH, New Delhi, 1951, p. 179. 14. C. S. Venkata Ratnam and B. K. Srivastava: op. cit., 1996, pp. 192-193. 15. Lyle W. Cooper: Profit Sharing, Encyclopedia of Social Sciences, vol X 11, Macmillan, New York, 1934, p. 387. 16. David W. Belcher: Compensation Administration, Prentice-Hall, New Jersey, 1984, p. 351. 17. T. V. Sethuraman and A. V. Muthukrishnan: Impact of Monetary Incentives on Productivity, Economic Times, Bombay, July 12, 1977, p. 5. 18. D. Belcher: Fringe Benefits: Do We Know Enough About Them, In: Langsner and Zollitsch (Eds.): Wage and Salary Administration, South-Western Publishing Company, Cincinnati, Ohio, 1961, p. 488. 19. R. Cockman: Employee Benefits for Managers and Excutives, In: A.M. Favey (Ed.): Handbook of Salary and Wage, Grover Press, Epping, Sussex, 1975, p.73. 20. ILO: International Comparisons of Real Wages, Geneva, 1956, p.19. 21. C. S. Venkata Ratnam and B.K. Srivastava: op: cit, 1996, p. 195. 22. Frederick Herzberg: Work and the Nature of the Man, World Press, New York, 1966. 23. C. P. Thakur: Corporate Strategy on Fringe Benefits, Spectrum, Patna, 1985. 24. U.S. Chamber of Commerce: Employee Benefits, Washington, 1971.

17 MOTIVATION : CONCEPTS AND APPLICATION Learning Objectives After Studying this chapter, you should be able to : 1.

Explain the meaning of motivation.

2.

Appreciate the need for and importance of motivation.

3.

Analyse some of the important theories of work motivation.

4.

Discuss various tools of motivation generally used to motivate employees.

5.

Distinguish between motivation and morale.

In order to extract more from employees, an HR manager needs to understand how to make people work more or work better. Motivation helps understand this. This chapter is, therefore, devoted to discuss various explanations why people make more efforts on their jobs. Also discussed are tools and techniques used to enthuse people to work more and better. Let us begin with understanding the meaning of the term ‘motivation?

17.1 MEANING OF MOTIVATION The term ‘motivation’ has been derived from the word ‘motive’. Motive may be defined as an inner state of our mind that activates and directs our behaviour. It makes us move to act. It is always internal to us and is externalised via our behaviour. Motivation is one’s willingness to exert efforts towards the accomplishment of his/her goal. Let us consider a few important definitions on motivation that will help us understand the meaning of motivation more clearly. Fred Luthans1defined motivation as a “process that starts with a physiological or psychological deficiency or need that activates behaviour or a drive that is aimed at a goal or incentive”. According to Stephen P. Robbins2, “motivation is the willingness to exert high levels of efforts toward organisational goals, conditioned by the effort ability to satisfy some individual need”. In the opinion of Gray and Starke 3, “motivation is the result of processes, internal or external to the individual, that arouse enthusiasm and persistence to pursue a certain course of action”. After going through the above definitions, motivation can be defined very simply as the willingness to exert towards the accomplishment of goal or need.

Motivation Cycle or Process As stated earlier, motivation is a process or cycle aimed at accomplishing same goals. The basic elements included in the process are motives, goals and behaviour. A brief mention of these follows: Motives: Almost all human behaviour is motivated. It requires no motivation to grow hair, but getting a hair cut does. Motives prompt people to action. Hence, these are at the very heart of motivational process. Motives provide an activating thrust towards reaching a goal. The examples of the needs for food and water are translated into the hunger and thrust drives or motives, Similarly, the need for friends becomes a motive for affiliation. 186

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Goals: Motives are generally directed towards goals. Motives generally create a state of physiological or psychological imbalance. Attaining goals restores balance, For example, a goal exists when the body of the man is deprived of food or water or one’s personality is deprived of friends or companions. Behaviour: Behaviour is a series of activities to be undertaken. Behaviour is directed to achieve a goal. For example, the man goes to saloon to cut his hair. Diagrammed simply, the cycle or process of motivation is presented in Figure 17.1 as follows:

Motive

Goal

Behaviour

Tension Reduction Fig. 17.1: Motivation Process

17.2 IMPORTANCE OF MOTIVATION The need for and importance of motivation can be imbued with multiplicity of justifications as follows: 1.

Organisations are run by people, Hence, mangers cannot afford to avoid a concern with human behaviour at work. This is because the motivated employees are more productive and quality- conscious than apathetic ones.

2.

Motivation as a pervasive concept affects and is also affected by a host of factors in the organisational milieu. It enables managers to understand why people behave as they behave.

3.

Organisational effectiveness becomes, to some extent, the question of management’s ability to motivate its employees. Hence, an appreciation of motivation helps the mangers how to motivate their employees.

4.

Machines become necessary in case of complex technology. However, these remain inefficient vehicles of effective and efficient operations without man to operate them. Therefore, organisations need to have employees with required capability and willingness to use the advanced complex technology to achieve the organisational goal.

5.

With the realisation that organisations will run in more complex milieu in future, an increasing attention has been given to develop employees as future resources (a ‘talent bank’). This facilitates the managers to draw upon them as and when organisations grow and develop.

In sum and substance, the need for and significance of motivation for an organisation can be put as follows: “If we compare management with driving, while the organisation is the vehicle, then motivation is the power or fuel that makes the vehicle moving”.

17.3 THEORIES OF MOTIVATION From the very beginning, when the human organisations were established, various thinkers have tried to find out the answer to what motivates people to work. Different approaches applied by them have resulted in a number of theories concerning motivation. These all theories are broadly classified into three categories:

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1.

Theories based on human needs(theories by Maslow, Herberg, and McClelland);

2.

Theories based on human nature (theories by McGregor, Urwick, and Argyris); and

3.

Theories based on expectancy of human beings (theories by Vroom and Porter and Lawler).

These are discussed in brief in that order.

17.3.1 Maslow’s Need Hierarchy Theory It is probably safe to say that the most well-known theory of motivation is Maslow’s need hierarchy theory 4. Maslow’s theory is based on the human needs. Drawing chiefly on his clinical experience, he classified all human needs into a hierarchical manner from the lower to the higher order. In essence, he belived that once a given level of need is satisfied, it no longer serves to motivate man. Then, the next higher level of need has to be activated in order to motivate the man. Maslow identified five levels in his need hierarchy as shown in figure17.2. SELFACTUALISATION ESTEEM NEEDS SOCIAL NEEDS SAFETY NEEDS PHYSIOLOGICAL NEEDS Fig. 17.2: Maslow’s Need Hierarchy

These are now discussed one by one. 1. Physiological Needs: These needs are basic to human life and, hence, include food, clothing, shelter, air, water and necessities of life. These needs relate to the survival and maintenance of human life. They exert tremendous influence on human behaviour. These needs are to be met first at least partly before higher level needs emerge. Once physiological needs are satisfied, they no longer motivate the man. 2. Safety Needs: After satisfying the physiological needs, the next needs felt are called safety and security needs. These needs find expression in such desires as economic security and protection from physical dangers. Meeting these needs requires more money and, hence, the individual is prompted to work more. Like physiological needs, these become inactive once they are satisfied. 3. Social Needs: Man is a social being. He is, therefore, interested in social interaction, companionship, belongingness, etc. It is this socialising and belongingness why individuals prefer to work in groups and especially older people go to work. 4. Esteem Needs: These needs refer to self-esteem and self-respect. They include such needs which indicate self-confidence, achievement, competence, knowledge and independence. The fulfilment of esteem needs leads to self-confidence, strength and capability of being useful in the organisation. However, inability to fulfil these needs result in feeling like inferiority, weakness and helplessness.

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5. Self-Actualisation Needs: This level represents the culmination of all the lower, intermediate, and higher needs of human begins. In other words, the final step under the need hiearchy model is the need for self-actualisation. This refers to fulfilment. The term self-actulisation was coined by Kurt Gloldstein and means to become actualized in what one is potentially good at. In effect, selfactulisation is the person’s motivation to transform perception of self into reality. According to Maslow, the human needs follow a definite sequence of domination. The second need does not arise until the first is reasonably satisfied, and the third need does not emerge until the first two needs have been reasonably satisfied and it goes on. The other side of the need hierarchy is that human needs are unlimited. However, Maslow’s need hierarchy-theory is not without its detractors. The main criticisms of the theory include the following: 1.

The needs may or may not follow a definite hierarchical order. So to say, there may be overlapping in need hierarchy. For example, even if safety need is not satisfied, the social need may emerge.

2.

The need priority model may not apply at all times in all places.

3.

Researches show that man’s behaviour at any time is mostly guided by multiplicity of behaviour. Hence, Maslow’s preposition that one need is satisfied at one time is also of doubtful validity.

4.

In case of some people, the level of motivation may be permanently lower. For example, a person suffering from chronic unemployment may remain satisfied for the rest of his life if only he/she can get enough food.

Notwithstanding, Maslow’s need hierarchy theory has received wide recognition, particularly among practicing mangers. This can be attributed to the theory’s intuitive logic and easy to understand. One researcher came to the conclusion that theories that are intuitively strong die hard5.

17.3.2 Herzberg’s Motivation Hygiene Theory The psychologist Frederick Herzberg extended the work of Maslow and propsed a new motivation theory populary known as Herzberg’s Motivation Hygiene (T wo-Factor) Theory6. Herzberg conducted a widely reported motivational study on 200 accountants and engineers employed by firms in and around Western Pennsylvania. He asked these people to describe two important incidents at their jobs: (1) when did you feel particularly good about your job, and (2) when did you feel exceptionally bad about your job? He used the critical incident method of obtaining data. The responses when analysed were found quite interesting and fairly consistent. The replies respondents gave when they felt good about their jobs were significantly different from the replies given when they felt bad. Reported good feelings were generally associated with job satisfaction, whereas bad feeling with job dissatisfaction. Herzberg labelled the job satisfiers motivators, and he called job dissatisfiers hygiene or maintenance factors. Taken togther, the motivators and hygiene factors have become known as Herzberg’s two-factor theory of motivation. Herzberg’s motivational and hygiene factors have been shown in the Table 17.1 According to Herzberg, the opposite of satisfaction is not dissatisfaction. The underlying reason, he says, is that removal of dissatisfying characteristics from a job does not necessarily make the job satisfying. He believes in the existence of a dual continuum . The opposite of ‘satisfaction’ is ‘no satisfaction’ and the opposite of ‘dissatisfaction’ is ‘no dissatisatisfaction’. According to Herzberg, today’s motivators are tomorrow’s hygiene becauses the latter stop influencing the behaviour of persons when they get them. Accordingly, one’s hygiene may be the motivator of another. However, Herzberg’s model is labeled with the following criticism also:

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1.

People generally tend to take credit themselves when things go well. They blame failure on the external environment.

2.

The theory basically explains job satisfaction, not motivation.

3.

Even job satisfaction is not measured on an overall basis. It is not unlikely that a person may dislike part of his/ her job, still thinks the job acceptable.

4.

This theory neglects situational variable to motivate an individual. Table 17.1: Herzberg’s Motivational and Hygiene Factors

Motivators: Job Satisfaction

Hygiene: Job Dissatisfaction

Achievement Recognition Work itself Responsibility Advancement Growth Company Policy and Administration Supervision Interpersonal Relations Working Conditions Salary* status Security *Because of its ubiquitous nature, salary commonly shows up as a motivator as well as hygine.

Regardless of criticisms, Herzberg’s ‘two-factor motivation theor y’ has been widely read and a few managers seem unfamiliar with his recommendations. The main use of his recommendations lies in planning and controlling of employees work.

Distinction between Maslow’s and Herzberg’s Theories Both Maslow and Herzberg theories focus on motivational factors. However, both differ from each other in their approaches. As discussed earlier, Maslow’s motivation theory is based on the hierarchy of needs. According to this theory, only unsatisfied needs motivate individuals. Once a need is satisfied, it ceases to be a motivating factor. But, Herzberg’s motivation theory is based on motivational and hygiene or maintenance factors. According to Herzberg, hygiene or maintenance factors prevent job dissatisfaction but do not provide motivation to workers. In his view, Maslow’s lower order needs like physiological, safety and social needs act as hygiene or maintenance factors.

17.3.3 McClelland’s Need Theory Another well-known need-based theory of motivation, as opposed to hierarchy of needs of satisfaction-dissatisfaction, is the theory developed by McClelland and his associates7. McClelland

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developed his theory based on Henry Murray’s 8 developed long list of motives and manifest needs used in his early studies of personality. McClelland’s need-theory is closely associated with learning theory, because he believed that needs are learned or acquired by the kinds of events people experienced in their environment and culture. He found that people who acquire a particular need behave differently from those who do not have. His theory focuses on Murray’s three needs; achievement, power and affiliation. In the literature, these three needs are abbreviated “ n Ach”, “ n Pow”, and “n Aff” respectively 9. They are defined as follows: Need for Achievement: This is the drive to excel, to achieve in relation to a set of standard, and to strive to succeed. In other words, need for achievement is a behaviour directed toward competition with a standard of excellence10. McClelland found that people with a high need for achievement perform better than those with a moderate or low need for achievement, and noted regional / national differences in achievement motivation. Through his reserach, McClelland identified the following three characteristics of high-need achievers : 1. High-need achievers have a strong desire to assume personal responsibility for performing a task for finding a solution to a problem. 2. High-need achievers tend to set moderately difficult goals and take calculated risks. 3. High-need achievers have a strong desire for performance feedback. Need for Power: The need for power is concerned with making an impact on others, the desire to influence others, the urge to change people, and the desire to make a difference in life11. People with a high need for power are people who like to be in control of people and events. This results in ultimate satisfaction to man. People who have a high need for power are characterized by : 1. A desire to influence and direct somebody else. 2. A desire to exercise control over others. 3. A concern for maintaining leader-follower relations. Need for Affiliation: The need for affiliation is defined as a desire to establish and maintain friendly and warm relations with other people12. The need for affiliation, in many ways, is similar to Maslow’s social needs. The people with high need for affiliation have these characteristics : 1. They have a strong desire for acceptance and approval from others. 2. They tend to conform to the wishes of those people whose friendship and companionship they value. 3. They value the feelings of others. Herzberg

Higher order needs

Esteem Socialisation

Lower order needs

Safety and Security

Physiological

Hygiene Factors

Self-actualisation

Motivational Factors

Maslow

The work itself: Responsibility Advancement Growth

McClelland Need for achievement

Achievement Recognition

Need for power

Quality of inter-personal relationships

Need for affiliation

Job security Working condition Salary

Fig. 17.2 : Three Need Theories of Motivation

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Figure 17.2 is a summary chart of the three need theories of motivation just discussed. The chart shows the parallel relationship between the needs in each of the theories. Maslow refers to higherlower order needs, whereas Herzberg refers to motivation and hygiene factors.

17.3.4 McGregor Participation Theory Douglas McGregor formulated two distinct views of human being based on participation of workers. The first basically negative, labeled Theory X, and the other basically positive, labled Theory Y13. Theory X is based on the following assumptions: 1.

People are by nature indolent. That is, they like to work as little as possible.

2.

People lack ambition, dislike responsibility, and prefer to be directed by others.

3.

People are inherently selfcentered and indifferent to organisational needs and goals.

4.

People are generally gullible and not very sharp and bright.

On the contrary, theory Y assumes that: 1.

People are not by nature passive or resistant to organisational goals.

2.

They want to assume responsibility.

3.

They want their organisation to succeed.

4.

People are capable of directing their own behaviour.

5.

They have need for achievement.

What McGregor tried to dramatise through his theory X and Y is to outline the extremes to draw the fencing within which the organisational man is usually seen to behave. The fact remains that no organisational man would actually belong either to theory X or theory Y. In reality, he/she shares the traits of both. What actually happens is that man swings from one set or properties to the other with changes in his mood and motives in changing environment.

17.3.5 Urwick’s Theory Z Much after the propostions of theories X and Y by McGregor, the three theoriests—Urwick, Rangnekar, and Ouchi-propounded the third theory lebeled as Z theory14. The two propositions in Urwicks’s theory are that: (i) Each individual should know the organisational goals precisely and the amount of contribution through his efforts towards these goals. (ii) Each individual should also know that the relation of organisational goals is going to satisfy his/her needs positively. In Urwick’s view, the above two make people ready to behave positively to accomplish both organisational and individual goals. However, Ouchi’s Theory Z has attracted the lot of attention of management practitioners as well as researchers. It must be noted that Z does not stand for anything, is merely the last alphabet in the English Language. Theory Z is based on the following four postulates: 1.

Strong Bond between Organisation and Employees

2.

Employee Participation and Involvement

3.

No Formal Organisation Structure

4.

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Ouchi’s Theory Z represent the adoption of Japanese management practices (group decision making, social cohesion, job security, holistic concern for employees, etc.)by the American companies. In India, Maruti-Suzuki, Hero-Honda, etc., apply the postulates of theory Z.

17.3.6 Argyris’s Theory Argyris has developed his motivation theory based on propostion how management practices affect the individual behaviour and growth 15. In his view, the seven changes taking place in an individual personality make him/her a mature one. In other words, Personality of individual develops from immaturity to maturity as follows: Immaturity

Maturity

Passivity Dependence Capable of behaviour in a few ways Shallow interest Short-term perspective Subordinate position Lack of sell-awareness

Activity Independence Capable of behaving in many ways Deep interest Long-term perspective Superordinate position Self-awareness and control

Argyris views that immaturity exists in individuals mainly because of organisational setting and management practices such as task specialisation, chain of command, unity of direction, and span of management. In order to make individuals grow mature, he proposes gradual shift from the existing pyramidal organisation structure to humanistic system; from existing management system to the more flexible and participative management. He states that such situation will satisfy not only their physiological and safety needs, but also will motivate them to make ready to make more use of their physiological and safety needs. But also will motivate them to make ready to make more use of their potential in accomplishing organisational goals.

17.3.7 Vroom’s Expectancy Theory One of the most widely accepted explanations of motivation is offered by Victor Vroom in his Expectancy Theory16. It is a cognitive process theory of motivation. The theory is founded on the basic notions that people will be motivated to exert a high level of effort when they believe there are relationships between the effort they put forth, the performance they achieve, and the outcomes/ rewards they receive. The relationships between notions of effort, performance, and rewards are depicted in Figure 17.3

Effort

Performance

Reward

Will my effort improve my performance?

Will performance lead to rewards?

Will rewards satisfy my individual goals?

Fig 17.3: Vroom’s Expectancy Model of Motivation

Thus, the key constructs in the expectancy theory of motivation are:

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1.

Valence: Valence, according to Vroom, means the value or strength one places on a particular outcome or reward.

2.

Expectancy: It relates efforts to performance.

3.

Instrumentality: By instrumentality, Vroom means, the belief that performance is related to rewards.

Thus, Vroom’s motivation can also be expressed in the form of an equation as follows: Motivation = Valence × Expectancy × Instrumentality Being the model multiplicative in nature, all the three variables must have high positive values to imply motivated performance choice. If any one of the variables approaches to zero level, the possibility of the so motivated performance also touches zero level. However, Vroom’s expectancy theory has its critics. The important ones are: 1.

Critics like Porter and Lawler lebeled it as a theory of cognitive hedonism which proposes that individual cognitively chooses the course of action that leads to the greatest degree of pleasure or the smallest degree of pain.

2.

The assumption that people are rational and calculating make the theory idealistic.

3.

The expectancy theory does not describe individual and situational differences.

But the valence, or value people place on various rewards varies. For example, one employee prefers salary to benefits, whereas another person prefer to just the reverse. The valence for the same reward varies from situation to situation. In spite of all these critics, the greatest point in the expectancy theory is that it explains why a significant segment of workforce exerts low levels of efforts in carrying out job responsibilities17.

17.3.8 Porter and Lawler’s Expectancy Theory In fact, Porter and Lawler’s theory 18 is an improvement over Vroom’s expectancy theory. They posit that motivation does not equal satisfaction or performance. The model suggested by them

Abilities and Traits

Value of Reward

Perceived Equitable Rewards Intrinsic Rewards

Effort

Satisfaction

Performance

Extrinsic Rewards Perceived effort-reward probability

Role Perceptions

Fig 17.4: The Porter and Lawler Motivation Model Adapted from : L.W. Porter and E.E. Lawler: Managerial Attitude and Performance, Richard D. Irwin. Homewood III, 1968, p. 165.

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encounters some of the simplistic traditional assumptions made about the positive relationship between satisfaction and performance. They proposed a multi-variate model to explain the complex relationship that exists between satisfaction and performance. What is the main point in Porter and Lawler’s model is that effort or motivation does not lead directly to performance. It is, in fact, mediated by abilities and traits and by role perceptions. Ultimately, performance leads to satisfaction,. The same is depicted in the following Fig 17.4. There are three main elements in this model. Let us briefly discuss these one by one. Effort: Effort refers to the amount of energy an employee exerts on a given task. How much effort an employee will put in a task is determined by two factors—(i) value of reward and (ii) perception of effort-reward probability. Performance: One’s effort leads to his/her performance. Both may be equal or may not be. However, the amount of performance is determined by the amount of labour and the ablity and role perception of the employee. Thus, if an employee possesses less ability and/or makes wrong role perception, his/her performance may be low in spite of his putting in great efforts. Satisfaction: Performance leads to satisfaction. The level of satisfaction depends upon the amount of rewards one achieves. If the amount of actual rewards meet or exceed perceived equitable rewards, the employee will feel satisfied. On the country, if actual rewards fall short of perceived ones, he/she will be dissatisfied. Rewards may be of two kinds—intrinsic and extrinsic rewards. Examples of intrinsic rewards are such as sense of accomplishment and self-actulisation. As regards extrinsic rewards, these may include working conditions and status. A fair degree of research support that the intrinsic rewards are much more likely to produce attitudes about satisfaction that are related to performance. There is no denying of the fact that the motivation model proposed by Porter and Lawler is quite complex than other models of motivation. In fact, motivation itself is not a simple cause–effect relationship rather it is a complex phenomenon. Porter and Lawler have attempted to measures variables such as the values of posible rewards, the perception of effort-rewards probabilities, and role perceptions in deriving satisfaction. They recommended that the managers should carefully reassess their reward system and structure. The effort-performance-reward-satisfaction should be made integral to the entire system of managing men in organisation.

17.4 MOTIVATIONAL TOOLS/APPLICATION Motivational tools are instruments that prompt people to action. Hence, while using motivational tools, these should be adequate and capable enough to motivate employees to make their maximum efforts to accomplish the set goals. Various motivational tools used to motivate employees in business organisations are broadly classified into monetary and non-monetary tools or incentives. These are discussed in more details subsequently. Here, we will focus on why motivational tools need to be appropriate to activate people to action. Man is a wanting animal. He works to satisfy his needs in a prepotency order. Therefore, motivational tools need to be effective enough to satisfy human needs. As human needs vary between people and between different points of times in case of the same person, motivational tools are, therefore, bound to vary accordingly. For examaple , while increase in salary may satisfy one’s physiological needs, recognition may satisfy the esteem needs. When needs are not satisfied, people become frustrated. Yes, there may be both environmental and personal factors resulting in one’s frustration. Apathy, indifference, aggression, anatgonism, open conflict, physical violence, etc., are the common response to frustration observed in organisations. These are detrimental to organisational efficiency.

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It is true that reaction to frustration may vary from person to person, yet the behavioural pattern of individuals is likely to be identical in identical situations. As such, it makes easier for the motivator/ manager to apply the appropriate motivational tools. If the behavioural pattern of the individuals is known to him. Thus, it can be concluded that motivational tools are expected to be need satisfying, and hence, need to be person-oriented. Better the motivational tools, greater would be its effect on the individual behaviour. This would, in turn, lead to organisational effectiveness. And in this lies the need for and significance of motivational tools to be used to motivate employees in business organisations.

17.4.1 Incentives The term incentive means an inducement which rouses or stimulates one to action in a desired direction. An incentive has a motivational power, a large number of incentives the modern organisations use to motivate their employees may be broadly grouped into (i) financial incentives, and (ii) non-financial incentives. These are discussed one by one. Financial Incentives: Money is an important motivator. Common uses of money as incentive are in the form of wages and salries, bonus, retirement benefits, medical reimbursement,etc. Management needs to increase these financial incentives making wages and salaries competitive between various orgnisations so as to attract and hold force19. Money plays a significant role in satisfying physiological and security/social needs. As money is recognized as a basis of status, respect and power, it also helps satisfy the social needs of the people. It is important to mention that once the physiological and security needs are satisfied, money ceases to be motivator. Money then becomes, what Herzberg termed, hygiene and maintenance factor. The presence of hygiene factor, of course, prevents job dissatisfaction but do not provide ‘on the job satisfaction’ to the employees in the organisation. In such case, money cannot be considered as motivator. Then, in order to motivate employees, according to Herzberg, it is necessary to provide other incentives for the satisfaction of ego, status, and self-actualisation needs. However, these needs are experienced generally by employees working at higher levels in the organisations. People in higher positions getting higher monetary rewards are not motivated by increased monetary rewards. Yes, they may be motivated by money only when increase is large enough to raise their standard of living and status in the society to which they belong to. What follows from above discussion is that money is not the only motivator and also it is not always a motivator. In order to satisfy different kinds of human needs, management needs to provide non-financial incentives such as job enlargement, participative management, recognition, praise, etc. These also motivate employees at their works. Non-Financial Incentive: As mentioned earlier, man is a wanting animal. Once money satisfies his/her physiological and security needs, it ceases to be a motivating force. Then, higher order needs for status and recognition and ego in the society emerge. The following non-financial incentives help management satisfy its employees’ these needs: 1. Appreciation of Work Done: Appreciation or praise for work done, be it at home, at school/ university or at work place, serves as an effective non-financial incentive. Appreciation satisfies one’s ego needs. However, managers need to use this incentive with great degree of caution because praising an incompetent employee may create a resentment among competent employees. 2. Competition: If there exists a healthy competition among the employees both at individual and group levels, it will prompt them to exert more to achieve their personnel or group goals. Thus, competition serves as a non-financial incentive for employees to put in more efforts at their works.

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3. Group Incentives: Sometimes, group incentives act as more effective than individual incentives to motivate the employees. Particularly, when the prestige or even existence of a group is at stake, the group members work with a team spirit. This results in high morale and, in turn, increase in its productivity. 4. Knowledge of the Results: Knowledge of the results of work done leads to employee satisfaction. An employee derives satisfaction when his/her boss appreciates the work he/she has done just as an MBA student gets satisfaction when his/her Professor appreciates the seminar he/ she presented in the class. 5. Worker’s Participation in Management: Inviting workers to participate in management gives worker’s a psychological satisfaction that their voices are also heard. This imbibes a sense of importance among the workers. 6. Opportunity for Growth:Man is not only a wanting animal but an ambitious creature also. People always need to grow in their career. So, if the employees are provided proper opportunities for growth and career advancement and chance to develop their personality, they feel much satisfied and become more committed to the organisational goals. 7. Suggestion System: Suggestion system is yet another non-financial incentive to be used to motivate employees. Following this, some organisations make use of cash awards for giving useful suggestions. They sometimes publish the worker’s name with his/her photograph in the company’s magazine with a motive to other workers to search for useful suggestions for the company. Thus, suggestion system acts as an incentive for the workers to be in search of something useful for the company. 8. Job Enrichment: Job enrichment simply means adding the contents to a job leading to increased responsibility, scope and challenge in its performance. Particularly, the executives working at the higher levels often prefer to job enrichment because it makes job more challenging. They derive higher satisfaction by performing more and more challenging jobs. Thus, job enrichment as an incentive motivates the executives to exert for accomplishment of their goals. Job enrichment is a by-product of job design which is discussed subsequently.

17.4.2 Job Design The job a worker does is a significant aspect of his/her life for more than one reasons. It provides worker not only a living, but also helps in achieving his/her other goals such as economic,

6 Goal Setting

1 job Enlargement 2 Job Enrichment

JOB DESIGN

3 Job Simplification

5 Quality of Work Life 4 Job Rotation

Fig. 17.5: Approaches to Job Design

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social, political and cultural. Somuchso, work is philosophised and treated as “ worship”. People who work for living spend a significant period of their lives at work. Hence, job needs to provide them satisfaction to sustain their interest in jobs. This is done through job design. While other incentives as discussed in the preceding section, provide extrinsic motivation, job design provides intrinsic motivation to the workers. A Job can be defined as a grouping of task within a prescribed unit or units of work. Job design is a deliberate attempt made to structure the tasks and social relationships of a job to create optimal levels of variety, responsibility, autonomy and interaction. In fact, the basic objective of job design is to maintain a fit between a job and its performer so that the job is performed well and the job performer derives satisfaction from doing job. The important approaches or strategies a job design involves are job enlargement, job enrichment, job simplification, job rotation, quality of work life and goal-setting. Fig. 17.5 summarized the various approaches to job design. Each of these approaches are now discuss one by one. Job Enlargement: Job enlargement consists of making a job larger in scope by combining additional task activities into each job through expansion. This is called horizontal loading. It, thus, focuses on enlarging jobs by increasing tasks and responsibilities. An example of job enlargement in a university may be assigning a Professor the task of looking after the NSS activities besides his/her teaching in his/her Department. Similarly, a clerk in an office who is doing the typing work only may also be assigned the task of drafting letters, sorting of incoming mails and filing of letters. Following are the advantages of job enlargement: 1.

Job enlargement avoids monotony which is the result of high degree of specialisation and division of labour.

2.

It improves workers satisfaction, decreased production costs, and increased quality20.

3.

It also improves the worker’s efficiency at work.

In spite of above advantages, certain disadvantages of job enlargement cannot be lost sight of. These are: 1.

Workers may require additional training for performing enlarged tasks. Thus, the training costs tend to rise.

2.

Moreover, productivity may fall during the introduction of new system based in job redesigning.

3.

Lastly, workers often argue for increased pay because of the increased work load as a result of job enlargement.

Job Enrichment: Closely related to job enlargement is job enrichment. Job enrichment is a direct outgrowth of Herzberg’s21 two–factor theory of motivation. It refers to the vertical enlargement of a job by adding responsibility and opportunity for personal growth. In other words, job enrichment is concerned with designing jobs that includes a greater variety of work content, require a higher level of knowledge and skill, give worker more autonomy and responsibility, and provide opportunity for personal growth. Increases in job content vertically leads to variety, making repetitive jobs less boring but more satisfying22. The term job enrichment needs to be distinguished from the term job enlargement. The difference between the two lies on the nature of additions to the job. While job enlargement involves a horizontal loading, or expansion, or the adding of more tasks of the same general nature, job enrichment involves vertical loading, addition giving more challenge.

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The advantages of job enrichment are as follows: 1.

It makes the job more interesting.

2.

It discourages absenteeism and turnover of workers.

3.

It motivates employees through opportunities for growth and advancement.

4.

Workers derive higher job satisfaction from doing work.

5.

The enterprise also gains through improvement of output both in quantity and quality.

However, job enrichment is not an unmixed blessing. It suffers from the following limitations or disadvantages also: 1.

Technologically, it may not be easy to enrich all jobs.

2.

Enrichment of jobs has proved to be a costly preposition in certain cases as the expenditure exceeds gains.

3.

Adding challenges to highly skilled jobs may not necessarily bring satisfaction for highly professional ones.

4.

All those who prefer to job enrichment may not have the requisite capability to meet the new challenges.

Go through the following short case of job enrichment applied in Dynamo Corporation Limited, Rampur. It will help you understand how job enrichment motivates workers to improve their job performance.

Job Enrichment in Dynamo Corporation Limited, Rampur An interesting study in job enrichment was undertaken by Professor Nitish De23 at the Rampur unit of Dynamo Corporation Limited. The corporation was set up for 10 years and produced items for the “core” sector (heavy engineering equipment). The study was conducted on managers, supervisors, and workers of a unit producing auxiliary equipment. An initial survey revealed that none of the workers was emotionally committed to the product, there was forced idle time because of task interdependence and uneven distribution of work load. Having worked for a long time at the same job, workers did not find it sufficiently challenging. These findings were placed before the total unit, which agreed on setting up a rotating task force with representatives from each category and the introduction of a new work system. The new work system consisted of having a group of employees taking charge of a complete task and gradually taking on each other’s job after training. Thus, a welder did the job of a fitter, and a fitter did that of a welder or a gas cutter. Each worker became multiskilled. Three things were noted: (1) Monotony was partially eliminated: (2) the traditional hierarchical concept of trade was minimized, and (3) a positive attitude towards co-workers and the work was developed. Monthly data for targets set and percentages of fulfilment of targets were plotted. From April 1975 to November 1975, rising trends were noticed both in the fulfilment of targets and the overall efficiency against clocked time. There was an increase of 6.9 per cent and 45.3 per cent in relation to the targets and the overall efficiency respectively. Thus, changes in job content, greater variety, and freedom contributed to the performance of the employees. Job Simplification. In case of job simplification, a job is broken down, to the extent possible, into smaller parts as is done in assembly line operations. Doing so fragmented task repetitively leads to increase in worker’s productivity. However, the other side of doing the repetitive task is that job may produce boredom and monotony to the workers. This may, in turn, lead to a tendency of absenteeism among them. Nonetheless, such type of job may be suitable for workers having low levels of skills and knowledge.

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Job Rotation: Some people have suggested job rotation also as a motivational strategy. In job rotation, a worker moves from one job to another, at the same level, that has similar skill requirements. Job rotation reduces boredom and monotony through changing employee’s activities. This has almost the similar effects as the job enlargement has. However, job rotation has certain drawbacks also. The important ones are: (i) Work suffers from obvious disruption caused by change in job; (ii) Job rotation becomes less useful as specialisation proceeds, and (iii) It may demotivate intelligent and ambitious employees who seek specific responsibilities in their chosen speciality. Quality of Work Life (QWL): There have been divergent views as to what really is quality of work life (QWL). According to Sangeeta Jain 24, QWL consists of a whole parcel of terms and notions all of ‘which really belong under the quality of Working Life Umbrella’. Walton 25 viewed it as consisting of all those work conditions that give satisfaction to workers while doing their jobs/ tasks. In simple words, QWL refers to the favourableness or unfavourableness of a total job environment for people. The elements included in a QWL programme like open communication, equitable reward system, employees’ job security and satisfaction, participative management, development of employee skill, etc., make job environment favourable. Though one can catalogue a long list of factors that contribute to quality of work life, the following four are the broad and common ones: 1.

Job Involvement

2.

Job Satisfaction

3.

Sense of Competence

4.

Job Performance and Productivity

Now, in what follows is their brief description one by one. 1. Job Involvement: Job involvement indicates the extent a worker identifies himself/ herself with the work. Workers involved in their jobs spent more time on their jobs. Challanging jobs make workers to get involved with their jobs. Besides, people with high need for achievement and high work ethic are also found to be involved with their jobs. 2. Job Satisfaction: Job satisfaction refers to one’s good or positive feeling toward his/her job. Job satisfaction improves work performance and reduces employee absenteeism and turnover. 3. Sense of Competence: Job involvement ultimately results in sense of competence. Sense of competence denotes the feelings of confidence that one has in one’s own ability, skill or competence. High sense of competence and job involvement combinedly produce high levels of job satisfaction and productivity. 4. Job Performance and Productivity: The aforesaid three factors–job involvement, job satisfaction, and sense of competence— boil down to improve job performance and productivity of employees. How to improve QWL? Suggestion and measures given by behavioural scientists do not tally but vary. The simplest solution to improve QWL may be improving the existing job environment. Some researchers 26 consider two directions to improve QWL. One direction concerns the alleviation or removal of negative aspects of work and working conditions and the other direction concerns the modification of aspects of work and working conditions. Measures to improve QWL in India, include participative community development projects, job sharing and creating part-time jobs, choice of appropriate technology, involving unions, education and training and lagislative measures. Besides, the conditions that contribute to motivation (equitable salaries, financial incentives, effective, employee selection, etc.) also contribute to improving the quality of work life (QWL).

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Job Analysis: Closely related to job enlargement, enrichment, simplification, and rotation is job analysis. Job analysis is a statement mentioning who will do what. Absence of job analysis may adversely affect the performance of a task just as exemplified in the following box: This is a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done!

17.4.3 Goal Setting What is a goal? Goal is a target and objective for future performance. It helps focus employees’ attention on items of greater importance to the organisation and stimulates employees towards goal attainment. Goal setting refers to setting of attainable goal for an organisation as well as for an employee. It was Locke27who did the seminal work on a theory of goal setting way back in 1968. His theory has generated a considerable research on goal setting. Goal setting works as a motivational tool because it creates a discrepancy between current and expected performance. Goal setting results in a feeling of tension which is diminished through goal attainment. Individuals attaining goals successfully tend to set even higher goals in the future. Self-efficacy contributes a lot to success of goal setting. Self-efficacy is an internal belief regarding one’s job related capabilities and competencies. It differs from self-esteem, which is a broader feeling of like or dislike for oneself. The presence of the following four elements in goal setting makes it more effective in improving job performance: 1.

Goal Acceptance

2.

Specific Goals

3.

Challenging Goals

4.

Performance Monitoring/Feedback.

These are shown in Fig. 17.6 : Specificity

Acceptance

GOAL SETTING

Challenging

Monitoring and Feedback

Fig 17.6: Elements Making Goal Setting Effective

Goal Acceptance: Effective goals need to be not only understood but also accepted. Accepted goals arrived at through participation seem preferable to assigned goals. There is ample evidence to

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suggest that people who set their goals through participation, and who won their goals, perform better than those who are told what their goals are going to be. Specific Goals: Goal need to be as specific, clear, and measurable as possible. Specific goals are always better than vague or general goals such as “do your best”, “do better” or “work harder”. Giving a salesperson a specific quota or a worker an exact number of units to produce should be preferable to setting a goal such as “try as hard as you can”, or “try to do better than last year”. Challenging Goal: Research shows that most employees work harder when they have difficult goals to attain rather than easy ones. Take the case of MBA students itself, for example. They work harder in papers e.g., Financial Management, Statistics for Managers,etc., they treat/ consider these hard or difficult and their surprise they perform better in these papers than in easy or simple ones, e.g., Principles of Management , Marketing Mangement, etc. However, challenging goals must be attainable/reachable and no so difficult that they would be frustrating. Monitoring and Feedback: Besides setting well-defined and challenging goals, the two closely related elements , viz., monitoring and feedback, are also important to complete the process of goal-setting. Performance monitoring is observing one’s behaviour, inspecting output, etc. This heightens their awareness of the role they play in contributing to organisational effectiveness. Monitoring needs to be followed by performance feedback to enable employee to have an idea how successful he/she is. Man, by nature , is hungry for information about how well he/she is performing. Just as a football team needs to know the score of the game, the woodchoper needs to see the chips fly and pile of firewood grow, and the student of MBA like you needs to know how he performed in his assignment-seminar, the same is true of a worker working in an organisation. In sum, performance feedback tends to increase better job performance, and self-generated feedback is an especially powerful motivational tool. A logical extension of goal setting is the traditionally used management-by-objectives, or MBO, approach to planing, control, performance appraisal, and overall system performance. The same is discussed next.

17.4.4 Management By Objectives (MBO) The term ‘management by objectives’ ( MBO) was first coined by Peter Drucker28 in 1954. Basically, Drucker tried to attach MBO level to result-oriented evaluations. He proposed MBO as means of using goals to motivate people rather than to control them. Management by objectives can simply be defined as a programme that encompasses specific goals, participatively set, for an explicit time period, with feedback on goal progress. Accordingly to Odiorne 29 “MBO is a process whereby the superior and subordinate managers of an organisation jointly identify common goals, define each individual’s major areas of responsibilities in terms of the results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members”. MBO provides specific objectives for each succeeding level (i.e., divisional, departmental, individual in the organisation). In other words . MBO is a process by which objectives cascade down through the organisation as depicted in Fig 17.7. An MBO progamme or process consists of four common ingredients. These are: specificity, pariticipative decision making, an explicit time period, and performance feedback. A breif description of these follows. 1. Specificity: The objective in MBO should be clear and precise that can be measured and evaluated. To state a desire to cut costs, for example ,may not be enough. Instead, to cut costs by 5 per cent will be more clear. Exact and measurable objective.

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2. Participative Decisions / Objectives:In MBO goals are not imposed on people. The superior and subordinate jointly set objectives to be attained. 3. Explicit Time: Each objective is to be completed within a specific time period, be it three months, six months or a year. 4. Performance Feedback: The final ingredient in MBO programme is feedback on performance. It includes continuous and systematic measurement and review of performance. Based on these, Corrective actions are taken to achieve the planned objectives. Overall Organisational Objectives

Divisional Objectives

Departmental Objectives

Individual Objectives Fig. 17.7: Management by Objectives

Advantages of MBO Following are the advantage of MBO: 1.

The need to clarify objectives is stressed and suggestion for improvement are obtained from all levels of management.

2.

All managers have a clear idea of the important areas of their work and of the standards required.

3.

The performance of staff can be assumed and their needs for improvement highlighted.

4.

Greater participation may improve morale and communication.

5.

It makes individuals more aware of organisational goal.

Disadvantages of MBO MBO suffers from the following disadvantages also: 1.

It takes a few years to be effective.

2.

Some companies always tend to raise goals. If these are too high, employees become frustrated.

3.

Appraisals are sometimes made on personality traits rather than on performance.

4.

Some employees do not want to be held responsible and goals forced upon them may lead to ill-feeling.

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17.5 MOTIVATION AND MORALE The two expressions are not synonymous or interchangeable. As may be clear from the description on motivation given earlier in this chapter, motivation is the process of steering a persons’s inner drive and actions towards certain goals and committing his energies to achieve these goals. The concept of ‘morale’ is defined as an overall state of group’s emotional health, arousal and enthusiasm. Morale is a composite attitude of various individuals employed by an organisation. It is generated by the group and may be considered as a by-product of the group. It must be noted that it is not an average of individual attitudes. M.S Viteles30 defines morale as “an attitude of satisfaction, with a desire to continue in, and willingness to strive for, the goals of a particular group or organisation”. Morale is the summation of feeling of employees as a group towards various aspects of their work / job, the company, working conditions, fellow workers, supervisors and so on. If the attitude of employees towards all these aspects is more positive than negative, the morale of the group can be said to be high, otherwise it is low. Research studies in India show that high morale among workers may not be necessarily an indication of high productivity. For example, higher morale of union members may enable them to continue to strike and fight out the issue. What Determines Morale? The following important components determine the morale of a work group: (i) A feeling of togetherness. (ii) Need for a clear goal or objective to be achieved. (iii) Expectation of success towards the attainment of the goal. (iv) Feeling of each member within the group that he has a meaningful task to perform for achieving the goal and he also matters whatever may be the goal assigned to him. (v) Supportive and stimulative leadership. How Does Motivation Differ from Morale? Motivation and morale are conceptually different. They could be distinguished along the following lines: 1.

Motivation is an individual’s state of disposition, and decision to do or not to do things, to behave or not to behave in a particular way, in response to given stimuli, whether internal or external, while morale is more a group situation.

2.

Motivation is only one of the factors which explains ‘why’ of individual behaviour and performance. Morale represents the totality of impact of several interacting factors and forces in the atmosphere of a group.

3.

A well-motivated individual tends to experience a high degree of morale also. As regards this, a group charaterised by a high state of morale may or may not have a high degree of motivation to perform.

4.

It is possible to build up motivation in an individual or group by a combination of rewards and penalties, But morale can be built up by positive and favourable means only.

5.

Organisations, in general, devote more direct attention towards motivational aspects of people’s behaviour than to aspects of morale.

6.

The field of motivation is more extensively explored and intensively studied and researched by theorists, and several theories on motivation have been evolved but morale has remained a less directly studied and researched area.

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17.6 SUMMARY This summary is organised by the learning objectives given on page...186: 1.

Motivation is the set of processes that arouse, direct and maintain human behaviour toward attaining some goal.

2.

Motivation is symbiosis to both employees and employer. Motivated employees contribute to organisational results by producing more in quantity and better in quality. In turn, employees get more remuneration in return of their higher contribution to organisational performance.

3.

The main theories of motivation include Maslow’s need hierarchy theory, Herzberg’s two factor theory, McClelland’s need theory, McGregor’s participation theory, Urwicks’s theory Z, Argyris’s theory, Vroom’s expectancy theory, and Porter and Lawler’s expectancy theory.

4.

Incentives, job design, goal setting and management by objectives (MBO) are the prominently used tools of motivation.

5.

Motivation is largely an individual concept while morale is a group concept. Put simply, motivation is an individual’s state of disposition, while morale is more a group situation.

KEY TERMS Esteem Needs

Job Rotation

Hygiene Factors

Management by Objectives

Incentive

Motivation

Job Design

Needs

Job Enlargement

Quality of Work Life

Job Enrichment

Self-Actualisation Needs

REVIEW AND DICSUSSION QUESTIONS 1. What is the need for motivating employees in an organistion? 2. Critically examine the need hierarchy theory of motivation. 3. Think of a person who, in the past, did an excellent job of motivating you. Which of the following approaches did he use? Why? (i) Lower-order or higher-order needs. (ii) Motivational or maintenance factors. (iii) E.R.G needs. (iv) Behavioural Modification. 4. Can the expectancy model be applied to your motivation as a student? Discuss. 5. “Money cannot motivate all people under all circumstances.” Give you viewpoint. 6. How does job enrichment differ from job enlargement? Discuss the situations under which each of these is effective. 7. Define morale. Distinguish between morale and motivation. 8. Write notes on: (i) Management by Objectives (MBO). (ii) Quality of Work Life (QWL).

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REFERENCES 1. Fred Luthans : Organisational Behaviour, McGraw-Hill Company, New Delhi, Seventh Edition, 1995, p. 203. 2. Stephen P. Robbins: Organisational Behaviour, Printce-Hall of India Pvt. LTd., New Delhi, Eight Edition, 1998, p.68. 3. J.L. Gray and F.A. Starke: Organisational Behaviour: Concepts and Applications, Merrill Publishing Co., Columbus, 1998, p.104. 4. Abrahim Maslow: A Theory of Human Motivation, Psychological Review, March-April 1943, No. 50, pp.370-396 5. M.a Wahba and L.G. Bridwell: Maslow Reconsidered: A Review of Research on the Need Hierarchy Theory, Organisational Behaviour and Human Performance, April 1976, pp. 212240. 6. Fredrick Herzberg, B.Mausner and B.Snyderman: The Motivation to Work, John Wiley, New york, 1959. 7. David C. McClelland: The Achieving Society, Free press, New york, 1961; Also J.W Athinson and J.O. Raynor: Motivation and Achievement, Winston, Washington, D.C, 1974. 8. H.A Murray: Explorations in Personality: A Clincial and Experimental Study of 50 Men of College Age, Oxford University Press,New York, 1938. 9. David C. McClelland : Towards a Theory of Motive Acquisition, American Psychologist, vol, 20, 1965, pp. 321-333. 10. David C. McClelland : Achievement Motivation can be Learned, Harvard Business Review, No. 43, 1965, pp. 6-24. 11. David C. McClelland and D.Burnham: Power is the Great Motivator, Harvard Business Review, No 54, 1976, pp. 100-111. 12. S.Schachter: The Psychology of Affiliation, Standard University Press, Stanford, 1959. 13. Douglas McGregor: The Human Side of Enterprise, McGraw-Hill, New york, 1960. 14. F.L. Urwick: Theory Z, Indian Administrative and Mangement Review , Jan-March, 1974, Sharu S.Rangnekar: The Last Alphabet of Management Theory Z, Industrial Times, June 1972, and William Ouchi: Theory Z, Addison-Wesley, 1981. 15. Chris Argyris : Personality and Organisation, Harper & Row, New york, 1957. 16. Victor H. Vroom: Work and Motivation, Wiley, New York, 1964. 17. Stephen P. Robbins: op. cit., 1998, p.189. 18. L.W.Porter and E.E.Lawler: Managerial Attitude and Performance , Richer D. Irwin, Homewood, III, 1968. 19. S.W. Gellerman: Management by Motivation, American Management Association, New York, 1968, p.173. 20. David J. Cherrington: Organisational Behaviour, Allyn and Bacon, Boston, 1994, p.225. 21. Fredrick Herzberg: Work and Nature of Man, World Publishing Company, Cleveland, Ohio, 1966. 22. Nitish De: Training Strategy for Change in Attitude : Micro-Level Expriences, Economic Times, 26 February, 1976. 23. Nitish De: Ibid, 26 February, 1976.

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24. Sangeeta Jain: Quality of Work Life, Deep & Deep Publications, New Delhi, 1991, p.17. 25. Richard E. Walton: Quality of Working Life: What is it?, Sloan Management Review, Vol. 15, No. 1, Fall 1973, pp.11-21. 26. J.P. Singh : Improving Quality of Working Life in the Indian Context, Productivity, Volume 22, No. 4, 1982, pp. 13-20. 27. Edwin A. Locke: Toward a Theory of Task Motivation and Incentives, Organisational Behaviour and Human Performance, May 1968, pp. 157-189. 28. Peter F. Drucker: The Practice of Management, Haper & Row, New York, 1954. 29. G.S Odiorne: Management by Objectives, Pitman, New York, 1965,p.8. 30. Referred in Motivation, Job Design and Appraisal, MS-2, Block 3, Indira Gandhi National Open University, New Delhi, 1991(Reprint), p.37.

18 EMPLOYEE EMPOWERMENT Learning Objectives After studying this chapter, you should be able to: 1.

Define empowerment.

2.

Identify the conditions necessary for implementations of employee empowerment in an organisation setting.

3.

Delineate the various forms of empowerment implemented in organisations.

4.

Give an overview of employee empowerment in India.

5.

Identify various barriers to effective empowerment.

We have seen in the preceding chapter that the various motivational schemes have intrinsic and extrinsic influences on employees to perform better. But, motivation may not influence or motivate all employees in all situations. It may fail to influence those employees, might be in minority in number, who believe that they can not accomplish their own work. But, research has shown that they need to depend on others for performing their works. Such works may also perform better if involved in their works1. In other words, employee involvement enables them to work more and better. Of late, employee involvement has become a convenient catchall term to cover a veriety of techniques of employee involvement. For example, it encompasses techniques such as employee participation, also called participative management, work place democracy empowerment, and employee ownership. These all techniques illustrate employee involvement. In this chapter, we shall discuss employee involvement in the context of employee empowerment. Accordingly, we shall clarify what we mean by employee empowerment, describe some of the various forms that it takes, discuss the barriers to it, and delineate empowerment scenario in Indian organisations.

18.1 WHAT IS EMPOWERMENT? In simple words, empowerment is giving power. In the Webster’s English Dictionary, the verb empower means to give the means, ability and authority. Viewed from this angle, employee empowerment in an organizational setting means giving employees the means, ability and authority to enable them to do some work. According to Newstrom and Davis2, “Empowerment is any process that provides greater autonomy through the sharing of relevant information and provision of control over factors affecting job performance”. J.I. Cotton3 has defined empowerment as “ a participative process that uses the entire capacity of employees and is designed to encourage increased commitment to the organisation’s success”. The common sense or theme flowing from the two definitions is that they refer to employee involvement in their works. On the whole, employee empowerment means making him/her able run the show by himself/ herself. With a view that women, who were considered abla till the other day in India, be made able to run their shows/ works themselves only, ‘woman empowerment’ has become the buzzword of the day. 208

Employee Empowerment

209

Thus, empowerment refers to a process in which a manager shares power with a subordinate. Managers may empower subordinate by sharing resources with them, allowing them to participate in the decision making process, and by giving them access to relevant and important information. When such sharing of resources, decision-making and information are curtailed, this increases powerlessness. This powerlessness contributes to frustration and, in turn, low self-efficacy4. Selfefficacy is the conviction among people that they can successfully perform their jobs and make meaningful contributions. Several factors cause the problems of low self-efficacy. Of these, major ones are the major organisational change, authoritarian leadership, jobs lacking in discretion or role clarity, etc. Low self-efficacy leads to low performance. Hence, the need for employee empowerment. The underlying logic behind empowerment is that by involving workers in those decisions that affect them and by increasing their autonomy and control over their work lives, employees will become more motivated, more committed to the organisation, more productive, and more satisfied’ with their jobs. Research findings5 support this point Does that mean that employee involvement and participation are synonymous for each other? The answer is no. As a matter of fact, employee involvement is an all embracing term. Whereas participation is a subset within the larger framework of employee empowerment. Employee involvement, thus, includes participation also. While employee involvement includes deriving the employees the means, ability and authority to do their works, participation relates to employee participation in decision making only. Similarly, empowerment differs from delegation in the sense that only authority is given to the subordinates to get the work done. Means are not given to the subordinates. Moreover, authority is delegated to the subordinates, but it still remains with the superior. Delegation of authority is just like teaching knowledge where teacher gives knowledge to the students but still knowledge remains with the teacher.

18.1.1 Approaches to Empowerment The real problem is, in fact, how to empower employees. Like other behavioural problems, the researchers6 have studied the problem and have suggested five broad approaches to empowerment. These are: 1.

Helping employees achieve job mastery. (Giving proper training, coaching, and guided experience that will result in initial successes.)

2.

Allowing more control. (Giving them discretion over job performance and then holding them accountable for outcome.)

3.

Providing successful role models. (Allowing them observe peers who have already performed successfully on their jobs.)

4.

Using social reinforcement and persuation . (Giving praise, encouragement, and verbal feedback designed to raise self-confidence.)

5.

Giving emotional support. (Providing reduction of stress and anxiety through better definition, task assistance, and honest caring.)

Thomas and Velthouse 7 have developed a model recently using four dimensions of empowerment. These four dimensions include: 1. Impact: Perceived to make a difference in terms of accomplishing purpose of the task. 2. Competence: Skilful trying of a job results in the task to affect competence. 3. Meaningful: If a task is worthwhile, it provides meaningfulness. 4. Choice: A task provides choice if it allows the employee self-determination in performing task activities.

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Thomas and Velthouse have also illustrated, as shown in Table 18.1, how various actions of empowerment taken by management result in the various dimensions of employee empowerment, viz., impact, competence, meaningfulness, and choice. Table 18.1: Empowerment Interventions and Their Effect

SL

Empowerment Dimensions

No

Action

Impact Competence meaning- choice fulness

1.

Delegate Authority

√

2.

Participative Decision Making

√

3.

Encourage Self Management

4.

Enrich Job

√

√

√

5.

Create Self-Managed work Teams

√

√

√

6.

Create task that provide intrinsic feedback

√

7.

Instal upward performance appraisals*

8.

Lessen Formalization

9.

Create Supportive Culture

√

10.

Encourage Goal Setting

√

11.

Educate and Train Employees

√

√

√ √ √

√

√

*Appraised by subordinates about their superiors.

18.2 CONDITIONS NECESSARY FOR EMPOWERMENT As the existence of a minimum prior built-up infrastructure is required to start any economic activity, similarly some necessary conditions to be satisfied are also necessary for implementing employee empowerment scheme. These necessary conditions make conducive environment for empowerment. These also help empowerment gain credibility and acceptance at various levels in an organisation. J.H Dobbs8 has suggested four conditions necessary for empowerment. These are: 1. Participation: As mentioned earlier, participation is a subset of empowerment. Hence, efforts should be made to encourage employees/workers to take initiative in the participative process. Two actions can be taken for this purpose. First, the bureaucratic hurdles, whatsoever these be, coming in the way must be kept at bay or removed. Second, employees should be imparted necessary training and coaching to enable them to participate more effectively. 2. Innovation: Innovation has been the hallmark of much talked about and referred to Japanese management. In Japan, empowerment, in Latin inter alia, ushered in innovation, The reason is not difficult to seek. Empowerment allows employees to do things in their ways and manners. This breeds creative and innovative culture of doing things in an organisation. Therefore, management must encourage employees to try out new ideas and new methods of decision making. Even when employees fail in their efforts, management should encourage them to keep their efforts on. Employees should be made realize that failures are stepping stones to success. With such supportive conditions, employees are sure to ride the tidal wave of success on one day. 3. Information: Information is the power. It is also as raw material for performing various activities by the employees. Good decision depends, among other things, on good information or data. Hence, employees must have free access to information and the required information must be made readily available to them.

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4. Accountability: Alongwith giving authority to the employees, they also must be held accountable for their results. The purpose behind it is not to identify their black spots and single out them for punishment, but to know that they are giving their best efforts, Experience shows that “tagging accountability with authority leads to better use of authority .”

18.3 FORMS OF EMPOWERMENT Now, the issue is how to empower the employees. In other words, how does management specifically empowers its employees? Though empowerment can be undertaken on both individual and group bases, the recent emphasis is on group or teams in different forms. Hollander and Offermann9 have identified three forms of employee empowerment. These are reviewed here in seriatim.

Quality Circles (QCs) Perhaps, the most widely discussed and undertaken intervention of employee involvement is the quality circle (QC). The concept of QC originally began in the United States and was exported to Japan in the 1950s. It is mentioned that it is the concept of QC that enabled Japanese firms to make high quality products at low costs10. What is quality circle? It is a work group of employees who meet regularly to discuss their quality problems, investigate causes, recommend solutions, and take corrective actions11. Generally, QC is a small group of employees belonging to the same similar work area. This is so because the employees doing the similar type of work are well familiar to problems faced by them. The size of the QC should not be too big so as to prevent some members from participating meaningfully in its meetings. Generally, six to eight members are considered the ideal size of the QC. QC is formed to achieve the following objectives: 1.

Improvement in quality of product manufactured by the organisation.

2.

Improvement in methods of production.

3.

Development of employees participating in QC.

4.

Promoting morale of employees.

5.

Respect humanity and create a happy work place worthwhile to work.

The main features of QC can be listed as follows: 1. Voluntary Groups: QC is a voluntary group of employees generally coming from the same work area. There is no pressure from any where on employees to join QC. 2. Small Size: The size of the QC is generally small consisting of six to eight members. 3. Regular Meeting: QC meetings are held once a week for about an hour on regular basis. The members meet during working hours usually at the end of the working day in consultation with the manager. The time of the meetings is usually fixed in advance in consultation with the manager and members. 4. Independent Agenda: Each QC has its own agenda with its own terms of reference. Accordingly, each QC discusses its own problems and takes corrective actions. 5. Quality Focused: As per the very nature and intent of QC, it focuses exclusively on quality issues. This is because the ultimate purpose of QC is improvement in quality of product and working life.

Developing Quality Circles in Organisations Like any other organizational change, QC being a new concept may be opposed by the employees. Therefore, QC should be developed and introduced with great concern and precaution as discussed below:

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1. Publicising the Idea: Introduction of QC is just like an organisational change programme, Hence, like an organisational change programme, the workers need to be convinced about the need for and significance of QC from the points of view of the workers and the organisation. Moreover, participation in QC being voluntary, its publicity among the workers is necessary. To begin with, management can also arrange for initial training to those workers who want to form a quality circle. 2. Constitution of QC:Workers doing the same or similar type of work are drawn voluntarily to form quality circle. The membership of a QC is generally restricted to eight to ten. Once a QC is formed, they remain as permanent members of the circle unless they leave that work area. 3. Initial Problem Solving:The members of QC should discuss the problem at threadbare and, then, prepare a list of alternative solutions. Thereafter, each alternative solution should be evaluated and the final solution should be arrived at on the basis of consensus. 4. Presentation and Approval of Suggestions: The final solution arrived at should be presented to the management either in oral or in written form. The management may evaluate the solution by constituting a committee for this purpose. The committee may also meet the members of the quality circle for clarifications, if required. Presentation of solutions to the management helps improve the communication between management and workers and reflects management’s interest to the members of QC. 5. Implementation: Once the suggestion or solution is approved by the management, the same is being put into practice in a particular workplace. Quality circles may be organized gradually for other workplaces or departments also. In this way, following above outlined process, the entire organisation can have quality circles.

Quality Circles in India The concept of quality circle which was originated in the United States and actually proliferated in Japan, is of recent origin in India. In India, by now several companies have implemented QC programmes, However, it has not come up to expectations due to certain reasons which are discussed little later in the chapter.Companies where the QC programmes have been working successfully include BHEL, Kirloskar Oil Engines, Mahindra & Mahindra, Bajaj Auto, HMT, Maruti, Modi Xcrox, SBI, Hindustan Aluminum, Modi Rubber, TELCO, LUCAS-TVS, etc.. In an attempt to make the QCs as movement, the successful cases of QC implementation are published by the Quality Forum of India through its journal, namely, ‘Quality Circle India’. Following this, an increasing number of companies in India have also been publishing QC cases in their in house magazines and newsletters to disseminate their quality circle experiences across the country. As such, QC as a campaign has gained momentum and more and more companies are coming forward to implement QC programmes to improve the quality of their products and working life conditions as well.

Problems of Quality Circles and Their Solutions Though QC concept has many positive points, it has failed miserably in many organisations due to certain problems and pitfalls12. Following are some important problems of QC implementation in India and remedies to overcome or solve them. 1. Negative Attitude: Both employees and managers having negative attitude toward QC often resist its implementation. Managers feel that QC dilutes their authority and importance in the organisation. This negative attitude can be dispelled by imparting appropriate training to employees as well managers about the real concept and contribution of QC. 2. Lack of Ability:The Indian workers are chracterized by their low level of educations and also lack of leadership qualities. This problem can be overcome by initiating workers’ education programme. 3. Lack of Management Commitment: Lack of management commitment toward QC is demonstrated by not permitting the members to hold QC meetings during the working hours. Therefore,

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the top management should permit the members to hold QC meetings periodically during working hours proferrably at the end of the day.Management should also extend all required and timely assistance for the smooth functioning of QC. 4. Non-implementation of Suggestions:The members of the QC feel disheartened in case their suggestions are not accepted and implemented by the management without giving convincing reasons for not doing so. Instead, the suggestions rendered by QC should be given due consideration and weightage and should be implemented honestly. This will, as a result, further enthuse the members of QC to improve quality of their goods and services. In this way, QC may benefit both workers and organisation. In other worlds, QC is symbiotic for workers and organisation, if used honestly.

Empowered Teams Closely related to QCs are empowered teams, also called ‘self-directed teams’ or ‘self-managing teams’. These are the teams allowed to run the show by themselves. These are the groups that are given a large degree of decision-making autonomy and are expected to control their own behaviour and results. Following features characterize13 the empowered teams: 1.

They plan, set goals, supervise progress and improve the same.

2.

These teams prepare their own budgets and maintain coordination with other departments of organisation.

3.

They are free to acquire any training which they feel necessary.

4.

They prepare their work schedules and then monitor the same.

5.

These teams take sole responsibility for achieving quality in their products and services, whatsoever be the case.

6.

These teams are also given right to share with management in decision-making process.

How to Develop Empowered Teams? Like developing QC, development and implementation of empowered team also imply a sort of organizational change and hence, is susceptible to resistence. Therefore, implementation of empowered teams should be gradual following a process as outlined here: 1. Identification of Responsibility:In order to facilitate the smooth and systematic functioning of group, there is a need to firstly identify the specific areas of responsibility that will be looked after by the empowered groups. The teams’s responsibility should be identified and defined with consensus after consulting the prospective members of the team. Usually, areas like personnel, administration, quality, productivity, safety etc., fall within the ambit of group’s areas of responsibility. 2. Methods of Monitoring and Feedback:In this step, specific means are decided to identify the extent of responsibility to be discharged by the empowered group. Thus, this serves as a boundary of group’s responsibility, Thereafter, means and methods are devised to get information on how the specified responsibilities are discharged by the group. This helps avoid deviations from boundaries prescribed for the group. 3. Specification of Member’s Responsibilities:Alongwith group responsibilities, responsibilities of the each member of the group are also specified and defined. Thus, each member of the group is held responsibile firstly for his/her specific job and then for the job of the group also. Feedback on individual members’s performance is also gathered to effectively monitor his/her performance. 4. Determination of Training Needs: In order to facilitate the members in discharging their responsibilities, the training required for this purpose is identified and contents determined, of

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course, in consultation with the team members. Then, the necessary training is imparted to the members. 5. Work Plan for Transition: Now, the stage has come when the employees have to actually work as empowered group. In other words, employees are in transition from the old way of working to empowered group working. Hence, this underlines the need for chalking out a systematic work plan for switching over from old way of working to the new one, ie, empowered team. One of the greatest advantage of empowered group is its synergistic effect on group performance. This means a process of putting two or more elements together to achieve a sum total greater than the sum total of individual elements separately14. This effect can best be described as 2 + 2 = 5. This effect is produced mainly because of the complementarity nature of elements i.e group members in which one element/member affects other and is also affected by it.

Life Stages of an Empowered Group Now one last mention about empowered group’s life stages, also called life cycle, i.e, how an empowered group comes into existence, passes through certain stages and then disappears from the scene. Research studies15 indicate that a group, including empowered group, passes through a standard sequence of four stages as shown in Figure 18.1. Collaboration Differentiation Confrontaion

“Performing”

“Norming”

Orientation “Storming” “Forming”

Fig. 18.1: Life Stages of a Group

Forming Stage: The first stage for almost every group is an orientation stage. This stage is marked by a great deal of caution, confusion courtesy and uncertainty about the group’s purpose, structure and leadership. The formal leader exerts a great influence in structuring the group and shaping member expectations. This stage is complete when members of the group have begun to think of themselves as part of a group. Storming Stage: This stage is characterized by conflict, confrontation, concern, and criticism. Struggles for individual power and influence are common. In case, the conflict becomes extremely intense and dysfunctional, the group may dissolve or continue as an ineffective group that never advances to higher levels of group maturity. Norming Stage: This is the stage in which close relationship among the members develops. The group evinces cohesiveness. The group now assumes to certain identity and camaraderie.

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Performing Stage: This is the highest level of group maturity. This stage is marked by teamwork, role clarity, and task accomplishment. Conflict is identified and resolved through group discussion. The members of the group are aware of group’s process and extent of their own involvement in the group. Adjourning Stage: Groups are adjourned for two reasons. First, the group has completed its task. Second, the members decide to disband and close the group with sentimental feelings.

Participative Management This is also called ‘Workers’ Participation in Management (WPM). Since WPM is discussed, in detail, in the next Chapter 19, the same is not discussed here for the sake of repetition.

18.4 EMPLOYEE EMPOWERMENTIN INDIA : AN OVERVIEW Empowerment benefits both the workers and the organisation. How? Workers own the organisation, discharge their duties effectively, and derive satisfaction from the job as well as overall life events and situations. Organisations do record higher levels of productivity, sustainability, and growth. These benefits obviously make ground for implementation of empowerment in organisation. It is against such background, a few organisations in India have testified the empowerment experiments. Let us produce some successful experiences of empowerment to vouchsafe our contention. Vaghul’s encouraging experiences in empowerment in the I C I C I are noteworthy. He transformed a development bank into a multibusiness super market with a classical combination of strategic envisioing and complete empowerment. He never looked the next day but next year and beyond. This was one significant aspect in his future orientation and vision. What is more that Vaghul does not manage a single ship, he commands a flotilla: The SCICI, CRISIL, Venture Capital Fund, DTCEI, ICICI Asset Management Company, ICICI Bank, Technology Development and Information Company of India16. In all these organisations, either he had read the rule correctly or interpreted the rule exactly or framed new rules based on institutional requirements. Accordingly to Avijit17, the following three parameters helped Vaghul implement empowerment interventions successfully: 1.

Trust your people but track their performance through financial parameters.

2.

Empower managers to run the organisation, but emission the future personally.

3.

Recounting mangers with motivation abilities who alone can inspire workers.

Tapan Mitra of Indian Aluminium Company (INDAL) has also the same story to tell 18. In INDAL, Tapan Mirta governed employee motivation neither by dangling rewards nor by threatening punishment. According to Tapan Mitra , it is all about people : Placing them at the center of the corporation’s activities, and then, giving them powerful reasons to do their work to the best of their abilities. He also posits that the workers’ participation in management is putting a simple, but fundamental thing, i.e, employee involvement. This is necessary also. The reason being if employees feel that they are merely appendages to an inscrutable decision-making machinery locked in an ivory tower, they would not give you their best. But remember, when one decentralises, one empowers and, in turn, motivates. Bajaj Auto is yet another case of successful employee empowerment. In 1990s, Bajaj Auto had just ridden into the worst recession in its history and Rahul Bajaj decided to respond for the first time by changing the fundamental structures and system in the company. Focusing on cost-cutting, motivating people, boosting quality, flattening the organisation, raising research level, and exporting; Rahul Bajaj was forced to pass authority down the line to his people. All these initiatives needed empowered people, not autocratic command to be successful.

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These are a few illustrative cases of effective employee empowerment in Indian organisations. However, empowerment could not record success in some organisations due to certain barriers coming in their way. These barriers to empowerment are discussed subsequently.

18.5 BARRIERS TO EMPOWERMENT Of the several barriers to effective empowerment, some are highlighted below: 1.

In India, some sort of organizational culture is found incongruent with the concept of employee empowerment,. In India, family-run –enterprises present such incongruent culture to empowerment. In these organisations, the management philosophy is moulded by the whims and fancies of the owner-CEO. These CEOs are hardly enlightened with education, but enriched by wealth. As such, they follow dictatorship and run the administration with an iron hand.

2.

There are organisations where employees have no inclination towards the concept of empowerment. This, then, provides a situation just like taking the horse to the water, but the horse is not intersted in drinking water. Then, the process of empowerment is inevitable to be meaningless.

3.

Some employees may have fear in their minds that they will be punished if they will take initiative in the matter of empowerment. Thus, fear of retribution by subordinates adversely affects the implementation of empowerment. A recent survey shows that workers are often reluctant to take the initiative unless they have a union to protect them19. Management, of course, can change its organisational culture to be more supportive or empowerment friendly. But this is typically a long term proposition.

4.

Employees who are either under prolonged autocratic leaderships or possessing external locus-of-control, want the security of having some one tell them what to do and when to do it. They will, therefore, resist empowerment. Training and education can often be effective in overcoming this obstacle.

5.

The superiors who are power hungery never would like to part their authority with their subordinates/employees. Mary-Parker Follet has described the “ power-on” “power-over” behaviour of such persons. They, thus, act as a barrier to empowerment. This situation can be overcome by changing their attitude in favour of empowerment. However, people cannot change overnight from their habits. Attitudinal changing is a time taking process. This change process should be started from the school level itself as is done in Japan. As mentioned at the outset, Japan is the excellent example of success in empowerment of our times.

18.6 SUMMARY This summary is organised by the learning objectives given on page…208: 1.

Empowerment is a process that provides greater autonomy to employees through the sharing of relevant information and provision of control over factors at the bottom that affect job performance.

2.

Factors such as participation, innovation, information, and accountability create necessary conditions for implementing empowerment successfully.

3.

The common forms of empowerment comprise quality circles(QCs), empowered teams and participative management.

4.

A few organisations like the ICICI, the Indal and the Bajaj Auto have recorded success in empowerment interventions.

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Incongruent organisational culture, fear of retribution by subordinates, dependency nature of workers, and power-hungry attitude of superiors are the main barriers to empowerment.

Employee empowerment serves as foundation for employees’ participation in management . The same is the subject matter of the next Chapter 19, i.e, Workers’ Participation in Management.

KEY TERMS Accountability

Group

Employee Involvement

Participation

Empowered Group

Self-Efficacy

Empowerment

Synergy

Frustration

Training

REVIEW AND DISCUSSION QUESTIONS 1. Define employee empowerment. How does it differ from participation and delegation? 2. “ Empowerment is a process that increases employee’s task motivation.” Explain. 3. What are the necessary conditions for successful implementation of employee empowerment? To what extent do these conditions exist in India? 4.

What are the various barriers to empowerment? How can these be overcome?

5. Give an overview of empowerment scene in India. 6. What is meant by quality circle? Delineate the process involved in developing a quality circle. 7. “ Quality circles in India are plagued by certain problems”. Discuss. Also, suggest how to make quality circles more effective.

REFERENCES 1. J.I Cotton: Employee Involvement, Sage, Newbury Park, CA, 1993, PP. 3-14. 2. John W.Newstrom and Keith Davis: Organisational Behaviour: Human Behaviour at Work, Tata McGraw-Hill Publishing Company limited. New Delhi, 1998, p. 227. 3. J.I. Cotton : op. cit., 1993, p.3. 4. R. Venkatapathy: Empowering People for Success, Indian Management, July 2000, pp.67. 5. R.C. Fond and M.D. Fottler: Empowerment: A Matter of Degree, The Academy of Management Executive, August 1995, PP. 21-31; and G.M. Spreitzer: Psychological Empowerment in the Workplace; Dimesions, Measurement, and Validation, Academy of Management Journal , October 1995, pp.1442-1465. 6. J.A. Conger and R.N. Kanungo: The Empowerment Process: Integrating Theory and Practice, Academy of Management Review, 1988. 7. K.W. Thomas and B.A. Velthouse: Elements of Empowerment: An Interpretive Model of Intrinsic Task Motivation, Academy of Management Review, October 1990, pp. 666-681. 8. J.H Dobbs: The Empowerment Environment, Training and Development Journal, 1993, pp. 55-57. 9. R. Venkatapathy: op. cit, 2000, p.68. 10. J.I. Cotton : op. cit., 1993, p.115. 11. Stephen P. Robbins: Organisational Behaviour, Printice Hall of India Private Limited, New Delhi, 2000, p.195.

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12. B.R. Dey : Quality Circles, Macmillan, New Delhi, 1988, pp. 120-123. 13. Richard S. Wellins: Empowered Teams, San Francisco, Jossey Bass, 1991, p.4. 14. L.M. Prasad : Business Policy: Strategic Management, Sultan Chand & Sons, New Delhi, 2000, P.174. 15. B. W. Tuckman : Development Sequence of Small Groups, Psychological Bulletin, No.63, 1965, B.W. Tuckman and M.C. Jensen: Stages of Small Group Development Revisited, Group and Organisational Studies, December 1977, pp. 419-427, and Anthony R. Montebello and Victor R. Buzzotta : Work Teams That Work, Training and Development, March 1993 pp. 59-64. 16. R. Venkapathy: op. cit., 2000, p. 70. 17. Avijit Ghosal : The Master Motivator, Business Today, 1996. 18. Ibid, pp. 69-70. 19. Stephen P. Robbins : op. cit., 2000, p.402.

19 WORKERS’ PARTICIPATION IN MANAGEMENT (WPM) Learning Objecives After studying this chapter, you should be able to: 1.

Justify the rationale for WPM.

2.

Define WPM and list its objectives.

3.

Discuss the various forms of WPM.

4.

Give a review of worker’s participation in management in India.

5.

Present the progress and problems of WPM scheme in India

6.

Suggest the ways and means for making WPM effective and successful one.

19.1 RATIONALE FOR WPM Before we justify the rationale for WPM, let us first understand what participation, in general, means. In simple words, participation means the meaningful interaction of human beings with people they are concerned to enhance their sense of being in control of their immediate environment. In fact, this has been a phenomenon throughout the history of mankind. In ultimate manner, participation enables one to perform better. People’s participation in governance commonly termed as ‘democracy’ is precisely a quest toward that end only, i.e., better performance of the government. Democracy means government of the people, by the people and for the people. Workers’ participation in management that crystallises ‘industrial democracy’ means management of an industrial unit by the people for the people. Collective bargaining (discussed later in Chapter 27), empowerment (discussed just in the previous chapter 18) and workers’ participation in management, also called ‘participative management’, are the manifestations of industrial democracy. In this Chapter, we will discuss industrial democracy in the context of workers’ participation in management. Strictly speaking, what purposes democracy serves in government are served by WPM in industry. The thinking that for the best in man to come out, it is necessary for him to know why he is doing certain things and not the others, is precisely the rationale for WPM. This can be imbued with multiplicity of justifications. WPM gives the workers a sense of belongingness to the organisation and also a sense of commitment to various decisions taken. These contribute to better results in an organisation. The same has become the most desideratum of the time in industrial organisations. The results of various experiments initiated by several countries like England, Sweden, Germany, USA, Yugoslavia, etc., confirm the role of WPM in improving organisational performance. England and Scandinavian nations, where negotiation rather than legislation has been the traditional method of solving industrial problems, also suport the significance of WPM. On the contrary, in the absence of WPM, workers consider themselves to be just employees, having no commitment to the objectives of the organisation. This, in turn, ultimately hinders the effective functioning and growth of the organisation. Hence the need for workers’ participation in management. 219

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25.2 DEFINITION AND OBJECTIVES 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. Let us go through some important definitions of WPM. According to Keith Davis1, “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”. In the words of Mehtras2, “Applied to industry, the concept of participation means sharing the decision-making power by the rank and file of an industrial organisation through their representatives, at all the appropriate levels of management in the entire range of managerial action”. A clear and more comprehensive definition of WPM is given by the International Labour Organisation (ILO). According to the ILO3: “Workers’ participation may, broadly be taken to cover all terms of association of workers and their representatives with the decision-making process, ranging from exchange of information, consultations, decisions and negotiations to more institutionalised forms such as the presence of workers’ member on management or supervisory boards or even management by workers themselves as practised in Yugoslavia”. In Yugoslavia, WPM is governed by the Law on Workers’ Management of State Economic Enterprises and Higher Economic Association. The Act consists of a three-tier. participation structure: Collective bargaining, workers’ council, and board of management. In fact, the basic reason for differences in perception of WPM is mainly due to the differential pattern of practices adopted by various countries while implementing workers’ participation in management . For example, in Great Britain and Sweden, WPM is in the form of Joint Consultation through Joint Consultative Committees, Works Committees in France, Co-determination Committees in West Germany, Joint Work Council in Belgium, Workers’ Council and Management Board in Yugoslavia and Union Management Co-operation in USA. In India, WPM is in the form of, what we call, Labour Management Cooperation and Workers’ Participation in Management. It is implemented through the agencies like Works Committees, Joint Management Councils (JMCs) Shop Councils, Unit Councils and Joint Councils, discussed later in the chapter. Notwithstanding, these different forms of WPM differ only in degree, not in nature. Be the perceptual differences as these may, WPM is a system of communication and consultation, either formal or informal, by which the workers of an organisation are kept informed, as and when required, about the affairs of the undertaking and through which they express their opinion and contribute to decision-making process of management.

Characteristics The following are the main characteristics of WPM: 1.

Participation implies practices which increase the scope for employees’ share of influence in dicision-making process with the assumption of responsibility.

2.

Participation presupposes willing acceptance of responsibility by workers.

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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 The objectives of WPM are closely netted to the rationable for WPM. Acordingly, 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 mattters 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. 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 organisational 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 resistence 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

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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 consultative participation. In a way, this is an advanced and improved form of consultative participation. Now, the management is under a moral obligation to acknowlege, accept and implement the unanimous decision of the council. 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.

19.3 FORMS OF WPM The form of WPM depends, to a great extent, on the levels of participation. The reason being the forms of participation attempt to achieve the objectives of WPM set by an organisation. Hence, this deserves mention. Now we, therefore, consider the well-known forms of WPM adopted in organisations. Suggestion Scheme: Under this scheme, a suggestion committee is constituted consisting of equal number of members from management and workers. A suggestion box is installed at an appropriate place in the organisation. Workers are invited and encouraged to put their suggestions for improving working of the organisation into the suggestion box. The suggestion committee periodically scrutinizes the suggestions given by the workers. Good suggestions are accepted and implemented and also rewarded. This encourages workers to make more and better suggestions. Works Committee: Under section 3 of the Industrial Disputes Act,1947, the appropriate Government may require an enterprise employing 100 or more workers, to constitute a works committee with equal number of representatives from the employees and the management. The main purpose behind Constituting works committees is to evolve ways and means for maintaining cordial and harmonious relations between the employees and the management. Joint Management Councils (JMCs): JMCs were introduced first in 1958. These councils are formed at plant level with equal number of representatives from employers and employees. These are mainly consultative and advisory ones. Hence, neither the workers nor the employers take them seriously. The responsibility of the JMCs is relating to matters such as working conditions, indiscipline, absenteeism, training, safety, accident prevention, preparation of holiday schemes, etc.. However, it was alleged that JMCs and work committees appeared similar in their scopes and functions. Further, multiplicity of bipartite consultative bodies did not serve any purpose. Board Representation: Under this scheme, one or two representatives of workers are nominated or elected on the Board of Directors. The basic idea behind incorporating workers’ representation on the Board of Directors is to safeguard the workers’ interest, usher industrial harmony and good relations between the workers and management. This is the highest form of workers’ participation in management. The Government itself, as an employer, introduced this scheme in several public sector enterprises such as Hindustan Antibiotics Ltd., Hindustan Organic Chemicals Ltd., National Coal Mines Development Corporation, Bharat Heavy Engineering Ltd., National Textile Mills, etc. This scheme

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required the verification of trade union membership, identification of the representative union and selection of a worker director who is selected out of a penal of three persons furnished to the government by the representative union within a prescribed period. Subsequent to the nationalization of banks in 1970, the Government, under the Nationalized Banks (Management and Miscelleneous Provisions) Scheme 1970, introduced the nomination of workers’ representatives as directors to the Boards — one representing employees and the other representing officers for a tenture of 3 years. According to a study of the scheme introduced in the nationalized banks conducted by the National Labour Institute, the scheme has failed in its objectives because of the contentions raised about the scheme by both employees (trade unions) and employers. Co-partnership: Co-partnership means employees participation in the share capital of their own company. Under this scheme, workers are induced to buy equity shares of the company. Workers may be allowed to make payments in instalments, advanced loans or even give financial assistance to enable workers to buy equity shares. Workers hold sixty-one per cent of the shares of Otto India, Calcutta and forty-one per cent of the shares of Sehgal Sanitary Fittings, Jallandhar, for example. As shareholders, workers take part in the management by way of electing their representatives to the Board of Directors. However, the workers’ participation under this method is limited. Hence, trade unions in India do not favour this scheme. Nonetheless, workers’ participation in management through co-partnership scheme was approved logical in India by the Supreme Court in its judgement in Navneet R. Kamani vs. R.K.Kamani, in 1984, by allowing workers to takeover a sick unit. Kamani Tubes, New Central Jute Mills, Kamani Metals and Alloys, Powder Metals and Alloys and HCS Ltd., are the examples of enterprises in which workers through shareholding participate in management by their respective workers’ co-operatives. Workers’ Complete Ownership: Under this scheme, workers acquire complete control of management of their enterprise through an elected board or/and Worker’s Council. This system of participation is also called “self management.” This prevails in Yugoslavia. In this system, two different sets of persons perform two distinct types of functions, namely, managerial and operative. This system of participation is characterised by virtues like workers’ identification with their organisations, loyalty and responsibility to organisations, etc. This ushers in industrial harmony and peace for the organisation. Expectedly, trade unions favour this form of workers’ participation in management. Besides the following are the alternative forms of workers’ participation in management: Collective Bargaining (see Chapter 27), Empowernment (see Chapter 18), Quality Circles (see Chapter 18). These are not discussed here for the sake of repetition.

19.4 WPM IN INDIA: A REVIEW In this section, we attempt to review the various schemes of WPM in India. For convenience purposes, this is presented stage-wise, viz., before Independence, and after Independence.

Before Independence The workers’ participaton in management is not a novel and imported idea from outside. It can be dated as far back as 1920 when Mahatma Gandhi suggested participation of workers in management on the ground that workers contributed labour and brains while shareholders contributed money to the enterprise and that both should, therefore, share in its property. He said that there should be a perfect relationship of friendship and cooperation among them. For the unions, he said that the aim

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should be to raise the moral and intellectual height of labour and, thus, by sheer merit, make labour master of the means of production instead of the slave that it is. It was at his instance that, in 1920, the workers and the employers in Ahmedabad Textile Industry agreed to settle their disputes by joint discussions and consultations. Therefore, the Ahmedabad Agreement may be regarded as a milestone in the history of joint consultation i.e. participative management in India. Following this, some works committees were also set up in the Government Printing Presses and Railways. During the same period, such committees were also set up in the Tata Iron and Steel Company, Jamshedpur. Since then, there is no looking back in this direction. While supporting the need for works committees, the Royal Commission on Labour6 suggested that, to promoting industrial harmony and to avoid misunderstanding and settle disputes, not only works committees be set up, but strong trade unions be developed and labour officers be appointed. Along with the works committee, the Commission also suggested the establishment of a joint machinery to deal with the more general questions, and also to act as an advisory appellate body in respect of disputes which were confined to a single establishment. These recommendations of the Commission bore fruits with the provision of formal statutory machinery under the Bombay Industrial Relations Act, 1946 and the Industrial Disputes Act, 1947.

After Independence In fact, the first major step in the direction of workers’ participation in management in India was the enactment of the Industrial Disputes Act, 1947 with the dual purpose of prevention and settlement of industrial disputes. The Industrial Policy Resolution, 1948 advocated WPM by suggesting that labour should be in all matters concerning industrial production. Article 43A of the Constitution of India has provided for WPM in these words: “The State shall take steps, by suitable legislation, or in any other way, to secure the participation of workers in management of undertakings, establishments or other organisations engaged in an industry”. The First Five-Year Plan and the successive plans emphasised the need for workers’ participation in management. For example, the Second Five-Year Plan7 stressed the need for WPM in the following words: “It is necessary in this context that the worker should be made to feel that in his own way he is helping build a progressive state. The creation of industrial democracy, therefore, is a prerequisite for the establishment of a socialist society”. The Government of India set up a ‘Study Group on Workers’ Participation in Management’, in 1956, consisting of representatives of the government, employers, and workers to examine the system of WPM in the UK, Sweden, France, Belgium, West Germany and Yugoslavia and make recommendations for the Indian case. The Group submitted its report in May 1957 with the following recommendations: 1.

WPM schemes should be introduced in selected undertakings on a voluntary basis.

2.

A sub-committee consisting of representatives of workers, employers and government should be set up for considering the WPM in India.

The above recommendations, among other things, were accepted by 15th Indian Labour Conference held in July 1957. The Conference appointed a 12 member sub-committee to look into further details of the scheme. The recommendations made by the sub-commitee were discussed in a “Seminar on Labour-Management Co-operation” held in New Delhi on January 31 and February 1, 1958. It drew up a “Draft Model Agreement” between labour and management for the establishment of the Joint Management Councils (JMCs) which would have the following three sets of functions: First, to fulfil its functions as an advisory body. Second, to receive information on certain matters.

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Third, to fulfil administrative responsibilities. Besides, the Seminar on Labour Management Co-operation also took important decisions about the size of the Councils, its office bearers, term of office, etc. Thus, the Joint Management Councils (JMCs) were set up in 1958. Following the recommendations of the Administrative Reforms Commission, the Government of India accepted the inclusion of the representatives of workers on the Board of Directors of public sector undertakings. Following this, the Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970 also provided for the appointment of worker director to their Board. One director was from among employees (who are workmen) and another from among officers for a tenure of 3 years. Thus, upto July 1975, there had been three forms of workers’ participation in management introduced in India: Works Committees, Joint Management Councils and Workers-Directors (public sector) on Boards of Directors. Under the Government of India’s 20-Point Economic Programmes, a new scheme of shops and plants councils was introduced in 1975 after the emergency was declared in June 1975. In the following year 1976, the Government of India amended the constitution to incorporate workers’ participation in management as one of the Directive Principles of State Policy. In June 1977, the Government of India set up a high-powered Expert Committee on Companies and MRTP Acts under the Chairmanship of Rajinder Sachar with terms of reference to (i) consider the provisions of the Companies Act and MRTP Act and (ii) to suggest measures by which workers’ participation in management and share capital of companies can be brought about. The Sachar Committee submitted its report in August 1978. Meanwhile, the Janata Government also set up a “Committee on Workers’ Participation in Management and Equity” in september 1977 under the Chairmanship of Ravindra Varma, the then Union Minister of Labour. The Committee consisted of 18 members representing Central Organisations of trade unions and employers and some of the States and professional institutions of management. The strength of Committee increased to 21 by nominating three additional members in January 1978. The terms of reference of the Committee were to consider, among other things, the need for a statutory scheme for workers’ participation in management. The Committee was also to study and recommend an outline of a comprehensive scheme of workers partcipation at different levels of management in industrial establishments and undertakings The Committee submitted its report to the Government in March 1979. The report showed that the majority of the members favoured adoption of a three-tier system of participation, viz., at the shop, plant and corporate or board levels. However, the employer of private sector did not favour board or corporate level participation in management. It also recommended to enact a legislation on workers’ participation in management covering all undertakings, be public or private, employing 500 or more workers. The Government accepted the recommendations made by the 21-Member Committee on Workers’ Participation in Management and Equity. Based on a review of the working of the various schemes of workers’ participation in management and experiences so gained, the Government formulated and notified a new comprehensive scheme on a voluntary basis for ‘Workers’ Participation in Management’ on 30th December, 1983. The salient features of the scheme were: 1.

The scheme will be non-legislative.

2.

It will apply to all central public sector enterprises, expect those specifically exempted.

3.

It envisaged constitution of bipartite forums at shop and plant levels.

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4.

The mode of representation of workers representatives was to be determined by consultation with the concerned unions.

5.

A wide range of work related issues were brought within the ambit of the councils.

However, a host of constraints such as multiplicity of unions, inter-union rivalry, lack of proper knowledge on the part of workers about the scheme, etc., served as stumbling blocks in the successful working of the scheme. Participation of Workers in Management Bill 1990(Bill No. XXVIII of 1990) So far, all the schemes pertaining to the workers’ participation in management have been nonstatutory which failed to provide meaningful participation to workers in management. To remedy the situation, the Government has, therefore, introduced a Bill in the Parliament on 25th May,1990 to provide for: 1.

Meaningful three-tier participation of workers in management in all industrial establishments.

2.

Formulation of scheme specifying criteria regarding nomination of representatives from workers.

3.

The principle of secret ballot for determining the representation of workers on the shop floor and establishment level councils.

4.

Rules for monitoring the scheme.

5.

Deletion of Section 3 of the Industrial Dispute Act, 1947.

6.

Rules for appointment of Inspector.

7.

Imprisonment up to 2 years or a fine upto Rs. 20,000 or both for contravention of the provisions.

19.5 EVALUATION OF WPM SCHEME Despite the noble intentions and evolution of the various WPM schemes over the period, the schemes have not been a success. There are ample evidences to report that the Indian experience in workers’ participation in management has been far from satistfactory. To quote, the 1983 scheme was introduced in only 91 out of 216 central public sector undertakings upto september 1986. In a study8 covering six industrial units, (three each from public and private sectors) concluded that the functioning of JMCs had not been entirely satisfactory for reasons like JMCs imposition from above and its acceptance after hard persuasion, no clear-cut demarcation of JMCs from other consultative committees like works committee and production committee, etc.. Having reviewed the WPM scheme in India, Zaheer9 reported the following reasons for the failure of the concept of WPM in India. (i) Lack of understanding of the concepts. (ii) Rigid attitude of the employees. (iii) Vagueness of the legal definitions, scope and functions of these bipartite forums. (iv) Half-hearted implementation of decisions arrived at these forums. (v) Suspicion in the minds of trade union leaders about the fairness of the scheme. Of the several reasons for the failure of WPM, some more important ones are examined more closely here: 1. Ideological Differences: There is an ideological difference between the employees and the employers regarding the WPM scheme. While employees want to introduce the scheme simulta-

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neously at all levels, the employers are of the opinion to introduce participation gradually at the Board level10. The result is the half-hearted acceptance and implementation of the scheme. 2. Improper Imbibement of the Spirit: The workers’ representatives consider WPM an instrument for redressal of grievances, higher wages, better working conditions, better security of service, etc. They neglect the larger problems like absenteeism reduction, productivity increase, etc. On the other side, the employers feel that the participation will take away from them their right to manage. They also consider the bipartite bodies as substitutes for trade unions. 3. Absence of Strong Trade Unionism: The Indian trade unionism is characterized by features like multiplicity of unions, inter-union rivalry, affiliation to political philosophies, etc. As such, there is lack or absence of strong trade unionism in the country. This renders the working of the WPM scheme ineffective. 4. Illiteracy of Workers: The Indian working class is generally illiterate. The workers’ representatives on various participation bodies are, therefore, expectedly illiterate or less educated. As such, in the absence of adequate knowledge on their part about the various aspects of the WPM scheme, they are unable to actively and effectively participate in decision making forums. Sinha11 felt that it was mainly illiteracy of workers that rendere the JMCs ineffective or failure. 5. Improper Implementation: There are reports that, in contrast to the stated objectives of participation, in most cases, various boards find themselves dealing with personal matters rather than with productivity and efficiency. This causes dissatisfaction to the employers towards the participation scheme12. In addition, delay in implementing the suggestions and recommendations of various bodies often leads to the waning of workers’ interest in such bodies and schemes. 6. Absence of Committed Spirit:Past experiences suggest that mere creation of structures and formulation of schemes do not guarantee success. Spirit precedes success. The same seems absent in case of WPM scheme–be on the part of employees or employers. There are instances to cite that in some cases, even elementary procedures such as selection of representatives, rcognition of unions, and procedure for holding meetings were not clearly laid down.13 It is reported that the public sector undertakings are plagued by absence of genuine bargaining platforms14 . This leads to lack of trust between the parties and, in turn, eventual failure of the purpose.

19.6 MAKING WPM EFFECTIVE It is important that the WPM does not operate in vacuum. The following are the conditions to be satisfied to make the WPM effective or successful: 1.

The objectives of WPM should be closely set by the parties concerned.

2.

There should be a democratic, strong and representative union of workers to partcipate in management on behalf of workers.

3.

There should be a sincere feeling of participative management at all levels. Rigidity in terms of heirarchical participation distorts the atmosphere for participative management.

4.

There should be continuous communication and consultation between the workers and management in matters affecting their functioning.

5.

The workers and management should develop positive approach and favourable attitude to participative management. Conducting training and orientation programmes for the parties concerned can help create a conducive environment for successful application of WPM.

Besides, research15 has shown that the effectiveness of participative management can be improved if certain parameters are kept into consideration. Of these parameters, the following chief ones are highlighted here:

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1.

The effectiveness of participation is sine que non with fulfilment of motives of the participants.

2.

The clarity of goals and effectiveness of participation are positively related. Say the greater the former, the higher the latter and vice versa.

3.

More the issue is difficult, greater is the effectiveness of settlement through participatory mechanism.

4.

Urgency of decision is inversely related with effectiveness of decision.

5.

Last but no means the least, the more accurate and useful the information, the higher the effectiveness of participation.

While discussing about the effectiveness of participative management, it is worth mentioning that the effectiveness based on one parameter or a set of parameters may vary across cultures. Each country and organisation has a unique culture of its own. For example, while self-determination is very much valued by Americans, the same is not shared by workess in South America. Germans cohere in groups only if they are led by a leader, while the informal group is the norm in USA16. Thus, these facts support the point that the effectiveness of participative management will not be the same, i.e. uniform universally. One last mention about the Indian experience in WPM before we close this chapter. As mentioned earlier, since Tata Iron and Steel Company (TISCO) was the pioneer in introducing WPM in India, hence, it seems in the fitness of context to present the TISCO experience in WPM.

Workers’ Participation in Management at TISCO The close association between employees and management at TISCO is dated far back in 1919. However, it formalized in the form of workers’ participation in management in August 1956. Since then, there is no looking back in this regard. In 1982, TISCO celebrated the first silver jubilee of workers’ participation in management scheme. In fact, right from inception of the scheme, the purpose of the scheme was to promote productivity, make know workers better understood of their role and place, and satisfy their urge for self-expression. Since 1957, the WPM scheme, as set up at TISCO, consists of a three-tier system as outlined below: 1.

Joint Departmental Councils (JDC)

2.

Joint Works Councils (JWC)

3.

Joint Consultative Council of Management (JCCM).

The specific functions performed by these bodies are discussed as follows:

Joint Departmental Councils (JDCs) These Councils are set up at the department level. The main function of JDCs was to study operational problems, advise on the ways and means deemed necessary to promote productivity. Matters such as welfare and safety provisions, improvement in working conditions also fell within the purview of JDCs17. At present, there are 40 joint departmental councils at TISCO.

Joint Works Councils (JWC) JWCs review the working of JDCs and other committees such as Suggestion Box Committee, Safety Committee and Canteen Managing Committee.

Joint Consultative Council of Management (JCCM) Like JWC, the JCCM also reviews the working of JDCs and JWCs. Besides, JCCM also advises management on matters like production and welfare activities of TISCO.

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The above mentioned Councils consist of representatives of workers and management in equal number. Special task groups were also formed to avoid overlapping of the functions performed by these Councils. Aslo, special orientation and training courses were offered for both management and union representatives to enable them to effectively utilize the scheme. All these efforts and initiatives made the WPM experiment as sucessful one at TISCO. One indication of TISCO’s success in participative management is that from 1957 to middle of 1972, the JDCs have discussed a total of 14, 104 suggestions of which 70.3 per cent have been implemented. Here, the most important point that made TISCO experience a successful one is that the scheme involved both workers and management equally in the process of participative management.

19.7 SUMMARY This summary is organised by the learning objectives given on page...219: 1.

The rationale for WPM lies in the fact that it gives workers a sense of belongingness to the organisation and also a sense of commitment to various decisions taken.

2.

WPM means associating workers at every level in decision making. The main objective of WPM in India is to achieve organisational effectiveness and the satisfaction of the employees. There are at least five levels of participation that can be developed at the enterprise level: informative, consulative, associative, administrative, and decisive participation.

3.

Workers participate in management through suggestion schemes, works committee, joint management councils, board representation, co-partnership and complete ownership. Collective bargaining, quality circles and empowerment are alternative forms to participative management.

4.

WPM in India has been in practice for quite long time. Over the period, the Government of India has introduced a number of schemes of participative management. Participation of Workers in Management Bill, 1990 is the most recent one when the Government, for the first time, introduced a bill to make three-tier representative forums of participation.

5.

So far the progress of WPM in India has not been satisfactory because of reasons like ideological differences,absence of strong trade unionism, illiteracy of workers, absence of positive spirit, etc.

6.

Clear and closely formulated objectives, strong trade unionism, favourable attitude to participative management, smooth flow of communication and consultation between the parties, etc., are the prerequisites for effective workers’ participation in management.

KEY TERMS Collective Bargaining

Industrial Democracy

Democracy

Participative Management

Empowerment

Quality Circles (QC)

REVIEW AND DISCUSSION QUESTIONS 1. Why do you think workers’ participation in management necessary? What are the objectives of WPM? 2. What is meant by workers’ participation in management? Bring out its importance also. 3. What is the rationale for workers’ participation in management? 4. Briefly discuss the levels and forms of workers’ participation in management.

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5. Review the schemes of workers’ participation in management in India and outline the preconditions for their success. 6. Describe the various methods for achieving employee participation in management. 7. Critically review the government schemes of workers’ participation in management and suggest the prerequisites to make them effective. 8. “Workers’ participation in management in India has not been a resounding success”. Do you agree? Give your reasons. 9. Visit an organisation using the participative management. Study it and evaluate its effectiveness. 10. Write notes on: (a) Works Committees (b) Joint Management Councils (c) Joint Decisive Participation.

REFERENCES 1. Keith Davis: Human Relations at Work, Tata McGraw-Hill, New Delhi, 1975, p. 288. 2. V. G. Mehtras: Workers Participation in Management, Holt, New York, 1975. 3. International Labour Organisation: Labour Productivity Missions to Underdeveloped Countries, International Labour Review, July, 1957, p. 10. 4. C. B. Mamoria, Satish Mamoria and S. V. Gankar: Dynamics of Industrial Relations, Himalaya Publishing House, Nagpur, 2000, pp. 512-513. 5. V. G. Mehtras: Labour Participation in Management, Manaktalas, Bombay, 1966. 6. Report of Royal Commission on labour, 1938, p. 344. 7. Second Five-Year Plan, 1956, p. 577. 8. N. R. Sheth: Joint Management Councils: Problems and Prospects,Shri Ram Centre for Industrial Relations and Human Resources, New Delhi, 1977. 9. M. A. Zaheer: Participation: A New Dimension, Integrated Management, May, 1980. 10. Z. Tarie: Workers’ Participation in Management, Shri Ram Centre for Industrial Relations and Human Resources, New Delhi, 1969. 11. Jai B. P.Sinha: A Case of Reversal in Participation Management, Indian Journal of Industrial Relations, 1974, Vol.10, No.2, pp. 179-187. 12. Arun Monappa and Mirga S. Saiyadain: Personnel Management, Tata Mcgraw-Hill Publishing Company Limited, New Delhi, 1997, p. 314. 13. N. R. Seth: Hazards of Industrial Democracy, Economic and Political Weekly, 1972. 14. Seminar on Labour Participation in Management, Government of India, New Delhi, 1990. 15. R. K. Verma and P. R. N. Sinha: Workers Participation in Management, Oxford & IBH Publishing Co., New Delhi, 1991, pp. 81-85. 16. N.H. F. Maier and L. R. Hoffman: Group Decisions in England and United States, Personnel Psychology, 1962, Vol. 15, pp. 75-87. 17. Working Together; Public Relations Department, TISCO, Jamshedpur, January 1973.

20 EMPLOYEE HEALTH AND SAFETY Learning Objectives After studying this chapter, You should be able to: 1.

Define health and appreciate the importance of health.

2.

Discuss various occupational hazards and diseases.

3.

Suggest measures how to protect health.

4.

Appreciate the need for industrial safety.

5.

Enumerate the various types of accidents and their causes.

6.

List the statutory provisions for maintaining safety.

Closely related to the factors so far discussed in the preceding chapters are health and safety provisions to make workers stay and work in the organisations. This is because neither the workers with ill-health will be in the position to work productively nor the organisation itself can afford to retain such non-productive workers for a long period of time. Similarly, adequate provisions for safety at the work place also enable workers to work more and stay in the organisations. It is against this background, the present chapter is devoted to discuss the various aspects of employees health and safety in the industrial organisations. Let us first discuss employee health.

20.1 MEANING OF HEALTH The term ‘health’ is a positive and dynamic concept. In common parlance, health implies absence of disease. However, that industrial health implies much more than mere absence of disease is clear from the following definitions of health: The World Health Organisation (WHO) has defined health as: “a state of complete physical, mental and social well-being and not merely the absence of disease or illness or infirmity”. As regards the industrial health, it refers to a system of public health and preventive medicine which is applicable to industrial concerns. Here, the definition of health given by the joint I.L.O./W.H.O. Committee on Organisational Health is worth quoting: (i) the prevention and maintenance of physical, mental and social well-being of workers in all organisations; (ii) prevention among workers of ill-health caused by the working conditions; (iii) protection of workers in their employment from risk resulting from factors adverse to health; and (iv) placing and maintenance of the worker in an occupational environment adapted to his physicial and psychological equipment1. Thus, the modern concept of health emphasises on the “whole man concept.” In other words, health refers to the outcome of the interaction between the individual and his environment. So to say, he/she is healthy who is well adjusted with environment. The modern concept of health thus, anticipates and recognizes potentially harmful situations and applies engineering control measures to prevent disease or illness or infirmity. In this way, industrial health depends not only on the individual worker but also on the environment in which he/she lives and works. There are two types of employee health: physical health and mental health. A brief mention of these follows: 231

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Physical Health: The physical health refers to infirmity in the employee’s health. Employee’s physical health and his work are intimately related. While an unhealthy employee works less both quantitatively and qualitatively, commits accidents, and remains absent from work, a healthy employee produces results opposite to these. The same underlines the need for and importance of healthy employees in an organisation. Mental Health: This refers to the mental soundness of the employees. As is physical health important for good performance, so is mental health also. Experience suggests that three factors, namely, mental breakdowns, mental disturbances, and mental illness impair the mental health of employees. These factors are discussed subsequently later in the chapter.

20.2 IMPORTANCE OF HEALTH The trite saying ‘Health is Wealth’ explains the importance of health. Illhealth results in high rate of absenteeism and turnover, industrial discontent and indiscipline, poor performance and low productivity and more accidents. On the contrary, the natural consequences of good health are reduction in the rate of absenteeism and turnover, accidents and occupational diseases. Besides, employee health also provides other benefits such as reduced spoilage, improved morale of employee, increased productivity of employee and also longer working period of an employee which, of course, cannot be easily measured. In long and short, employee health is important because it helps: 

Maintain and improve the employee performance both quantitatively and qualitatively.



Reduce employee absenteeism and turnover.



Minimize industrial unrest and indiscipline.



Improve employee morale and motivation.

It is this importance of health, increasing emphasis is given to the employee health through various laws and provisions in this regard. For example, in India, the Royal Commission on Labour (1931), the Labour Investigation Committee (1946), the Health Safety and Development Committee (1943), the Labour Welfare Committee (1969) and the National Commission on Labour (1969), all have expressed concern for employee health. These emphasised upon the creation and maintenance of as healthy an environment as possible, in the homes of the employees as well as in all places where they congregate for work, amusement or recreation The I.L.O. in its Recommendation No.112 envisaged the importance of employee health in these words: “Occupational health services should be established in or near a place of employment for the purpose of : (i) protecting the workers against any health hazard arising out of work or conditions in which it is carried on; (ii) contributing towards worker’s physical and mental adjustment; and (iii) contributing to establishment and maintenance of the highest possible degree of physical and mental well-being of the workers”.

20.3 OCCUPATIONAL HAZARDS AND DISEASES Employees in certain industries are exposed to certain occupational hazards and diseases. Ronald Blake2 has classified occupational hazards into the following four categories: 1.

Chemical Hazards

2.

Biological Hazards

3.

Environmental Hazards

4.

Psychological Hazards.

These are discussed one by one.

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Chemical Hazards: The common chemical substances, such as carbon monoxide, carbon dioxide, nitrogen dioxide, sulphur dioxide, hydrocarbons, sulphuric acid, tannic acid, acetic acid, fumeric acid, ozone, limes and alkalies cause injury to the employee when they are absorbed through skin and inhaling or ingesting. Workers may suffer from respiratory diseases, skin diseases, allergy, heart disease, cancer and neurological disorders. These diseseas may be temporary or chronic in nature. Often a disease may be difficult to diagnose because either its symptoms may appear after a long dormant period or may not be apparent at all. These diseases often shorten employee’s life expectancy. Biological Hazards: These hazards are manifested by diseases caused by bacteria, fungi, viruses, insects, dietary deficiencies,exessive drinking, allergies, brain fever, imbalances, tetanus, stresses and strains. All these tell upon employee’s health. Environmental Hazards: Environmental hazards may include noise pollution, vibration and shocks, illumination, radiation, heat, ventilation, air and water pollution. These hazards cause redness of eyes, genetic disorders, cancer, sterility, hearing loss, nerve injury etc., to workers. Psychological Hazards: Industrial/job stress caused by various stressors3, such as task and role demands, organisational leadership,lack of group cohesion, intergroup and interpersonal conflicts, life and career changes, etc., lead to emotional disturbances which, in turn, lead to fatigue and exhaustion. All these affect health of employees. Appart from occupational hazards, there are some occupational diseases also that impair health of employees in industries. A brief mention of these follows: Occupational Diseases: Occupational diseases are caused by working conditions prevalent in industries. Let these be exemplified with a few examples. Workers working on lead (e.g., cable-makers, lead pipe makers, compositors, painters and plumbers) fall prey to ‘painter’s colic’ or ‘wrist drop’ disease. This disease causes vomitting, stomach pains, joint pains and loss of appetite4. . It may even lead the workers to collapse. Workers working in handling wool, hoofs, hides, hair bristles, animal caracasses etc., become victim of anthrax5. Like occupational hazards, occupational diseases also develop with worker’s frequent exposure to unhealthy working conditions. They develop slowly with accumulated effects over an extended period of time The Factories Act, 1948 vide sections 89 and 90 have identified the following 22 occcupational diseases6 . As per this Act, such diseases when noticed are to be notified to the government authorities. 1.

Lead poisoning

2. Lead tetraethyl poisoning

3.

Phosphorous poisoning

4. Manganese poisoning

5.

Mercury poisoning

6. Arsenic poisoning

7.

Poisoning from nitrous fumes

8. Carbon bisulphide poisoning

9.

Benzene poisoning

10. Chrome ulceration

11.

Anthrax

12. Silicosis

13.

Halogen poisoning

14. Radiation

15.

Primary skin cancer

16. Toxic jaundice

17.

Mineral oil poisoning

18. Byssionsis

(Dermatitis)

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19.

Asbestosis

20. Toxic Anaemia

21.

Chemicals and pair poisoning

22. Loss of hearing due to noise pollution and pressures

In addition to above ones,the Workmen’s Compensation Act, 1923 has identified the following three occupational diseases: 1.

Occupational cataract caused by infra red-radiation;

2.

Telegraphist’s cramp; and

3.

Begassoise

Occupational hazards and diseases benefit none. Hence, there is a need to cure, prevent and protect against them.

20.4 PROTECTION AGAINST HAZARDS Industrial establishments can take two types of measures to protect worker’s health against occupational hazards: 1.

Preventive Measures

2.

Curative Measures

Let us discuss these one by one.

Preventive Measures These are based on the philosophy that prevention is better than cure. The preventive measures to protect employee against occupational health hazards may include: 

Pre-employment medical examination.



Periodic post-employment medical examination.



Removal of hazardous conditions to the extent possible.



Surveillance of special classes of workers such as women workers and child labourers exposed to health hazards.



Emergency treatment in case of accidents.



Education of workers in health and hygiene.



Training in first-aid to workers.



Proper factory layout and illumination.



Proper effluent Disposal Treatment Plants.



Proper redesign of job to remove monotony and fatigue.



Proper scheduling of the work with adequate rest.

Curative Measures The curative measures begin once a worker actually suffers from ill-health or sickness or disease. The curative measures include the following: 

Adequate and timely medical treatment.



Allowing the employee adequate period of canvalescing and recuperating.



Adequate compensation.



Allowing the needed best medical treatment from outside hospitals.

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20.5 STATUTORY PROVISIONS CONCERNING HEALTH The Factories Act, 1948 insists that the following provisions must be made in industrial establishment for safeguarding employee health7: 1. Cleanliness: Every factory should be kept clean and free from effuvia arising from drain and privy refuse, dirt and such other nuisance. For this, the factory walls, partitions, ceilings, doors, windows, etc. should be whitewashed at least once in 14 months and painted and whitewashed once in 5 years. The floor should be swept and cleaned, at least once every week by washing using disinfactant fluid or by similar other methods. 2. Disposal of Wastes and Effluents: Effective measures should be taken in every factory for disposal of wastes and effluents arising out of manufacturing process. These effluents should be rendered innocuous. 3. Ventilation and Temperature: Proper provisions should be made in every factory for ensuring circulation of fresh air. Temperature should be maintained by using such materials in building walls and roofs as would keep it as low as required and reasonable. 4. Dust and Fumes: Effective and suitable measures should be taken to prevent or at any rate reduce the inhalation and accumulation of dust and fumes. Added to this is use of exhaust appliances near the point of origin of dust, fumes and other impurity. Such points should be enclosed as far as possible. 5. Lighting: Sufficient lighting, natural or artificial or both, should be made available in every place of factory where workers are working. Efforts should be made to keep all glazed windows and sky lights, clean and free from obstruction. 6. Overcrowding: Effective arrangements should be made to avoid overcrowding of workers at a room. Every worker should be provided at least 500 cu. ft. of space for his/her work. 7. Drinking Water: Effective and adequate arrangements should be made to provide drinking water throughout the year at suitable points conveniently situated for all workers. But, no such points shall be situated within six metres of any washing place, urinal, latrine, spittoon or any other sources of contamination. 8. Privy: In every factory, adequate latrines and urinal should be separately provided for men and women employees. These should be adequately lighted and ventilated. 9. Spittoons: Sufficient number of spittoons should be provided in the factory premises at the appropriate places. Spitting at open places in the premises should be strictly prohibited. Spittoons should be kept and maintained in clean and hyginic conditions. 10. First-Aid Appliances: Arrangement should be made for adequate number of first-aid boxes. There should also be adequate number of personnel to administer first-aid. There should be an ambulance readily available in the factory as and when required.

20.6 ACCIDENTS: THEIR TYPES AND CAUSES The ever increasing mechanisation, electrification, chemicalisation and sophistication have made industrial jobs more and more complex and intricate. This has led to increased dangers to human life in industries through accidents and injuries. In fact, the same underlines the need for and importance of industrial safety. Let us first understand what industrial accident actually means.

Industrial Accident An accident (industrial) is a sudden and unexpected occurance in the industry which interrupts the orderly progress of the work. According to the Factories Act, 1948: “It is an occurance in an industrial establishment causing bodily injury to a person which makes him unfit to resume his duties

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in the next 48 hours”. In other words, accident is an unexpected event in the course of employment which is neither anticipated nor designed to occur. Thus, an accident is an unplanned and uncontrolled event in which an action or reaction of an object, a substance, a person, or a radiation results in personal injury8 . It is important to note that self-inflicted injuries cannot be regarded as accidents. An industrial injury is defined as “a personal injury to an employee which has been caused by an accident or an occupational disease and which arises out of or in the course of employment and which could entitle such employee to compensation under Workers Compensation Act, 1923”9.

Types of Accidents Accidents may be of different types depending upon the severity, durability and degree of the injury. An accident causing death or permanent or prolonged disability to the injured employee is called ‘major’ accident. A cut that does not render the employee disabled is termed as ‘minor’ accident. When an employee gets injury with external signs of it, it is external injury. Injury without showing external signs such as a fractured bone is called an internal one. When an injury renders an injured employee disabled for a short period, say, a day or a week, it is a temporary accident. On the contrary, making injured employee disabled for ever is called permanent accident. Disability caused by accident may be partial or total, fatal or non-fatal. The various types of accidents are now shown in Figure 20.1.

Internal

External External

Internal Internal

Minor Minor

Major Major

Partial Partial

Fatal Fatal

Disability Disability

Temporary Temporary

Permanent Permanent

Total Total

Total Total

Partial Partial

Fig. 20.1: Types Accidents

No accident occurs automatically. Instead, certain factors cause accidents. It has been noticed

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that an accident does not have a single cause but a multipticity of causes, which are often closely related10. The same is discussed subsequently.

Causes of Accidents The industrial safety experts have classified the causes of accidents into three broad categories: 1.

Unsafe conditions

2.

Unsafe Acts

3.

Other Causes

These are disscussed, in brief. 1. Unsafe Conditions (work-related): Unsafe working conditions are the biggest cause of accidents. These are associated with defective plants, tools, equipments, machines and materials. Such causes are known as ‘technical causes’. They arise when there are improper guarded equipments, defective equipments, faulty layout and location of plant, inadequate lighting arrangements and ventilation, unsafe storage, inadequate safety devices, etc. Besides, the psychological reasons such as working over time, monotony, fatigue, tiredness, frustration and anxiety are also some other causes that cause accidents. Safety experts identify that there are some high danger zones in an industry. These are, for example, handlift trucks, wheel-barrows, gears and pulleys, saws and hand rails, chisels and screw drivers, electric drop lights, etc., where about one-third of industrial accidents occur. 2. Unsafe Acts: Industrial accidents occur due to certain acts on the part of workers. These acts may be the result of lack of knowledge or skill on the part of the worker, certain bodily defects and wrong attitude. Examples of these acts are: (a) Operating without authority. (b) Failure to use safe attire or personal protective equipments. (c) Careless throwing of material at the work palce. (d) Working at unsafe speed, i.e., too fast or too low. (e) Using unsafe equipment, or using equipments unsafely. (f) Removing safety devices. (g) Taking unsafe position under suspended loads. (h) Distracting, teasing, abusing, quarreling, day-dreaming, horseplay (i) One’s own accident prone personality and behaviour. 3. Other Causes: These causes arise out of unsafe situational and climatic conditions and variations. These may include excessive noise, very high temperature, humid conditions, bad working conditions, unhealthy environment, slippery floors, excessive glare, dust and fume, arrogant behaviour of domineering suspervisors, etc. Of late, industrial accidents have become common happening in our country. A brief catalogue of major accidents in the recent past in India is produced here:

Exhibit 20.1. Major Accidents in the Last Decade 

Bhopal, December 1984: In world’s worst chemical disaster. a methylisocyanate gas leak from the Union Carbide plant in the city killed over 4000 people. Thousands suffered irreversible health damage.



Delhi, December 1985: An oleum gas leak from the Sriram Foods and Fertilisers Plant in Delhi severely affected workers and those living in the neighbourhood.

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

Rourkela, December 1985: Blast furnace accident in Rourkela Steel Plant. 18 workers affected.



Durgapur, June 1987: Chlorine leak at Durgapur Chemical Factory created panic all around. Long distance trains were halted. Over 100 were affected.



Bombay, November 1988: Fire at the Bharat Petroleum Refinery at Mahul, north-east Bombay, killed 32.



Ramagundam, September 1989: Major gas leak at Fertilisers Corporation of India unit at Ramagundam killed 7.



Nagothane, November 1990: Explosion at the Indian Petrochemicals, Nagothane complex, 35 persons killed , over 50 suffered 70 per cent burns.



Bombay, July 1991: Accident in a Hindustan Organic Chemicals unit near Bombay, kills 7 workers.



Gwalior, December 1991: Blast at the dyeing department of GRASIM unit at Gwalior. 14 Killed and 22 severely injured.



Panipat, August 1992: Ammonia leak at the National Fertilisers plant, Panipat killed 11, many injured.



Kahalgaon, October 1992: Boiler explosion in the National Thermal Power Corporation (NTPC), 11 killed and several injured.

Source: The Economic Times, November 8, 1992. It is reported that in every twenty seconds of every working minute of every hour throughout the world, someone dies as a result of an industrial accident.12 Industrial accidents cause losses to the employees and organisations as well. Table 20.1 gives an idea about the enormous losses that accidents have caused to the industrial establishments in our country. Table 20.1: Accidents—Estimated Loss

Date of Occurence

Name of the Organisation

Estimated Loss (Rs in crore)

29-01-87

Madras Ref. Manali

11-11-87

HPL Refinery, Vizag

3.40

09-01-88

JK Synthetics

6.92

20-09-88

Monica Electronics

3.86

05-05-88

Zenith Chem., Tarapur

4.00

30-08-88

IOC, Mathura

4.63

07-09-88

IEL. Gornia

5.00

09-11-88

BPCL

9.00

02-02-89

IPCL, Baroda

41.82

09-02-89

IAAI, Bombay

43.00

23-02-89

Voltas, Warora

5.00

08-01-95

ONGC, Pasarlapudi well blowout

Source: The Economic Times. March 10, 1995.

4.85

41.44

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Accidents causing losses to the industrial establishments need to be avoided. Adequate safety measures can avoid accidents. The subsequent discussion focuses on certain questions: What?, why?, and How safety?

Safety In simple words, safety means freedom from the occurance or risk of injury or loss. As regards, industrial safety, it means the protection of employees/workers from the danger or risk of industrial accidents. In other words, industrial safety refers to protection against accidents occuring in the industrial establishments.

20.7 SIGNIFICANCE OF INDUSTRIAL SAFETY Safety i.e., accident-free industry enjoys certain benefits. The following are the major ones: 1. It saves costs: Occurance of an accident involves two types of costs: direct costs and indirect costs. The direct cost is in the form of compensation payable to the dependents of the victim employee, and medical expenses incurred in treating the patient employee if the accident is not fatal. However, the management has not to bear the direct cost if the victim is insured under the ESI Scheme. The indirect costs, also called the ‘hidden costs’, include loss on account of down-time of operators, slowed-up production rate of other workers, materials spoiled, and damages to equipment. Added to these is the injured employee’s work performance less than his normal efficiency. Research evidences indicate that the indirect costs are three to four times higher than the direct costs. But, the safety by avoiding accidents eliminates these direct and indirect costs. 2. It improves productivity: As safe conditions at the work place keep employees free from worrying about their safety, they devote more time to improving the quantity and quality of their output. Thus, safety in the industry promotes productivity. 3. It develops moral:An industrial employee is a worker in the factory and at the same time, breadearner for his/her family. Hence, the happiness of his/her family is tagged to the well-being of the worker. Safety is, therefore, important on human grounds as well. 4. Safety is a legal requirement: The maintenance of safety in the factory premises is a legal requirement for the industry. There are laws and acts for ensuring safety measures in the factory, and imposing penalties on non-compliance of the same has become quite severe. Given the benefits safety offers to an industrial establishment, as seen above, there is, therefore, a need for avoiding accidents. Adequate safety measures and precautions can avoid accident. The next section deals with the same.

20.8 SAFETY MEASURES/PROGRAMMES There are several measures to maintain safety and avoid accidents in the industrial establishments. The important safety measures or programes are discussed here: 1. Reduction in Unsafe Condition:One measure to prevent accidents may be maintaining a check on unsafe work conditions. These may include keeping the floors clean, maintaining adequate light and ventilation, proper maintenance of machines, equipments, and tools and sufficient space for workers for their movement without obstructions. 2. Safety Committee: Taking precautions and providing safety equipments will not ensure safety at work place. This should be backed up motivating workers to take care of themselves and their partners while at work. For this, a safety committee consisting of the representatives of both the employer and the employees should be constituted. The formulation and implementation of the safety programmes be effected through the safety committee.

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3. Safety Education andTraining: Employees should be given safety education and training to make them safety conscious. It can be done through posters, bulletins, cartoons, slogans, films,signs and house organs and supplemented by holding seminars, safety weeks and safety contests. Provisions should be made for disciplinary actions/punishments for breach of safety regulations. 4. Inspection: Strict vigilance should be kept in plant and machinery to ensure safety in the factory. Machines, equipments and electric cables should be inspected on regular basis to prevent untoward incidence in factory premises. 5. Role of Government:Realising the significance of safety at work places, the Government of India has established the Factory Advice Service and Labour Institute, Mumbai with an objective to render advice on safety meausures and enforce safety laws. Also, the National Safety Council was set up in 1966 to promote safety consciousness among the workers, avoid accidents and conduct safety programmes in the industries. Celebrating the National Safety Day and awarding the National Safety Awards every year also aim at promoting safety awareness to prevent accidents in the industrial establishments. Besides these, the Government of India has made legal provisions for ensuring safety in industries. These are discussed in the next section.

20.9 STATUTORY PROVISIONS FOR INDUSTRIALSAFETY IN INDIA The International Labour Organisation (ILO) organised a Tripartite Technical Conference in 1948 to formulate a ‘Model Code’ of Safety Regulations for Industrial Establishments for the guidance of governments and industry. The code covers various areas of unsafe conditions and unsafe acts. In India, The Factories Act, 1948 lays down safety provisions contained in Sections 21 to 41. These provisions are obligatory on the part of industrial establishments. A brief resume of these is presented as follows: 1. Fencing of Machinery (Section 21): It is obligatory on the part of the management to fence machinery with guards of a substantial construction. The same shall be constantly maintained and kept in its proper position when any part of the machine is in motion or movement. 2. Work on or Near Machinery in Motion (Section 22): A trained adult male worker wearing tight fitting clothing should examine and operate the machine in motion. He should not handle a belt on a moving pulley more than fifteen centimetres in width. No young children or women should handle a machine which is in motion. 3. Employment ofAdolescents on Dangerous Machines (Section 23): Young persons should not be allowed to work on dangerous machines unless he has been fully instructed as to the dangers involved and he has received sufficient training to work on the machine under the supervision of a person having thorough knowledge and experience of working on that machine. 4. Striking Gear or Device for Cutting off Power (Section 24): Every factory must provide suitable striking gear to move driving belt to and from fast and loose pulleys which form part of transmission machinery. There should also be a locking device to prevent accidental starting of transmission machinery to which the device is fitted. 5. Self-Acting Machines (Section 25): No traversing part of a self-acting machine and no material carried thereon shall be allowed to run within a distance of 45 centimetres from any fixed structure which is not a part of the machine. 6. Casting of New Machinery (Section 26):All machinery driven by power and installed in any factory after April 1, 1949, every set crew,bolt or key, spindle shall be sunk or securely guarded to prevent any danger. Further, all spur, worm and toothed or friction gearing while in operation shall be completely uneased unless it is safely situated.

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7. Prohibition of Employment of Woman and Children near Cotton Openers (Section 27): Women and children shall not be employed in any part of a factory for pressing cottons when cotton opener is in operation. However, women and children may be employed in a room which is separated from opener. 8. Hoists and Lifts (Section 28): In every factory, hoists and lifts should be in good condition and should be examined once in every six months. 9. Lifting Machines,Tackles, Chains and Ropes (Section 29): Similarly, in every factory, lifting machines chains, ropes and lifting tackles must be in good construction and should be examined once in a year. 10. Revolving Machinery (Section 30):In every room where grinding work is going on, a notice indicating the maximum safe working peripherials speed of the machine shall be affixed near it. Effective measures will also be taken in every factory to ensure that the safe working peripherial speed of every revolving vessel, cage, basket, flywheel, pulley, or similar other appliances driven by power is not exceeded. 11. Pressure Plants (Section 31): If in any factory, any plant or its part is operated at a pressure above atmospheric pressure, the pressure should not be allowed to exceed by taking effective measures in this regard. 12. Floors, Stairs and Other Means of Access (Section 32): In every factory, all floors, steps, stairs, passage and gangway shall be of sound construction and be properly maintained. 13. Pits and Openings in Floors (Section 33): Since every fixed vessel, sumps, tank, pit, or opening in a floor may be a source of danger, therefore, shall be securely covered or fenced. 14. Excessive Weights (Section 34): No person shall be employed in the factory to lift or carry excess load/weight so as to cause him/her physical injury. 15. Protection of Eyes (Section 35): In every factory, adequate provisions of goggles or screen to protect persons working on machine which might cause damage to their eyesight, shall be made. 16. Precaution against Dangerous Fumes (Section 36): No employee in any factory shall be allowed to enter any chamber, tank, pit, vat, pipe, flue or such other confined place in which any gas or fume is present. 17. Explosive or Inflammable Gas or Dust (Section 37):In any factory which produces through its manufacturing process dust, gas, fume or vapour of such nature exploding on ignition, effective measures such as enclosure of the plant or machinery used in the process, removal of accumulated dust or fume and effective enclosure of all possible source of ignition, should be taken to prevent explosion likely to be caused by gas or fume. 18. Precaution in Case of Fire (Section 38): In every factory, effective messures be taken to prevent outbreak of fire and its spread. These may include exit door to escape in case of fire, necessary equipments and facilities for extinguishing fire and adequate arrangement to raise alarm in case of fire, preferably a siren. 19. Power to Require Specification of Defective Parts orTests of Stability (Section 39): If it appears to the factory inspector that any building or part of it is in such a condition that it is dangerous to human life, he/she may ask for details about them or insist on suitable tests to determine their safety. 20. Safety of Building and Machinery (Section 40): Where unsafe condition of building and machinery is reported, the inspector having being satisfied, may ask the occupier or manager to repair it suitably.

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21. Power to Make Rules (Secton 41): The state Government is empowered to make rules requiring the provision in any factory of such further devices and measures for securing safety of persons employed therein. The other acts covering statutory provisions of safety are: Mines Act, 1952 Plantation Labour Act, 1961 Bidi and Cigar Workers (Conditions of Employment) Act, 1966. Contract Labour (Regulation and Abolition) Act, 1970 Motor Transport Workers Act, 1961

20.10 SUMMARY This summary is organised by the learning objectives given on page...231: 1.

Health refers to a complete mental, physical and social well - being of the industrial workers. The importance of health lies in improved productivity, reduced absenteeism and turnover, minimized industrial unrest and indiscipline and imporved employee morale and motivation.

2.

The main occupational hazards are chemical, biological, environmental and psychological hazards. Wrist drop, anthrax, poisoning, skin cancer, radiation, toxic jaundice, toxic anaemia,etc. are the serious occupational diseases.

3.

Both preventive and curative measures help protect health of industrial workers.

4.

That the poor health of employees leads to increased accidents and injuries appreciates the need for industrial safety.

5.

Unsafe working conditions, unsafe acts and other environmental factors cause industrial accidents. Internal/external and major/minor are the main types of industrial accidents.

6.

The Factories Act, 1948 has laid down detailed provisions for maintaining safety at the work place.

KEY TERMS Health

Occupational Hazard

Industrial Accident

Physical Health

Mental Health

Stress

REVIEW AND DISCUSSION QUESTIONS 1. Define the term ‘health’. Bring out the arguments for health. 2. How will you explain: ‘Health is wealth’. 3. Discuss the various ways and means to protect employee’s health in industries. 4. Outline the causes of industrial accidents. How can accidents be avoided? 5. Highlight the various legal provisions for industrial safety. 6. What do you mean by occupational hazards? How are these classified? 7. If you were a safety director in an industrial establishment, how will you avoid accidents therein? Mention in order of importance. 8. Write short notes on the following: (a) Occupational Hazards

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(b) Employee Stress (c) Accidents (d) Safety Education (e) Psychological Hazards.

REFERENCES 1. Claude Veil: Medical and Psychological Aspects of Modern Industry, International Labour Review, I. L. O., Geneva, 1957, p. 16. 2. Ronald Blake (Ed.): Industrial Safety, Printice Hall , New York, 1963, p. 300. 3. Fred Luthans: Organisational Behaviour, McGraw-Hill Book Company, Singapore (Seventh Edition), 1995, p. 314. 4. C. B. Mamoria: Personnel Management, Himalaya Publishing House, Bombay, 1996, pp. 905906. 5. C. B. Mamoria: Ibid, p. 906. 6. The Factories Act, 1948, Central Law Agency, Allahabad, 1977, p. 52. 7. Ibid, Sections 11 to 20. 8. H. W. Heinrich: Industrial Accident Prevention, McGraw-Hill, 1959, p. 16. 9. The Factories Act, 1948, op. cit. 10. Donald J. Kirpatrik: Supervisory Inventory on Safety, Personnel Administration, Vol. 8, No. 4, 1964, p. 32-34. 11. The Economic Times, November 8,1992. 12. Quoted by K. Aswathappa: Human Resource and Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1999, p. 457.

21 SOCIAL SECURITY Learning Objectives After studying this chapter, you should be able to: 1.

Define the term ‘social security’ and outline its scope.

2.

Classify social security measures into types.

3.

Give an overview of social security measures in India.

4.

Outline the various social security legislative provisions in India.

Ours is a ‘Welfare State’. Here, the state serves as the patron of the society especially of those who are helpless for various reasons. That is why the constitution of India lays down that the State shall, within the limits of its economic capacity and development, make effective provisions for securing public assistance in the event of unemployment, old age, sickness, and disablement. Therefore, the State as a patron has the obligation to help such helpless workers and provide them security. The government efforts to protect the workers in times of sickness and unemployment and provide relief in case of accidents and old age are collectively known as ‘social security measures’. This chapter is devoted to discuss social security in India. The aspects discussed are sub-summed under three broad categories, viz., meaning and scope, measures, and legislation of social security in India. Let us begin with explaining the concept of social security.

21.1 CONCEPT AND SCOPE Like other socio-economic concepts, the connotation of the term “social security” varies from country to country with varying political ideologies. For example, social security in the socialist countries implies complete protection to every citizen of the country from the cradle to the grave. In other countries which are relatively less regimented ones, social security refers to measures of protection afforded to the needy citizens by means of schemes evolved by democratic processes consistent with resources of the State.

Concept In general sense, social security refers to protection provided by the society to its members against providential mishaps over which a person has no control. The underlying philosophy of social security is that the State shall make itself responsible for ensuring a minimum standard of material welfare to all its citizens on a basis wide enough to cover all the main contingencies of life. In other sense, social security is primarily an instrument of social and economic justice. Following are a few important definitions of social security: According to a definition given in the ILO publication1, “Social security is the security that society furnishes through appropriate organisation against certain risks to which its members are exposed. These risks are essentially contingencies of life which the individual of small means cannot effectively provide by his own ability, or foresight alone or even in private combination with his fellows”. William Beveridge2 has defined social security as “a means of securing an income to take the place of earnings when they are interrupted by unemployment, sickness or accident to provide for 244

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the retirement through old age, to provide against loss of support by death of another person or to meet exceptional expenditure connected with birth, death, or marriage. The purpose of social security is to provide an income upto a minimum and also medical treatment to bring the interruption of earnings to an end as soon as possible.” Objectives of Social Security: The objectives of social security can be sub-summed under three, categories: 1.

Compensation

2.

Restoration

3.

Prevention

A brief description of these is given as under.: Compensation: Compension ensures security of income. It is based on this consideration that during the period of contingency of risks, the individual and his/her family should not be subjected to a double calamity , i.e., destitution and loss of health, limb, life or work. Restoration: It connotates cure of one’s sickness, reemployment so as to restore him/her to earlier condition. In a sense, it is an extension of compensation. Prevention: These measures imply to avoid the loss of productive capacity due to sickness, unemployment or invalidity to earn income. In other words, these measures are designed with an objective to increase the material, intellectual and moral well-being of the community by rendering available resources which are used up by avoidable disease and idleness. Scope: The term ‘social security’ is all embracing. The scope of social security is, therefore very wide. It covers the aspects relating to social and economic justice. All social security schemes furnished by the government are broadly classified into two types: (i) Social Assistance, and (ii) Social Insurance. These are separately discussed subsequently in the chapter. According to the Social Security (Minimum Standards) Convention (No.102) adopted by the ILO in 1952, the following are the nine components of social security that configure its scope.: (i) Medical care, (ii) Sickness benefit, (iii) Unemployment benefit. (iv) Old age benefit, (v) Employment injury benefit, (vi) Family benefit, (vii) Maternity benefit, (viii) Invalidity benefit, and (ix) Survivor’s benefit

Need for Social Security One moot question to be answered is why there is a need for social security especially in India. As has already been mentioned, the underlying philosophy of social security is to ensure a minimum level of material living to the needy or helpless ones of the society by the State. Our accumulated experience reveals that in an industrial economy, the workers have been subjected to periodic unemployment due to cyclical fluctuations in business, sickness, industrial accidents and old age. In fact, there is nothing more disconcerting to worker and his/her family than unemployment. Similarly, while sickness suspends earning capacity of a worker temporarily, industrial accidents may disable

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him/her partially or even permanently, and old age may put a stop to his/her ability to earn and support himself/herself and the family. The capitalist having sufficient resources has no problem in facing such risks of life. But, the worker does not have resources required to face the risks caused by sickness, accidents, unemployment and old age. Nor has he/she alternative sources of livelihood or accumulated property to overcome the period of adversity. Such a situation underlines the need for social security to be provided to such needy workers/people. Naturally, the Government has, then, the obligation to help the needy and helpless workers and provide them security to pass through in period of adversity. That the need for social security is realized not only to afford the needy workers’ protection against the adversities of life, but also for the overall development of the State is well elucidated by a former veteran trade union leader the President of India, Mr.V.V. Giri. He opines that, “Social security measures have two-fold significance for every developing country. They constitute an important step toward the goal of a Welfare State, by improving living and working conditions and affording the people protection against the uncertainties of the future. These measures are also important for every industrialisation programme, for not only to enable workers to become more efficient but they also reduce the wastage arising from industrial disputes. The man-days lost on account of sickness and disability also constitute a heavy drain on the slender resources of the worker and on the industrial output of the country. Lack of social security impedes production and prevents the formation of a stable and efficient labour force. Social security is, therefore, not a burden, but a wise investment in the long run.” Thus, the need for a comprehensive programme of social security in India is so strong that it need no more proof or evidence. It is must to ensure a minimum level of living for those who are helpless on various counts.

21.2 TYPES OF SOCIAL SECURITY Social security is a comprehensive term. All social security measures provided by the Government are of two types: 21.2.1 Social Assistance 21.2.2 Social Insurance These are discussed one by one.

21.2.1 Social Assistance Social assistance refers to the assistance rendered by the Government to the needy persons without asking them to make contributions to be entitled to get such assistance. In other words, social assistance includes those benefits which are provided by the Government without any contribution from workers and employers. Workmen’s compensation, maternity benefits, old age pensions, etc. are the examples of social assistance.

21.2.2 Social Insurance Social insurance refers to a scheme of maintaining fund from the contributions made by the employees and employer, with or without a subsidy from the Government. In other words, social insurance can be defined as a device to provide benefits as of right for persons of small earnings, in amounts which combine the contributive efforts of the insured with subsidies from the employer and the Government4. Examples of social insurance are provident fund and group insurance. Strictly speaking, these two types of social security measures may be said to be the two faces of the same coin. As a matter of fact, both of them are integral parts of a social security system. Here, it seems pertinent to make distinction between social insurance and commercial insurance. Following Table 21.1 bears out how social insurance differs from commercial insurance.

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247

Table 21.1: Difference Between Social Insurance and Commer cial Insurance

Bases

Social Insurance

Commercial Insurance

1.

Motive

The inspiring motive of social insurance is the maintenance of minimum level of living.

There is no motive as such in case of commercial insurance.

2.

Risk

It is undertaken to meet a chain of contingencies of diverse nature and intensity.

It is undertaken to provide against an individual’s risks only.

3.

Benefit

Benefits are usually much larger then contribution made.

Benefits are in proportion to the contribution made, i.e., premium paid.

4.

Option

Social insurance is generally compulsory.

Commercial insurance is necessarily voluntary.

21.3 SOCIAL SECURITY MEASURES IN INDIA In the pre-industrial society, security against various contingencies was provided by the institutions like joint family, caste, guild, village community, religious institutions, etc. Eventually, the emergence of industrial revolution changed both the nature of insecurity as well as the remedies provided for it5. The United States of America is considered to be the birth place of modern social security measures. The social security measures in the USA were inaugurated with the enactment of the Social Security Act, 1935 under which a United Social Insurance System was established as the first major step taken in the field of social security. An old age pension system was also established by the Act of 1935. In 1938, a Social Security Board was set up to administer social security measures in the United States. Later on, the term ‘social security’ was adopted in various countries, of course, in different forms. The introduction of social security measures in India is expectedly a recent one. In fact, the making of climate for industrial security in India started from the 10th Session of the International Labour Conference held in 1927 in which two Conventions and Recommendations were adopted for social security in the country. These were discussed thread bare in the Indian Legislative Assembly in 1928. However, the Assembly resolved that the introduction of any comprehensive scheme for social security on the lines proposed by the ILO was impracticable under the conditions then prevailing in the country. Later, the Preparatory Asian Regional Labour Conference, held in New Delhi in 1947 adopted a comprehensive resolution on social security implementation in various Asian Countries. Following this resolution, the Employees State Insurance Act, 1948 was enacted in India to inaugurate the social security measures in the country. As stated earlier, India, as a ‘Welfare State’, is expected to take care of the citizens from the ‘cradle to the grave’. It is this realisation, the constitution of India lays down that the State shall, within the limits of its resources and development, make effective provisions for securing public assistance in event of unemployment, old age, sickness, and disablement. This constitutional obligation has served as epochmaking in India’s efforts in the field of social security provisions in the country. Since then, various social security schemes have been introduced in the country. Among the social assistance schemes, old-age assistance schemes are the most important ones. It was the Government of Uttar Pradesh who introduced old-age assistance scheme for the first time in

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1957. The scheme was designed to pay a monthly benefit to needy individuals over the age of 70 years who had no one to support them. Later on, similar schemes were introduced in Andhra Pradesh in 1961, Tamil Nadu in 1962, Punjab and Haryana in 1963 and subsequently in many other states. Yes, the eligibility conditions to avail of these benefits and levels of benefits differ across the States. Subsequently, with increasing need for social security alongwith the increasing levels of national development, the Government made various legislative provisions to afford the needy people/workers protection against uncertainties in their lives. These are discussed, in detail, separately under the following Section 21.4 ‘Social Security Legislation in India’.

21.4 SOCIAL SECURITY LEGISLATION IN INDIA In her drive to provide protection to the needy workers, the Government of India has made the various enactments from time to time. The important among them are: 21.4.1 The Workmen’s Compensation Act, 1923 21.4.2 The Employee’s State Insurance Act,1948 21.4.3 The Employee’s Provident Funds and Miscellaneous Provisions Act,1952 21.4.4 The Maternity Benefit Act, 1961 21.4.5 The Payment of Gratuity Act, 1972 The social security provisions in these Acts are now briefly outlined as under:

21.4.1 The Workmen’s Compensation Act, 1923. This Act is the first planned step in the field of social security in India. The main objective of the Act is to ensure compensation to workers for accidents occurred during the course of employment. The main features of the Act are as follows: Coverage. This act covers workers employed in factories, mines, plantations, mechanically propelled vehicles, construction works, railways, ships, circus and other hazardous occupations specified in schedule II of the Act. It does not apply to the Armed Forces, casual workers and workers covered by the Employee’s State Insurance Act, 1948. Administration: The Act is administered by the State Government by appointing commissioners for this purpose under Section 20 of the Act. Benefits: Under this Act, compensation is payable by the employer to the workman for all personal injuries caused by industrial accidents which disable him/her for more than three days. In case of the death of workman, the compensation is paid to his/her dependants. The Act also Specifies that in case a workman contracts any occupational disease, which is specified in its third schedule, such disease shall ordinarily be treated as an employment injury arising out of and in the course of employment. The compensation is paid depending upon the type of injury. In case of permanent total disablement, the rate of compensation varies between Rs.60,000 to Rs.2.74 lakhs. In case of partial disablement, compensation at the rate of 50 per cent of wages is payable for a maximum period of 5 years. There is no wage limit to the coverage of the Act. In case of injuries causing death, the rate of compensation varies from Rs.50,000 to Rs. 2.28 lakhs depending upon the salary and age of the worker at the time of his/her death. The employer is under obligation to make the payment of compensation within one month from the date on which it falls due. In case of default in paying the compensation due under the Act, the commissioner may direct for recovery of the amounts of arrears with interest @ 12% p.a. on the amount due. If , in the opinion of the commissioner, delay is without convincing justification, a further due not exceeding @ 50% of such amount by way of penalty may also be recovered from the employer.

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21.4.2 Employee’s State Insurance Act, 1948. The main object of this Act is to provide social insurance for workers. It is a contributory and compulsory health insurance scheme that provides medical facilities and unemployment insurance to industrial workers for the period of their illness. Following are main features of this Act: Coverage: The Act covers all workers (whether manual, supervisory or salaried employees) whose income do not exceed Rs. 6,500 per month and are employed in factories, other than seasonal factories which run with power and employ 20 or more workers. The State Government can extend the coverage of the Act with the approval of the Central Government. Administration: The Act is administered by the Employees State Insurance (ESI) Corporation, an autonomous body of 40 persons consisting of representatives of the Central and State Governments, employers, employees, medical profession and the parliament. Benefits: Under this Act, an insured is entitled to receive the following types of benefits: (i) Medical Benefit: An insured or a member of his/her family requiring medical help is entitled to receive medical facility free of charge in a hospital either run by the ESI Corporation or by any other agency. (ii) Sickness Benefit: An insured worker in case of certified sickness is entitled to receive cash payment for a maximum period of 91 days in any continuous period of one year. The daily rate of sickness benefit is calculated as half of average daily wages. The insured worker should be under medical treatment at a dispensary of other medical institutions maintained by the corporation. (iii) Maternity Benefit: An insured woman is entitled to receive cash payment calculated at a full average wage for a period of 12 weeks of which not more than 6 weeks shall precede the expected date of her confinement. (iv) Disablement Benefit: This benefit is entitled to insured worker in case of industrial accidents and injury. In case of temporary disablement, the worker is paid 70 per cent of wages during the period of disablement. In case of permanent partial disablement, the insured individual is entitled to a cash benefit for life to be paid as a percentage of the full rate. In case of permanent total disablement, 70 per cent of the wages is paid as monthly pension to the worker for life. (v) Dependents’ Benefit: This benefit is available to the dependents of a deceased worker due to industrial accident or injury. The rate of benefit differs depending upon the relationship between the deceased and the dependents. For example, the widow of the deceased will receive during her lifetime or untill remarriage, an amount equivalent to three-fifth of the full rate. Every dependent son receives two-fifths of the full rate till he reaches to the age of 15 years. Every dependent daughter gets the same amount till she reaches to 15 year or until marriage, whichever is earlier. Since its inauguration in October 1948, the ESI Corporation has 129 ESI hospitals with 23,690 beds, 43 ESI annexes and 1,450 dispensaries including mobile dispensaries and 66.13 lakhs employees had received benefits as on 31st December, 1998. During a single year 1997-98, the Corporation had distributed Rs.932 crores by way of sickness benefits, maternity benefits, temporary and permanent disablement benefits and dependents benefit.

21.4.3 The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 The main object of this Act is to afford the retired workers financial security by way of provident fund, family pension, and deposit linked insurance. The Act is characterised by the following features: Coverage: The Act covers workers employed in a factory of any industry specified in Schedule I in which 20 or more workers are employed or which the Central Government notifies in its official

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Gazette. The Act does not apply to co-operative societies employing less than 50 persons and working without the aid of power. It also does not apply to those new establishments till they become 3 years old. Administration: The Act is administered by Tripartile Central Board of Trustees represented by employers, employees and the Government. Benefits: The Act provides 3 (Three) types pf benefits: (a) Provident Fund: Under this benefit, an employee can avail non-refundable withdrawl or take advances from the Provident Fund Account for various purposes. On superannuation, the employee gets the full balance at his credit with interest. (b) Pension: Under the new pension scheme which has come into force from 16-11-1995 replacing the 1971 scheme, several types are available to an employee and his/her dependents. (c) Deposit Linked Insurance: Under the deposit-linked insurance scheme, an amount equal to the average balance in the Provident Fund Account of the deceased employee during the preceding one year subject to a maximum of Rs.35,000 is granted to his/her nominee/legal heir.

21.4.4 The Maternity Benefit Act, 1961 The main object of this Act is to regulate women employment in industrial establishments for certain specified period before and after childbirth. Coverage: The Act is applicable to all establishments not covered under the Employee’s State Insurance Act, 1948. Administration: The Act is administered by the Employee’s State Insurance (ESI) Corporation. Benefits: Under the Act, a woman worker is entitled to receive the payment for maternity benefit at the rate of average daily wages for a total period of 12 weeks. With effect from 1st February 1996, a woman worker is entitled to grant of leave with wages for a maximum period of one month in cases off illness arising out of MTP or tubectomy. Women workers who will undergo tubectomy operation will get two weeks’ leave.

21.4.5. The Payment of Gratuity Act, 1972 The object of this Act is to provide economic assistance on the termination of an employee. Coverage: The Act is applicable to the employees employed in factories, mines, oil fields, plantations, ports, railways, companies, shops or other establishments employing 10 or more persons. Administration: The act is administered by a controlling authority appointed by the appropriate Government Benefits: Under this Act, on completion of 5 years of service, the employees are entitled to gratuity payable at the rate of 15 days wages for each completed year of service subject to a maximum of Rs. 3.5 lakhs with effect from September 1997. The wage ceiling has been removed with effect from 24th May, 1994.

21.5 SUMMARY This summary is organised by the learning objectives given on page... 244: 1.

Social security refers to the protection afforded by the Government to the needy people against certain risks over a person has no control. It covers the aspects relating to social and economic justice.

2.

Social security measures are of two types: Social assistance and social insurance.

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3.

Social security provisions are of a recent origin in India. It is the Constitutional obligation of the State that has paved path for social security measures in India.

4.

The main legislative enactments to provide social security to the workers are: The Workmen’s Compensation Act 1923. The Employee’s State Insurance Act 1948, The Employee’s Provident Funds and Miscelleneous Provisions Act 1952. The Maternity Benefit Act 1961 and The Payment of Gratuity Act 1972.

KEY TERMS Benefit

Social Insurance

Compensation

Social Security

Social Assistance

REVIEW AND DISCUSSION QUESTIONS 1. Define social security. How will you justify the need for social security in India. 2. Write a note on social security measures in India. 3. Describe the various benefits available to an industrial worker under the Workmen’s Compensation Act, 1923. 4. Discuss the various benefits available to workers under the Employees’ Provident Fund and Pension Fund. 5. “Social assistance and social insurance are the two sides of the same coin” Explain. 6. Name a legislation that provides for financial benefits payable by the employer to the employees without the employees having to make any contribution. Also discuss the various benefits this legislation provides. 7. Explain the main features of the Employees’ State Insurance Scheme. What are the benefits it provides for workers?

REFERENCES 1. ILO : Approaches to Social Security: An Introductory Survey, 1942, p. 80. 2. William Beveridge : Report on Social Service and Allied Service, 1942, p. 120. 3. V.V. Giri : Labour Problems in Indian Industry, Asia Publishing House, Bombay, 1972, p. 271. 4. T.N. Bhagoliwal : Economics of Labour and Industrial Relations , Sahitya Bhawan, Agra, 1995, p. 461. 5. T.N. Bhagoliwal : Ibid, 1995, P. 460

22 EMPLOYEE DISCIPLINE Learning Objectives After studying this chapter, you should be able to : 1.

Define discipline and list its features.

2.

Outline the main objectives of imposing discipline among employees.

3.

Discuss the types of discipline

4.

Identify the causes of indiscipline.

5.

Discuss the general guidelines followed for administering discipline.

6.

Outline the procedure involved in taking a disciplinary action.

7.

State the different types of penalties and punishments imposed on the accused employee.

8.

Know statutory provisions concerning discipline and also code of discipline.

People working in groups-be it in a family, a University department, a sport club, a society or a nation-need to behave in a desired manner so as to work in an effective manner. Similarly, regardless of what best organisation has done at selection, development, motivation and reward practices as discussed in the preceding chapters, employees need to behave in a desired or orderly manner to make their actions effective and productive. Behaving in a desired manner is called ‘discipline’. Reverse is called ‘indiscipline’. Indiscipline adversely affects the effective functioning of the organisation. It is against this backdrop, a detailed discussion on what digressions cause indiscipline in an organisation and what can be done about them become the major concern of this chapter.

22.1 MEANING AND FEATURES OF DISCIPLINE 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. Following definitions of discipline will make its meaning more clear. According to Richard D. Calhoon1, “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”. William R. Spreigel and Edward Schultz2 define discipline as “the force that prompts an individual or a group to observe the rules, regulations and procedures which are deemed to be necessary to the attainment of an objective, it is force or fear of force which restrains an individual or a group from doing things which are deemed to be destructive of group objectives. It is also the exercise of restraint or the enforcement of penalties for the violation of group regulations”. In the opinion of Ordway Tead3, “Discipline is the order, members of an organisation who adhere to its necessary regulations because they desire to cooperate harmoniously in forwarding the end which the group has in view”. Thus, discipline can now be defined as a condition in the organisation when employees conduct themselves in accordance with the organisation’s rules and standards of acceptable behaviour. 252

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The main features or characteristics of discipline that flow from above definitions are: 1. Discipline is self-discipline: It refers to one’s efforts at self-control to conform to organisational rules, regulations and procedures which have been established to ensure the successful attainment of organisational 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.

22.2 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 illwill 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 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. 6 5. Foster industrial peace which is the very foundation of industrial democracy .

22.3 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

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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, 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 organisational 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.

22.4 CAUSES OF INDISCIPLINE OR MISCONDUCT What is indiscipline? In simple words, what is not discipline is ‘indiscipline’. Indiscipline is also called ‘misconduct’. Misconduct is a transgression of some established or definite rules and

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regulations which is prejudicial to the interests of the employer, or which is likely to impair the reputation of the employer, or create unrest among other employees9. Indiscipline can be created by the employees while on the job, off the job, inside organisation or outside organisation. It is, therefore, necessary for the management to determine what constitutes indiscipline or misconduct. Based on the severity of the consequences flowing from indiscipline of misconduct, they are divided into three categories, These are: 1. Minor Infractions: These refer to actions which do either no harm or very little harm. Carelessness, wage garnishment, and negligence are some of the examples of minor infractions. Yes, accumulation of these may become serious in due course of time. 2. Major Infractions: The acts which damage morale such as cheating, lying, stealing, refusal to carry out orders, etc. fall under the category of major infractions. 3. Intolerable Offences: These refer to acts of drastic and illegal nature. Examples of some of these offences/acts are threat to use weapons, use of hard drugs on the job, fighting, smoking at the place where inflammables and combustibles are kept. Considering all acts of employees omissions and commissions which constitute indiscipline or misconduct, one can, with little difficulty, list a series of causes of indiscipline. For simplicity’s sake, we have classified the major ones into four broad categories: attendance, on the job, dishonesty, and outside activities. A brief description of these follows:

Attendance Attendance is one of the cost serious infractions creating disciplinary problem for managers. Research findings10 report that attendance problem is much more serious and widespread than other problems such as carelessness, negligence, violation of established rules and procedures. Now, the question arises is why attendance is such a serious problem. While there is no simple and clear answer to it, one might postulate more than one reason. These are listed below: 1.

Failure in aligning workers’ goals with those of the organisation.

2.

Change in most of the employees’ attitude toward their employment considering the job/ work involving no more central life interest.

3.

Change in the backgrounds of the new entrants like rapid movement of minorities and women into the job market.

4.

Employees’ preference to consume earned leave, regardless of whether they really need or not.

5.

Difficulty involved in firing employees because of union protection to them.

On-the-Job Behaviours These refer to employees’ behaviours evinced while on the job. This blanket level may include the actions of the employees such as carelessness, fighting, gambling, failure to use safety devices, insubordination, refusal to obey orders, horseplay, etc.. In contrast to ambiguous infractions such as taking unnecessary leaves, most of above actions of employees reflect direct infractions and violation of the organisational rules and established procedures. Two of the most widely discussed disciplinary problems in organisations today are abuse of alcohol and drugs. Arriving at work drunk or consuming alcoholic drinks on the job is a problem most of the organisations have been experiencing for long time of course, many organisations now consider alcoholism a curable disease and, therefore, have started programmes to treat alcoholic employees. But, the use of drugs on the job is a newer problem hovering in organisations. Evidences indicate

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that the use of drugs among the employees is on increase. With more and more employees experimenting with drugs off the job, the carryover of drug abuse onto the job is expectedly on increase.

Dishonesty It will not be less than correct to state that if honesty is the best policy, dishonesty is the worst curse. Dishonesty of employees has traditionally been one of the more widespread severe disciplinary actions found in organisations. Stealing, theft, information falsification, etc. have been the common examples of employee dishonesty. An employee who tells a lie or steals some thing even once is no more trusted. Such instances often happen in our day-to-day life also. For example, evidence of such practice appears in the media(usually local newspapers) on an almost regular basis. Given the impending implications of employees dishonesty for on organisation, it needs to be severely punished. The public’s treatment of Richard Nixon attests to this statement. Similarly, when it was confirmed that a Professor of a major Indian University had plagiarized nearly two-third part of his doctoral thesis, his admirable performance as an effective teacher was dwarfed by the fact that he had broken a cardinal rule within the academic community. Under pressure from the teaching community of the University, the Senate of the University and the media, the University authority fired the Professor from the job. According to one study11, as many as 90 percent of the surveyed organisations discharged an employee for the theft, even it was only a first offense. Similarly, 88 percent discharged those employees who were found to have falsified information on their employment application.

Outside Activities These activities or infractions of the employees take place outside of their jobs. These are, therefore, also called ‘off-the –job activities’. Examples of such activities include unauthorised strike, wage garnishing, outside criminal activities, working for a competing organisation, bad-mouthing of own organisation, questioning the values of own organisation, etc.. In nutshell, these activities may involve two types of implications either these may affect on-the-job performance of employees or may impair the organisation’s image or goodwill. Hence, there is a need for disciplinary actions against such off-the-job activities of the employees. Besides above activities, there are some activities of management also, as considered by the employees, that create indiscipline in an organisation. Included in these are: 1.

Weak, flexible, incompetent and distrustful leadership. Henry Fayol opines, “discipline is what the leaders make it”.

2.

Defective supervision due to absence of good and knowledgeable supervisors.

3.

The “divide and rule” policy practised by the management destroying team spirit among the employees.

4.

Bad and unhealthy working conditions.

5.

Discrimation based on caste, colour, creed, sex, language, place etc. in matters like selection, promotion, penalty, etc..

6.

Improper co-ordination, delegation of authority, fixing of responsibility, etc.

7.

Defective communication system.

8.

Lack of timely redressal of employee grievances.

It seems pertinent to quote here the apt observation in the context of discipline made by the American Management Association (AMA-Special Research Report No.3)12: “Until human nature attains greater perfection, the fullest measure of freedom of action can be realised only within the

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framework of an expressed discipline. In the social situation, this takes the form of laws, in industry, it is manifested in standards. Firmness in securing conformity in both instances is wholly consistent with the democratic approach. But the requirements must be fair, the reasons behind them must be clear and, in so far as possible, they must be arrived at co-operatively. This is the road to selfdiscipline, this is the aim of wise leadership”.

22.5 GUIDELINES OFA DISCIPLINARY ACTION Disciplinary action especially punitive one produces pains and displeasures for the accused employees. Hence, meticulous care is called for while taking disciplinary action. Over time, the behavioural scientists have developed some guidelines to indicate how discipline be administered. In this section, we will briefly describle these guidelines. 1. Disciplinary action should be corrective rather than punitive.The objective of disciplinary action is not to deal out punishment but to correct an employee’s undesirable behaviour . Therefore, disciplinary action must not be thought of a punitive action. 2. Disciplinary action should be progressive. It is generally desirable for descipline to be progressive. So to say,disciplinary actions must follow a series of sequential actions or steps with increasing severity of punishment in every next step. For example, progressive descipline should begin with an oral warning and proceed through a written warning, suspension, loss of seniority, loss of increment, and, only in most serious cases, dismissal or some such harsh punishment. 3. Disciplinary action should follow the “Hot Stove” rule.One effective guideline to administer discipline is to follow what is popularly known as the hot stove rule 13. This rule suggests that applying discipline is much like touching a hot stove. 

The burn is immediate. When one touches hot-stove, the burn is instantaneous, leaving no question of cause and effect.



The person had an ample warning. The person knows what would happen if it is touched.



The burn is consistent. Every time one touches hot stove, he/she gets the same response, i.e. one gets burned.



The burn is impersonal. Regardless of who one is, if he/she touches a hot stove, the stove will burn anyone.

Thus, the comparison between touching a hot-stove and administering discipline is apparent. Therefore, the administration of discipline should also be immediate, with warning, consistent, and impersonal. These guidelines are consistent with the positive approach to discipline. Following is the list of some important disciplinary considerations to be kept in the mind before initiating disciplinary action: 1. In very specifice terms, what is the offense charged?  Is management sure it fully understands the charge against the employee? 

Was the employee really terminated for insubordination, or did the employee merely refuse a request by management? 2. Did the employee know he or she was doing something wrong?  What rule or provision was violated? 

How would the employee know of the existence of the rule?

 Was the employee warned of the consequence? 3.

Is the employee guilty?  What are the sources of facts?

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 Is there direct or only indirect evidence of guilt?  Has anyone talked to the employee to hear his or her side of the situation? 4. Are there extenuating circumstances?  Were conflicting orders given bydifferent supervisors?  Does anybodyl have reason to want to “get” this employee?  Was the employee provoked by a manager or another employee? 5. Has the rule been uniformly enforced?  Have all managers applied this rule consistently?  What punishment have previous offenders received?  Were any other employees involved in this offense? 6. Is the offense related to the workplace?  Is there evidence that the offense hurt the organization?  Is management making a moral judgement or a business judgment? 7. What is the employee’s past work record?  How many years of service has the employee given the organization?  How many years or months has the employee held the present job?  What is the employer’s personnel record as a whole, especially his or her disciplinary record?

22.6 PROCEDURE OFDISCIPLINARY 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. 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

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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. 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 organisational objectives. Obviously, these standards need to be revised alongwith change in organisational goals and objectives. Many organisations provide their employees with written principles of behaviour in the form of ‘Employee Manuals.’ 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 behaviour should be communicated through employee handbooks/manuals, orientation programmes, rules and regulations distributed in writing to employees or posted on bulletin boards. 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 some what 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 behaviour 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 behaviour. 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 lebelled against him. Such a notice is generally known as a ‘show cause notice’. In the notice, each charge needs to be clearly specified. Also, the accused employee should be given an opportunity to explain his/her position. 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 lebelled 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.

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 characterised 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.

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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.

22.7 DISCIPLINARY ACTIONS: PENALTIES AND PUNISHMENTS Discipline particularly positive discipline follows a typical sequence from mild to harsh: These vary from oral warning, written notice, suspension, demotion, pay cut and dismissal in that order. These six steps are the topics for discussion in this section.

Oral Warning The mildest form of discipline is the oral warning. This is usually awarded on minor offences like late coming, absenteeism, etc. which are committed for the first time. A common practice followed in this regard is to make a temporary record of this warning and place the same in the employee’s file. Once the employee has shown better performance and willingness to adhere to rules and regulations, the record of the oral reprimand is removed from his file.

Written Notice The second step in order of severity in progressive discipline is the written notice or warning. This is awarded for repeated minor offences or some major lapses. The procedure involved in writing of the warning is the same as the oral warning. The only difference is that the discussion concludes with the employee being told that a written warning will be issued. Then, the manager writes up the warning. A copy of the warning is sent to the personnel department. Like oral warning, organisations may allow employees to purge their personnel file of these warnings after some period of time, i.e. usually two years of proper work behaviour.

Suspension Suspension also called lay off, is the next logical step taken in progressive discipline. Suspension as punishment is awarded for some major/serious offences. Suspension may be for a certain period ranging from one day to several weeks or months. During the suspension period, the employee is paid a reduced pay known as ‘subsistence allowance’. Full pay can be given if the suspension is withdrawn. However, suspension can have some implications for both the organisation and the employee. For organisation, suspension means loss of the employee for the lay off period. It is particularly so if the suspended employee is a skilled one. From the employee’s standpoint, suspension can result in a more negative frame of mind than before the layoff. Nonetheless, one reason why management considers suspending employee is to given an awakening to the problem employee.

Demotion For the serious offences where suspension has not been effective and management wants to avoid dismissal, demotion is considered as an alternative punishment. It is noteworthy that, in contrast to the previous disciplinary actions, demotion is not temporary, but a constant one. It has serious implications for employee morale and motivation.

Pay Cut Another alternative, also rarely applied in practice, is cutting the problem employee’s pay. This is awarded mostly when offence led to damage or loss of property. A part of the loss is recovered from such pay cut of the employee.

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Dismissal/Discharge Dismissal is the ultimate disciplinary action taken against problem employee. This punishment is awarded only for the most serious offences involving integrity. Both dismissal and discharge lead to employee separation from the organisation. However, the severity of punishment is more in dismissal than discharge. In case of dismissal, the employee is deprived of service benefits such as gratuity, provident fund, pension and other perquisites and even disqualified for securing job in other organisations. As regards discharge, it is termination of employee’s job with notice and with service benefits earned so far. Both dismissal and discharge involve implications for employee such as emotional trauma, difficulty in securing job elsewhere, etc.. This may compel the dismissed employee to take legal action against the decision. Hence, a dismissal or discharge as disciplinary action needs to be given a long and hard consideration. It is against this backdrop, some statutory provisions have been made to handle with discipline. In the next section, we will briefly describe these statutory provisions concerning discipline.

22.8 STATUTORY PROVISIONS CONCERNING DISCIPLINE Recognizing the implications of disciplinary actions in the form of penalties and punishments, the Indian law contains certain provisions concerning discipline. These are discussed as follows:

Industrial Employment (Standing Orders) Act, 1946 As per the provisions of this Act, it is mandatory for certain industrial undertaking to define precisely the employment conditions including the rules and the regulations of discipline. Also to clearly describe the punishment and penalties awarded to employees creating indiscipline and the same make known to the employees in the organisation. In addition, the standing orders also describe what acts of employees are treated as misconduct and what are the punishments awarded for different misconducts. Following are some examples of employee misconduct: 

Willful insubordination or disobedience.



Refusal to work on job assigned to him.



Theft or fraud in connection with the property of the organisation.



Sabotage of safety devices.



Any illegal gratification.



Habitual late coming



Absence from work without permission.



Gross negligence of duty.

The Industrial Disputes Act, 1947 Under the provisions of the Act, a Labour Court or Labour Tribunal is to be set up to deal with industrial disputes. In case of ‘protected workmen’, prior permission for discharge or dismissal is sought. Besides, the Act also makes it obligatory for an employer employing more than fifty workers during the preceding one year, to set up a ‘Grievance Settlement Authority.’ The responsibility of this authority is to settle industrial disputes of an individual worker. The Payment of Wages Act, 1936. Section 8 of this Act places restrictions on the imposition of fines on an accused employee. The rules or restrictions concerning to fines are to :

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

Impose fines for approved list of misconducts and commissions.



Exhibit the list at or near the main entrance of the factory.



Give employee an opportunity of showing cause before imposing fine.



Limit the fine three percent of the rupee wages payable to the accused employee during the period.



Exempt workers below the age of 15 years from fine.



Record fine realized so in a register.

Before we leave this chapter, one last mention about ‘code of Discipline’ follows in the next and last section.

22.9 CODE OF DISCIPLINE The Indian Labour Conference at its 15th session held at New Delhi in July 1957, after a long and hard discussion (formulated) a ‘Code of Discipline’ for the purpose of maintaining discipline in the Indian industries-both private and public sector industries. The principles laid down for governing discipline in the industries are classified into the three broad categories. These are : I.

Mutual Agreement between Management and Union 

There should be no strike or lock-out without due notice.



There should not be unilateral action on either side.



There should be no recourse to go slowdown.



Industrial disputes, if any , should be settled utilizing existing machinery.



Neither party should be indulged in the acts of violence, coercion or intimidation.



Both parties should agree to set up a grievance procedure and should also abide by it.



Both managers and employees should be properly educated about their duties, responsibilities and obligations to the organisation.

II. Agreement on the part of Management 

Not to increase workload unless agreed upon or settled otherwise.



Not to encourage unfair labour practices such as discrimination, coercion, victimisation, etc.



Take prompt actions to implement awards and agreements.



Take immediate and appropriate disciplinary action against officers found guilty of precipitating indiscipline among workers in the organisation.



Recognize trade union in accordance with the criteria evolved at the 16th session of the Indian Labour Conference held in May 1958.

III. Agreement on the Part of Trade Unions 

Not to encourage or support any form of physical duress.



Not to permit violent demonstrations and rowdyism.



Not to encourage unfair labour practices such as negligence of duty, insubordination, goslow, carelessness, etc..



Take immediate action to implement awards, agreements, settlements and decisions.



Display at a prominent place the ‘Code of Discipline’ in the local language for the knowledge of workers.



Disapprove the actions of the members found violating the ‘Code of Discipline’.

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22.10 SUMMARY This summary is organised by the learning objectives given on page…252: 1.

Discipline is a condition in the organisation when employees conduct themselves in accordance with the organisation’s rules and standards of acceptable behaviour. Discipline is characterised by self-discipline, negative and punitive approach.

2.

The main objectives of discipline are to motivate employees to comply with the organisation’s performance standards, maintain respect and trust between the supervisor and employee and improve employee’s performance.

3.

Discipline is classified into positive and negative types.

4.

The most frequent causes of discipline can be classified as related to attendance, on the job behaviour, dishonesty, and outside activities.

5.

The general guidelines in administering discipline include making disciplinary action corrective, progressive and following the “hot-stove” rule, i.e., discipline should be immediate, provide ample warning, be consistent, and be impersonal.

6.

Disciplinary action follows a procedure comprising a number of steps such as location of responsibility; communication of policy, rules and regulations; framing charges and intimating the same to the accused employee, consideration of his/her explanation; awarding punishment and follow-up.

7.

Disciplinary actions taken against the accused employee include oral warning, written notice, suspension, demotion, pay cut and discharge/dismissal in that order.

KEY TERMS Attribution

Hot-Stove Rule

Authority

Industrial Democracy

Delegation

Morale

Demotion

Objectives

Discipline

Positive Discipline

Dismissal

Punitive Discipline

Grievance

Suspension

REVIEW AND DISCUSSION QUESTIONS 1. Define the term “discipline” Discuss its salient features and chief objectives. 2. Explain with examples the types of discipline noticed in the Indian industries. 3. What are the causes of indiscipline in the Indian industries. Suggest how to maintain discipline. 4. Delineate the procedure involved in a disciplinary action. 5. Discuss the various penalties and punishments awarded to the accused employee in order to maintain discipline in an organisation. 6. Write an essay on “Code of Discipline” stating clearly its objectives and terms of agreement. Does it serve, in your opinion, the purpose it intended for? 7. What are the statutory provisions laid down concerning discipline in the Indian industries? 8. Write short notes on: (a) Progressive Discipline

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(b) Hot-Stove Rule (c) On-the–Job Causes of Indiscipline (d) Disciplinary Punishment

REFERENCES 1. Richard D. Calhoon: Managing the Personnel, p. 314. 2. William R Spreigel and Edwards Schultz: Industrial Management, 1957. 3. Ordway Tead: “The New Descipline” Human Nature and Management, 1933. 4. Bess Ritter: What to do about the problem worker, Supervision, Vol.36, No.9, September 1974, pp. 23-24. 5. D. Cameron: The When, Why, and How Discipline, Personnel Journal, Vol.63, July 1984, pp. 37-39. 6. Henry Fayol: General and Industrial Management, Pitman Publishing Company, New York, 1951, p. 23. 7. William R. Spriegel: Principles of Industrial Organisation. 8. Leon C. Megginson: Personnel and Human Resource Administration , Richard D.Irwin, Homewood, 1977, pp. 400-470. 9. C.B. Mamoria: Personnel Management, Himalaya Publishing House, New Delhi, 1996, p. 853. 10. Employee Conduct and Discipline , Personnel Policies Forum, Survey No. 102, Bureau of National Affairs, Washington, D.C., August 1973. 11. Ibid. 12. Quoted by C.B.Mamoria: op. cit., 1996, p. 860. 13. The originator of the popular ‘hot-stove’ rule remains a mystry, though many ascribe this simple but meaningful axiom to Douglas McGregor, author of the classic management book, Human Side of Enterprise, McGraw Hill New York. 1960.

23 EMPLOYEE GRIEVANCES Learning Objectives After studying this chapter, you should be able to : 1.

Define grievance

2.

Identify the factors that cause grievance.

3.

Discuss the various steps involved in a grievance procedure.

4.

Delineate the essentials of a model grievance procedure.

5.

List the essentials of an effective grievance procedure.

In a sense, discipline and grievance are the two sides of the same coin. When employees behave in an undesirable manner, it constitutes, what the employers or managers consider it, indiscipline. On the other side, when employees feel violation of the employment contract by the employers or managers, it constitutes the employee grievance. In order to ensure the smooth functioning of organisation both indiscipline and grievance need to be settled. While the employee discipline has already been discussed, in detail, in the preceding chapter 22, a detailed discussion on employee grievances becomes the subject matter of the present chapter 23. The specific aspects addressed to are: What is grievance? What are its causes? or Where does grievance come from ? and How is grievance handled? These are discussed in seriatim.

23.1 MEANING OF GRIEVANCE What is grievance? In a broader persepective, any discontent or dissatisfaction, real or imaginary, experienced, by an empolyee about his or her employment constitutes a grievance. In their working lives, employees occassionally become aggrieved at the treatment meted out to them by the supervisors or the management on certain service conditions, managerial decisions, practices, etc.. Let us consider some important definitions of grievance given by some behavioural scientists. Dale S. Beach1 has defined grievance as “any dissatisfaction or feeling of injustice in connection with one’s employment situation that is brought to the notice of the management”. According to J.M. Jucius2, . “ A grievance is any discontent or dissatisfaction whether expressed or not, whether valid or not, arising out of anything connected with the company which an employee thinks, believes or even feels to be unfair, unjust or inequitable”. In the words of Edward Flippo3, “It is a type of discontent which must always be expressed. A grievance is usually more formal in character than a complaint. It can be valid or ridiculous and must grow out of something connected with company operations or policy. It must involve an interpretation or application of the provisions of the labour contract”. The Model Grievance Procedure4 has provided the following definition of grievance: “ Complaints affecting one or more individual workers in respect of their wage payments, overtime, leave, transfer, promotions, seniority, work assignment and discharge would constitute grievance. Where the points at dispute are of general applicability or considerable magnitude, they will fall outside the scope of this procedure”. 265

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Now, grievance can be defined as a complaint expressed verbally or in writing where an employee feels injustice has been done to him by the management. Usually, a complaint based on interpretation or application of the provisions of negotiated contract between the union and the management constitutes a grievance. On an analysis of above definitions, the following features of grievance can be noted: 1.

Grievance reflects dissatisfaction or discontent experienced by an employee.

2.

It is a feeling of injustice to one’s job by the employer or the management.

3.

It may be unvoiced / implied or expressed by an employee.

4.

It may be written or verbal.

5.

It may be real or imaginary, valid and legitimate.

6.

Grievance arises out of something related to employee’s employment contract.

7.

Grievance, if not redressed in time, gives rise to discontent, frustration, poor morale, and ultimately to low productivity.

Here, a point to be noted is that where the complaint is of a wider or general nature, or of general applicability, then it will be outside the purview of the grievance machinery. Chandra5 listed some policy issues related to hour of work, incentive, wage, daily allowance and bonus which are beyond the scope of the grievance procedure. These constitute collective grievances. The collective grievances come under the purview of collective bargaining which is discussed, in detail in the next chapter 27.

23.2 CAUSES OR SOURCES OFGRIEVANCES As it can be seen from the definitions of grievance, it arises out of something that causes dissatisfaction or discontent to one’s employment. As such, there cannot be a precise set of the causes of grievances applicable to all organisations. In fact, the causes of grievances are likely to differ from organisation to organisation. Chandra6 in his study found the following areas as the causes of employee grievances. 

Promotions



Amenities



Continuity of service



Compensation



Disciplinary action



Fines



Increments



Leave



Medical benefits



Nature of job



Payment



Recovery of dues



Safety appliances



Superannuation



Supersession



Transfer

Employee Grievances



Victimization



Condition of work

267

However, whatever be the causes of grievances, they tend to fall under the following categories: 1.

Concerning Working Conditions: (i) Unsafe and unpleasant working conditions. (ii) Inadequate toilet facilities, dirty toilets, etc. (iii) Non- availability of necessary raw material, tools and machines. (iv) Misfit between worker’s ability and job

2.

Concerning Management Policy abd Practices : (i) Wage rate and its payment (ii) Incentive (iii) Seniority (iv) Promotion (v) Transfer (vi) Fines, punishments and penalties.

3.

Concerning Violation of Rules and Regulations : (i) Organisational rules and regulations (ii) Civic laws (iii) Past Practices (iv) Procedure of collective bargaining

4.

Concerning Personality Traits: (i) Fault-finding attitude (ii) Over-ambitious (iii) Mental tension (iv) Negative approach to life (v) Excessive ego feelings

The two Amercian experts7 have classified the causes of grievances into the following three categories: 1.

Management Policy and Practices

2.

Trade Union Practices

3.

Personality Traits

A brief description of these follows:

Management Policy and Practices At times, the particular style of management also gives rise to grievences. The autocratic or bureaucratic style of management, for example, is hardly liked by the educated workers. They favour the participative style of management. . So to say, the management styles need to be adapted in accordance to the composition of workforce forming a specific situational context. Closely related to management styles is management practices also leading to grievances. It is often found that if the implementation falls short of the intended policy, it also gives rise to grievances8.

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Added to this may be the managerial ambiguities in personnel policies which may also lead to employee grievances. Matters such as employee compensation, seniority, overtime, transfer, etc., are the common instances of ambiguities that lead to employee grievances. Much also depends on the supervisiory practices experimented in an organisation. For example, if the supervisiory style is inconsistent in the implementation of personnel policies, biased in application of organisational rules, regulations and decisions, indifferent in attitude toward employees union, etc., all these boil down to build pressure on employees. Such pressure ultimately results in employee grievances.

Union Practices It is found that where there are multiple of unions with different political affiliation work in an organisation, they remain engaged in constant jostling and lobbying the workers for gaining strengths in numerical terms. In practice, workers join a union which, in their opinion, has concern for their welfare. It is with this consideration, the unions take grievance machinery as an important vehicle to show their real concern for workers welfare. Expectedly, the unions are then found sometimes inclined to encourage workers for filing of grievances with an objective to demonstrate the advantage of joining the particular union. The workers are, therefore, found tempted to express their grievances, may not be real grievances.

Personality Traits Sometimes, an individual worker’s personality traits also have a bearing on the emergence of grievances. Traits such as over ambition, excessive self-esteem, grumbling and fault finding attitude, mental tension, etc., are illustrations of personality traits leading to employee grievances. Besides, the atmosphere at a time prevalent may also contribute to grievances. For example, when an antagonistic atmosphere prevails in and around, it may result in even a trivial matter being blown out of proportion. But the same in a cooperative and congenial atmosphere would not even have been noticed at all.

23.3 GRIEVANCE PROCEDURE Grievances are but natural in organisations. However,like disciplinary problems, grievances also benefit none. Hence, there is a need for handling or redressing grievances. For this, most large organisations in India have, therefore, evolved a formal grievance procedure which enables an organisation to handle grievances satisfactorily. As a matter of fact, there are several substantive reasons for having a formal grievance procedure in an organisation. The important ones are listed as follows: (i) It provides an established and known method of processing grievances and keeps this open. (ii) It brings grievance to the knowledge of management so that it can know and understand them to take necessary action for their settlement. (iii) It gives an assurance to the employee that there is a mechanism available to consider his or her grievance in a dispassionate and detached manner. (iv) Venting his grievance and being heard gives the employee a feeling of being cared for. This not only gets it off his chest”, but also helps him improve his morale and productivity. (v) Involving several levels of organisation in the grievance procedure provides help on two dimensions. Firstly, the supervisior who is the first level in the grievance process cannot be by-passed by the worker. Secondly, involvement of several hierarchical levels in the grievance machinery releases exclusive reliance on the supervisior who can’t jeopardize the interest of the employee. The supervisior knows his is a placetory role.

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(vi) Involvement of various levels makes them know the kinds of issues that concern workers and managers. (vii) Lastly, it checks the managers from taking arbitrary and biased actions against the workers as they know that their actions are subject to challenge. According to Michael Armstrong9, a formal grievance procedure provides the following benefits: (i) A channel for an aggrieved employee to express and present his grievance. (ii) An assurance for dispassionate handling of one’s grievance. (iii) An assurance about the availability of some machinery for prompt handling of grievance. (iv) A means by which an aggrieved employee can release his feelings of discontent or dissatisfaction with his job. As stated earlier, grievance which indicates discontent and dissatisfaction among employees adversely affects their productivity10. In other words, by not initiating timely action to deal with grievance, the organisation tends to lose the productive efforts of the disconted employee. It is indeed unrealistic to assume that an aggrieved or dissatisfied employee will put his or her best efforts on the job. The redressal of the employees grievances, therefore, assumes importance. The procedure the management applies to deal with the employees grievances can be stated as follows: 1. Timely Action: The first and foremost requisite in grievance handling is to settle them immediately as and when they arise. Or say, grievances need to be nipped in the bud. Sooner the grievance is settled, lesser will be its effects on employees’ performance. This requires the first line supervisiors be trained in recognizing and handling a grievance properly and promptly. 2. Accepting the Grievance:The supervisor should try to recognize and accept the employee grievance as and when it is expressed. It must be noted that acceptance does not necessarily mean agreeing with the grievance, it simply shows the willingness of the supervisor to look into the complaint objectively and dispassionately to deal with the grievance. Evidences suggest that more the supervisor shows his on her concern for the employees, lesser is the number of grievances raised by the employees. 3. Identifying the Problem: As stated earlier, the grievance expressed by the employee may be at times simply emotionally, overtones, imaginary or vague. The supervisor, therefore, needs to identify or diagnose the problem stated by the employee. 4. Collecting the Facts: Once the problem is identified as a real problem, the supervisior should, then, collect all the relevant facts and proofs relating to the grievance. The facts so collected need to be separated from the opinions and feeling to avoid distortions the facts. It is useful to maintain the facts for future uses as and when these are required. 5. Analysing the cause of the Grievance:Having collected all the facts and figures relating to the grievance, the next step involved in the grievance procedure is to establish and analyse the cause that led to grievance. The analysis of the cause will involve studying various aspects of the grievance such as the employees past history, frequency of the occurance, management practices, union practices, etc.. Identification of the cause of the grievance helps the management take corrective measures to settle the grievance and also to prevent its recurrence. 6. Taking Decision: In order to take the best decision to handle the grievance, alternative courses of actions are worked out. These are, then, evaluated in view of their consequences on the aggrieved employee, the union and the management. Finally, a decision is taken which is best suited to the given situation in the organisation. Such decision should serve as a precedent both within the department and the organisation. 7. Implementing the Decision: The decision whatsoever taken must be immediately communicated to the employee and also implemented by the competent authority. McGregor’s “ Hot-

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stove Rule’’11 should be strictly followed while implementing the decision. The decision, thus, emplemented should also be reviewed to know whether the grievance has been satisfactorily resolved or not. In case, it is not resolved, the supervisor once again needs to go back to the whole procedure step by step to find out an appropriate decision or solution to resolve the grievance. However, if the grievance is not resolved at the internal level, the grievance is, then, referred to an arbitrator who is acceptable to the employee as well as the management. The arbitrator follows a quasi- judicial process where both the parties present evidence. Based on the evidences so produced, the matter is cross-examined in thread-bare. The arbitrator then thinks, applies his mind and arrives at a decision. The decision taken by arbitrator is final and binding on both the parties. The Indian Institute of Personnel Management, Kolkata12 has listed the following five steps contained in a grievance procedure: 1.

The employee should raise his or her grievance with the immediate supervisior.

2.

If the decision taken by the supervisor is not acceptable to the aggrieved employee, he or she should be made known to whom next in the echelon of management, he or she should refer the grievance.

3.

The grievance should be promptly and dispassionately.

4.

Only the grievance raised by the employee having understood the instructions issued to him or her the employer will register the protest and set the grievance handling procedure in motion.

5.

If the aggrieved employee still remains dissatisfied, there will be no direct action by the either party which might prejudice the case or raise doubts while the grievance is being investigated.

Let us consider a unit level works grievance procedure as followed in the Tata Iron and Steel Company (TISCO). The procedure consists of the following stages13. Stage 1. The worker fills in a grievance form and submits the same to the shift incharge for information and consideration. Stage 2. In case, he is not satisfied with the decision, he goes to the departmental head for the settlement of his grievance. Stage 3. If the aggrieved employee is still dissatisfied, he forwards it to the appropriate chairman of the zonal works committee (ZWC). Each zonal works committee consists of five management and five union representatives. Their decision is final and binding on both the parties. The individual grievances considered by the zonal committee pertain to promotion, suspension, discharge and dismissal. Stage 4. If the zonal committee either does not reach to a unanimous decision or the decision is not accepted by the employee, the grievances is, then, forwarded to the central works committee. This committee consists of representatives of top management and union officials. Here also, the unanimity of principle operators and the decision taken by the committee is binding on both the parties. Stage 5. If this committee also does not reach to an unanimous decision, the matter is reffered to the Chairman of the company. His or her decision is final and is binding on both the parties. The stage at which the grievance is settled indicates the climate or the spirit that prevails in the organisation. Obviously, lower the level of settlement, the quicker the redressal of a grievance. The concerned officer, be he supervisior or manager, remains in a position to “ give and take” at initial lower stages such as stage 1. Gradually, he or she comes under the glare of publicity, his or her position becomes harder at the subsequent stages.

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Viewed from an aggrieved employee’s point, the delay in the settlement of grievance would intensify his or her anxiety and dissatisfaction. Which, in turn, would affect his or her morale and productivity. The colleagues would also get affected. For the organisation, the delay in settlement is a loss of goodwill and camaraderie that might have been built up over the period14.

23.4 MODEL GRIEVANCE PROCEDURE The National Commission on Labour has suggested a model grievance procedure which would ensure the speedy settlement of grievance. The model comprises of the five steps as outlined below: 1. The aggrieved employee shall convey his or her grievance verbally to the officer designated by the management to deal with grievance. The officer will have to reply to the complaints within forty-eight hours of its presentation to him or her. 2. If the grievant is not satisfied with the answer or does not receive the answer within 48 hours, he or she shall, then, present the grievance to the departmental head nominated for this purpose. The head must give his or her reply within three days of the presentation of the grievance. 3. If the aggrieved employee is still not satisfied with the decision of the departmental head or does not receive within the stipulated period, the employee can approach to the Grievance Committee for the settlement of his or her grievance. The Grievance Committee has to give its recommendations in seven days and report the same to the management. The management must communicate the decision to the grievant within three days. 4. If still employee is not satisfied either with the decision made by the Grievance Committee or does not receive decision from the committee, he or she can make appeal to the management for revision of the decision taken. The management can take a week period for appeal to be considered and the revised decision to inform to the grievant. 5. If the employee is still not satisfied with the management’s decision, the grievance is referred to a voluntary arbitration within a week after decision taken by the management at stage 4. The decision of the arbitrator is final and binding on both the parties, i.e, the management and the union. This Model Grievance Procedure is delineated in the chart 23.1.

23.5 LEGISLATIVE ASPECTS OF THE GRIEVANCE PROCEDURE IN INDIA During the pre-Independence period, not much attention was given to the settlement of the employees’ grievances. It was later only some legislative attention was paid to the employee grievances. Following are the legislative enactments that deal with the redressal of the employees grievances: 1. The Industrial Employment (Standing Orders) Act, 1946.As per the clause 15 of the model standing orders in schedule I of this Act, in every establishment with 100 or more workers, all complaints arising out of employment shall be submitted to the officer designated in this behalf, with the right of appeal to the employer. 2. The Factories Act, 1948.Under the Factories Act of 1948, there is a provision for the appointment of Labour Welfare Officers in the factories employing 500 or more workers. The rules of the Act enjoin upon these officers to ensure the settlement of the employee grievance, However, these provisions could not become helpful inter alia because of the dual role entrusted to them to play. 3. The Industrial Disputes Act, 1947.This act provides for the following provisions in order in regard to grievance settlement :

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Chart 23.1 Grievant STAGE-I Grievant-conveys Verbally

Management Officer designated by Management to deal with grievance at this initial stage. To reply in 48 hours.

Not satisfied, go to

Head of department (meet at preallocated time daily for grivance handling) Reply in 3 days.

STAGE-II Grievant+ departmental representatives

Decision unsatisfactory

Grievance committee to decide in 7 days and report to the manager,. If The decision is unanimous, then it should be implemented by the management. Time limit for manage-ment to accept and communicate its decision in 3 days.

STAGE-III Grievant+ departmental representatives

Decision not in time or not satisfactory

Appeal to management for revision A week for appeal to be considered.

STAGE-IV Grievant+departmental representatives

No agreement

STAGE-V Grievant- management may refer to union Voluntary arbitration within a week After decision from STAGE IV

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1.

A Grievance settlement Authority will be set up in every industrial establishment wherein 50 or more workers are ordinarily employed.

2.

As and when an industrial dispute will arise in such establishments, the worker may refer his or her dispute to the Grievance settlement Authority for its settlement.

3.

The Grievance Settlement Authority will process the matter within a specified period prescribed for this purpose.

4.

A grievance can be referred to Boards, Courts or Tribunals only after it is already referred to the Grievance Settlement Authority or the decision taken by the authority is not acceptable to the either of the parties.

23.6 ESSENTIALS OFA SOUND GRIEVANCE PROCEDURE The characteristics an effective or sound grievance procedure should contain are as follows. 1. Legal Sanctity: The grievance procedure should be legally allright. In other words, the procedure should be in close conformity with the existing law of the land. To the extent possible, the legislative machinery should be incorporated in the grievance procedure. 2. Acceptability: The procedure to be acceptable to all workers, managers and union should contain the features like a sense of fair paly, justice to workers and reasonable exercise of authority to managers. 3. Timely: The procedure should aim at timely redressal of grievances at the lowest level possible. Added to it, there should be a time limit prescribed and rigidly followed at each level of grievance procedure. 4. Simple: The procedure should be simple to understand and implement. Minimization of steps to be involved in the procedure makes it simple. 5. Training: To make the grievances procedure effective, the supervisors and other officers should be imparted training in grievance handling. 6. Follow up: The decision taken for settling grievance should be reviewed at periodical intervals so that corrective measures can be taken to make the grievance procedure more effective.

23.7 SUMMARY This summary is organised by the learning objectives given on page...265: 1.

Grievance means discontent or dissatisfaction in connection with an employee’s employment.

2.

Working conditions, management policy and practices, union practices and personality traits cause grievances.

3.

A typical grievance procedure consists of six steps, namely, timely action, acceptance of the grievance, identification of the problem, collection of facts, analysis of the cause, taking decision and implementation and follow up of the decision.

4.

An effective grievance procedure contains characteristics such as legal sanctity, acceptability, timely, simple, training and follow up.

KEY TERMS Attribution

Grievance

Collective Bargaining

Grievance Procedure

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REVIEW AND DISCUSSION QUESTIONS 1. Define grievance. Identify and analyse the various causes of grievances. 2. Appreciate the need for grievance redressal. How is a grievance redressed? Outline the grievance procedure (MBA, Gouhati University, May 2001) 3. What statutory measures are available in India for redressal of employees grievances? Are these sufficient? If not, whar are your suggestion? 4. “An effective grievance procedure must contain some essential characteristics” Explain. 5. Write notes on: (a) Sources of Grievances (b) Model Grievance Procedure (c) Essentials of a Sound Grievance Procedure

REFERENCES 1. Dale S. Beach : Personnel, Macmillan Publishing Company, New York, 1965, p. 583. 2. Michael J. Jucious: Personnel Management, Richard D. Irwin, Ilinois, 1917, p.108 3. Edwin B. Flippo: Personnel Management, Mc Graw Hill, Kogakusha Tokyo, 1990, p. 319 4. Government of India: Report on the National Commission of Labour , Ministry of Labour, Employment and Rehabilitation, New Delhi, 1969. 5. S. Chandra : Grievance Procedure: A Survey of Practices in Industries in India,Administrative Staff College of India Ahemedabad, 1968. 6. Ibid, 1968 7. J.J. Cruden and A.W. Sherman: Personnel Management, SouthWestern Publishing Company, Cincinpati, Ohio, 1963, pp. 433-435. 8. Arun Monappa and Mirza S.Saiyadain: Personnel Management, Tata McGraw Hill Publishing Company Limited, New Delhi. 1997, pp. 299-300 9. Michael Armstrong: A Handbook of Human Resource Management , Aditya Books Private Limited, New Delhi, 1990, p. 222. 10. C. S. Venkata Ratnam And B.K. Srivastava: Personnel Management and Human Resources, Tata McGraw-Hill Publishing Company Ltd., New Delhi, 1996, pp. 256-257 11. Douglas McGregor : op. cit. 12. Personnel Management in India, Indian Institute of Personnel Management,Kolkata, 1973, pp. 188-189. 13. Arun Monappa and Mirza S. Saiyadain: op. cit, 1997, p. 303. 14. Ibid, p. 305.

24 INDUSTRIAL RELATIONS (IR) Learning Objectives After studying this chapter, you should be able to: 1. Define IR and delineate its scope. 2. List the various objectives of IR. 3. Appreciate the importance of IR. 4. Discuss the various approaches to IR. 5. Identify the various parties to IR. 6. Discuss the various causes responsible for poor IR. 7. Suggest measures to develop sound IR 8. Give an overview of IR in India 9. Bring out the effects of New Economy Policy (NEP) on IR 10. Reflect on the impact of the ILO on IR. 11. Discuss the main provisions contained in labour legislations relating to IR. As people in their normal life have understanding about each other called ‘relation’, so do have employees and management in an organisation. The understanding between employees and management in an industrial organisation is commonly called “industrial relations (IR). Some people term the same as “men-management relationship” “employee-employer relation.” That good industrial relations help retain employees on the one hand, and run the organisation successfully, on the other, is well confirmed by Reliance’s sprawling Hazira Petrochemicals Complex, for example. It was mainly its better industrial relations that resulted in high productivity for the organisation and better wages for employees. In case of strained relationship between the two, the consequences are otherwise such as lock-out, strikes, fire- fighting, etc.. This makes a case for IR in human resource management. What is IR? Why is IR important? Who are parties to IR? How did IR get that shape? How is IR seenario in India? These are some of the questions addressed in this chapter.

24.1 CONCEPT OF IR Basically, IR sprouts out of employment relation. Hence, it is broader in meaning and wider in scope. IR is dynamic and developing socio-economic process. As such, there are as many as definitions of IR as the authors on the subject. Some important definitions of IR are produced here. According to Dale Yoder1, IR is a designation of a whole field of relationship that exists because of the necessary collaboration of men and women in the employment processes of Industry”. Armstrong2 has defined IR as “ IR is concerned with the systems and procedures used by unions and employers to determine the reward for effort and other conditions of employment, to protect the 275

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interests of the employed and their employers and to regulate the ways in which employers treat their employees”. In the opinion of V. B. Singh3, “Industrial relations are an integral aspect of social relations arising out of employer-employee interaction in modern industries which are regulated by the State in varying degrees, in conjunction with organised social forces and influnced by the existing institutions. This involves a study of the State, the legal system, and the workers’ and employers’ organisations at the institutional level; and of the patterns of industrial organisation (including management), capital structure (including technology), compensation of the labour force, and a study of market forces all at the economic level”. Encyclopaedia Britannica4 defined IR more elaborately as “The concept of industrial relations has been extended to denote the relations of the state with employers, workers, and other organisations. The subject, therefore, includes individual relations and joint consultation between employers and workers at their places of work, collective relations between employers and trade unions; and the part played by the State in regulating these relations”. Thus, IR can now safety be defined as a coin having two faces co- operation and conflict. This relationship undergoes change from thesis to antethesis and then to synthesis. Thus, the relationship starting with co-operation soon changes into conflict and after its resolution again changes into cooperation. This changing process becomes a continuous feature in industrial system and makes IR concept as dynamic and evolving one.

24.2 SCOPE OF IR 

Based on above definitions of IR, the scope of IR can easily been delineated as follows:



Lobour relations, i.e., relations beteen labour union and management.



Employer-employee relations i.e. relations between management and employees.



The role of various parties viz, employers, employees, and state in maintaining industrial relations.



The mechanism of handling conflicts between employers and employees, in case conflicts arise.

The main aspects of industrial relations can be identified as follows: 

Promotion and development of healthy labour — management relations.



Maintenance of industrial peace and avoidance of industrial strife.



Development and growth of industrial democracy.

24.3 OBJECTIVES OF IR The primary objective of industrial relations is to maintain and develop good and healthy relations between employees and employers or operatives and management. The same is sub- divided into other objectives. Thus, the objectives of IR are designed to: 1.

Establish and foster sound relationship between workers and management by safeguarding their interests.

2.

Avoid industrial conflicts and strikes by developing mutuality among the interests of concerned parties.

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3.

Keep, as far as possible, strikes, lockouts and gheraos at bay by enhancing the economic status of workers.

4.

Provide an opportunity to the workers to participate in management and decision making process.

5.

Raise productivity in the organisation to curb the employee turnover and absenteeism.

6.

Avoid unnecessary interference of the government, as far as possible and practicable, in the matters of relationship between workers and management.

7.

Establish and nurse industrial democracy based on labour partnership in the sharing of profits and of managerial decisions.

8.

Socialise industrial activity by involving the government participation as an employer.

According to Krikaldy5, industrial relations in a country are influenced, to a large extent, by the form of the political government it has. Therefore, the objectives of industrial relations are likely to change with change in the political government across the countries. Accordingly, Kirkaldy has identified four objectives of industrial relations as listed below: 1.

Improvement of economic conditions of workers.

2.

State control over industrial undertakings with a view to regulating production and promoting harmonious industrial relations.

3.

Socialisation and rationalisation of industries by making the state itself a major employer.

4.

Vesting of a proprietory interest of the workers in the industries in which they are employed.

24.4 IMPORTANCE OF IR Industrial relations usually imply good and positive relations between the employees and employers. The good IR help run an industry effectively and successfully, i.e., the desideratum of the day. The importance of IR can be imbued with multiplicity of justifications. To mention, good IR help: 1. Foster Industrial Peace:Under the mechanism of IR, both employees and managers discuss the matter and consult each other before initiating any actions. Doubts, if any, in the minds of either party are removed. Thus, unilateral actions that prop confusion and misunderstanding, disappear from the scene. In this way, IR help create a peaceful environment in the organisation. Peace, in turn, breeds prosperity. 2. Promote Industrial Democracy: Industrial democracy means the government mandated worker participation at various levels of the organisation with regard to decisions that affect workers. It is mainly the joint consultations, discussed later in this chapter, that pave the way for industrial democracy and cement relationship between workers and management. This benefits the both. The motivated workers give their best and maximum to the organisation, on the one hand, and share their share of the fruits of organisational progress jointly with management, on the other. 3. Benefit to Workers: IR benefit workers in several ways. For example, it protects workers against unethical practices on the part of management to exploit workers by putting them under inhuman working conditions and niggardly wages. It also provides a procedure to resolve workers’ grievances relating to work. 4. Benefit to Management:IR protect the rights of managers too. As and when workers create the problem of indiscipline, which is discussed in detail earlier in chapter 22, IR provides mangers with a system to handle with employee indiscipline in the organisation.

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5. Improve Productivity: Experiences indicate that good industrial relations serve as the key for increased productivity in industrial organisations. Eicher Tractors, Alwar6 represents one such case. In this plant, productivity went up from 32 per cent to 38 per cent between 1994 and 1997. This increase is attributed to the peaceful IR in the plant. Similar other success stories abound in the country. As reported by V.S.P. Rao,7 Sundaram Fasteners (A TVS group company which begged the prestigious GM award for the fourth successive year in 1999 as a quality supplier of radiator caps) is well known for zero breakdowns, zero accidents and zero defects. Company did not lose even a single day due to strike. The per-employee productivity is comparable to the best in the world. One study8 rates the company among the 20 most competitive companies in the Asia.

24.5 APPROACHES TO IR Like other behavioural subjects, both the scenario of IR and factors affecting it are perceived differently by different behavioural practitioners and theorists. For example, while some perceive IR in terms of class conflict, others view it in terms of mutual co-operation, yet others understand it related to competing interests of various groups and so. An understanding of these approaches to HR helps the human resource manager in devising an effective human resource strategy. Based on these perceptions, the behavioural theorists have developed some approaches to explain the IR dynamics. Among them, the popular approaches to IR are: 1.

Unitary Approach

2.

Pluralistic Approach

3.

Marxist Approach

These are discussed one by one.

Unitary Approach The Unitary approach to IR is based on the assumption that every one be it employee, employer or government-benefits when emphasis is on common interest. Alternatively speaking, under unitary approach, IR is founded on mutual co-operation, team work, shared goal, and so. Conflict at work place, if any, is seen as a temporary aberration resulting from poor management or mismanagement of employees. Otherwise, employees usually accept and cooperate with management. Conflict in the form of strikes is disregarded as destructive. Alwar plant of Eitcher Tractors represents one such example of unitary approach9. Nonetheless, unitary approach is criticised mainly on two grounds. First, it is used as a tool for keeping employees at bay from unionism. Second, it is also seen as exploitative and manipulative.10

Pluralistic Approach In fact, pluralistic approach is a departure from unitary approach of IR. This approach was evolved and practised in mid 1960s and early 1970s in England. Later, this approch was developed by the British scholars in particular by A. Fox 11. The approach perceives that organisation is a coalition of competing interest groups mediated by the management. At times, it may so happen that management in its mediating role, may pay insufficient attention to the needs and claims of employees. In such a situation, employees may unite in the form of trade unions to protect their needs and claims. As a result, trade unions become the legitimate representatives of employees in the organisation.

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Thus, the system of IR gets grounded on the product of concessions and compromises between management and trade unions. Conflict between employees and management understood as competing interest groups, is considered as inevitable and, infact, necessary also. Normally, employees are not that much forceful in negotiation process as much management is. Hence, employees join trade unions to negotiate with management on equal terms to protect their interests. Like unitary approach, pluralistic approach also suffers from certain limitations. The basic assumption of this approach that employees and management do not arrive at an acceptable agreement do not hold good in a free society. This is because a society may be free, but power distribution is not necessarily equal among the competing forces. The experience of England where this approach was involved and developed in mid sixties and early seventies faced widespread strikes substantiates that pluralistic approach is a costly affair, at least, in short run if not in long-run.

Marxist Approach Like pluralists, marxists also view conflict between labour and management as inevitable. But marxists unlike pluralists, regard conflict as a product of the capitalist society based on classes. According to marxists, conflict arises because of devision within society in terms of haves i.e., Capitalists and have nots i.e., labour. The main objective of capitalists has been to improve productivity by paying minimum wages to labour. Labour views this as their exploitation by the capitalists. The marxists do not welcome state intervention as, in their view, it usually supports management’s interest. They view the pluralistic appraoch is supportive of capitalism and the unitary approach as an anathema. Therefore, the labour-capital conflict, according to marxist approach, cannot be solved by bargaining, participation and co.operation. In such situation, trade union comes in picture and is seen as a reaction to exploitation by capitalists and also a weapon to bring a revolutionary social change by changing capitalistic system. For this, coercive powers such as strikes, gherao, etc. are exercised by the labour against capitalists. Such systems of IR have been very much observed in most of the socialist countries like erstwhile USSR. The marxist approach is mainly practised in communist bloc. Hence the scope of marxist approach remains limited to the countries based on socialism.

24.6 PARTIES TO IR IR as a system is a complex of inter-relations among workers, managers and government. Based on this, there are three major parties to industrial relations: 1.

Employees

2.

Employer

3.

Government

Now, a description of these follows in seriatim.

Employees Among the participants to IR, employees are considered as the most affected one by the IR system prevalent in an organisation. Employees with their various characteristics such as their commitment to the work and the organisation, their educational and social background, their attitudes towards the management and so on affect and are affected by the system of IR. Generally, employees perceive IR as a means to improve their conditions of employment, voice against any grievances,

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exchange views and ideas with management and participate in organisational decision making process12. Employees participate in the IR system through their associations, or say, trade unions.Trade unions are discussed, in detail, in the next chapter 26. Past evidences indicate that trade unions play a crucial role in making an IR system as effective or otherwise. Trade unions with their strong political and emotional overtones are looked upon as a tool to wrest concessions from employers. With regard to their role in relation to IR, they work to achieve the following objectives13: 1.

To redress the bargaining advantage on one-on-one basis, i.e., individual worker vis-à-vis individual employer by way of joint or collective actions.

2.

To secure better terms and conditions of employment for their members.

3.

To obtain improved status for the worker in his/her work.

4.

To increase democratic mode of decision making at various levels

However, various factors such as union membership, its attitude towards management, interunion rivalry and the strengths at the national or local level determine the role of trade unions in influencing the system of IR in an organisation.

Employer Employer is the second party to IR. In the corporate organisation, employer is represented by the management. Hence, management becomes responsible to various stakeholders in an organisation including employees. According to Cole14, management has to see IR in terms of the following employee-employer relationship : 1.

Creating and sustaining employee motivation.

2.

Ensuring commitment from employees.

3.

Achieving higher levels of efficiency.

4.

Negotiating terms and conditions of employment with the representatives of employees.

5.

Sharing decision making with employees.

Like employees’ associations, employers also form their associations at the local, industry and national levels. Examples of employers’ associations at all India level are Associated Chambers of Commerces and Industry (ASSOCHAM), Confideration of Indian Industry (CII) Federation of Indian Chambers of Commerce and Industry (FICCI), etc. The major objectives of the employers’ associations in relation to IR are to: 1.

Represent employers in collective bargaining at the national or industry level.

2.

Develop machinery for avoiding disputes.

3.

Provide feedback on employee relations.

4.

Advise member organisations on the issues relating to IR.

Government The role of government in the matter of industrial relations has been changing along with changes in industrial environment and management persepective. For example, till 19th century, the governments everywhere in the world adopted a policy of laissez faire. The IR matters were left to be settled by the employees and employers. But, towards the end of the 19th century, the attitude of the

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government in the changed conditions of conflicts between employees and employers, changed to some kind of intervention in the matter of IR. In due course of realization, government intervention became a reality. As of day, government intervention has become widespread in HR matters. In India, government tries to regulate the relationship of employees and employers, and also keeps an eye on both groups to keep each in line. This relationship is enforced and maintained through labour courts, industrial tribunals, wage boards, investigating and enquiry committees, etc..

24.7 CAUSES FOR POOR IR IR is often found poor in industrial organisations. Several factors cause poor IR. These factors are viewed differently by different groups both within and outside an organisational context. For example, while an economist interprets poor IR in terms of demand and supply of (human) resources factor, a psychologist perceives the same in terms of opposing interests, and a leader (political) views poor IR in terms of ideological differences between the parties. However taking a comprehensive view of causes of poor IR, the important ones can be listed as follows: 1. Nature of Work: It is the work only that gives birth to releationship between the employee and employer . A good work i.e., work interesting to the employee fosters good IR. The reason being an employee interested in his work remains absorved in his/her job. This results in job satisfaction. On the contrary, a work not interesting to the employee breeds bad or poor IR. The reason is not difficult to seek. An uninterested work leads to job dissatisfaction and frustration which, in turn, among other evil effects, causes poor IR between the employee and employer. Hence, this underlines the need for proper job design and job assignment among the employees. 2. Dissatisfactory Compensation andWork Conditions: Employees work for compensation i.e, wages and salaries. Often, compensation as low and working conditions as poor viewed by employees become an important reason for poor IR. We have already seen in chapter 15 that widespread wage differential prevail across organisations due to various factors. But, employees often demand for equity, i.e., wages equal to what the employees of other organisations are getting in the region, industry, etc. Not fulfilment of such demands is interpreted as employee exploitation by the management . This worsens relationship between the employees and management. 3. Dysfunctional Trade Union: Essentially, trade unions are meant to protect the interests of its members. But, as we shall see later in the next chapter 26, the ongoing trade union system in India is characterised by politicisation , muiltiplicity, and inter-union rivalry. These often lead trade unions dysfunctional and ineffective in playing their roles. The unions are used as a means to serve the purposes of a few (leaders) rather than working in the wider interest of the employees. As such, these unions lack workers’ faith and trust in their functioning. This breeds discontent among the employees and their relationship with management also gets worsen. 4. Non-conducive Organisational Climate:Organisational climate essentially emphasises work environment. It consists of a set of characteristics that describe an organisations, distinguish it from other organisations, are relatively enduring over time, and influence the behaviour of people in it15. Organisational climate affects organisational processes and behaviour in more than one ways. A conductive and supporting organisational climate helps employees integrate themselves with organisation and enjoy a feeling of confidence in organisation. On the contrary, a non-conductive and unfavourable one frustrates the same. Instead, its creates mistrust between employees and organisation. Ultimately, mistrust boils down to poor IR.

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The effects of poor IR on an organisation are ultimately reflected in the forms of low employee morale and productivity, absenteeism, turnover, resistance to change, strikes and several types of conflicts and pressure tactics exercised against management. Thus, poor IR benefits to none. Hence, the need for developing sound IR in an industrial organisations. The subsequent section deals with the same.

24.8 DEVELOPING SOUND IR Sound IR does not happen automatically. Instead, developing and maintaining sound IR require conscious and delibrate efforts to be made in this direction. Following help build sound IR in an industrial organisation: 1. Developing Trust between Labour and Management: Research studies16 report that trust between labourers and managers serves as a foundation for developing sound IR in an organisation. Among others, there may be two most effective ways to create trust between the IR parties: (I) to build competence in both labourers and managers, and (ii) to develop and practice right human resource practices in the organisation. In fact, it is trust only that binds labour and management together. 2. Existence of Sound and DemocraticTrade Unions: One another prerequisite for a sound IR is the existence of sound and democratic trade unions to bargain with management. It is the sound and democratic trade union that can protect the employee’s interest in terms of wages, benefits, working conditions, job security and so on. These make employees satisfied and satisfaction permits no alibis and grievance. 3. Maintenance of Industrial Peace: Peace promotes prosperity and prosperity supports happiness. In an industrial organisation, peace can be established through several ways. To mention a few, establish a machinery for the prevention and settlement of industrial disputes. Such machinery should include both legislative and non-legislative measures. Arm the Government with appropriate powers to settle the industrial disputes wherever necessary. Make provisions for bipartite and tripartite committees for envolving personnel policies, code of conduct, code of discipline, etc. Create implementation and evaluation committees for looking into collective bargaining agreements, court orders and judgements and violations of statutory provisions of the various laws. 4. Continuous Feedback and Monitoring:Feedback serves as an input for improvement in all types of activities and so in IR as well. A properly devised feedback mechanism enables the HR managers to spot the grey areas in IR system and, then, take proactive actions to solve the problems before these assume alarming proportions. Nipping the problems at the bud is better because, sometimes, a seemingly small problems if not solved, culminates to a complex and serious one later on. 5. Professional Approach: Understanding human behaviour has ever been a complex phenomenon. And the same has become more so in case of modern knowledge workers. This underlines the need for handling with employees, or say, IR by the persons having professional competence and approach in the subject. These persons need to be well versed with whole gamut of employee/human behaviour at work. In other words, these persons must know why employees behave as they behave at work place. Besides, they should also have a problem -solving approach to tackle with the employee problems in the organisations.

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24.9 INDUSTRIAL RELATIONS IN INDIA IR is dynamic in nature. The nature of IR can be seen as an outcome of complex set of transactions among the major players such as the employers, the employees, the trade union, and the state in a given socio-economic context. In a sense, change in the nature of IR has become sine quo non with change in the socio-economic context of a country. Keeping this fact in view, IR in India is presented under the following two sections: 1.

IR during Pre- Independence

2.

IR during Post-Independence

IR During Pre-Independence The structure of the colonial economy, the labour policies of colonial government, the ideological composition of the political leadership, the dynamics of political struggle for independence, all these shaped the colonial model of industrial relations in pre-independent India17. Then, even union movement was an important part of the independence movement. However, the colonial dynamics of the union movement alongwith the aggressiveness of alien capital, the ambivalence of the native capital and the experience of the outside political leadership frustrated the process of building up of industrial relations institutions. Other factors like the ideology of Gandhian class harmony, late entry of leflists and the bourgeois charcter of congress also weakened the class approach to the Indian society and industrial conflict18. Till the Second World War, the attitude of the colonial government toward industrial relations was a passive regulator only. Because, it could provide, that too only after due pressure, the minimum of protective and regulative legal framework for industrial relations Trade Union Act 1926 (TUA), Trade Disputes Act 1929 (TDA)19. It was the economic emergence of the Second World War that altered the colonial government’s attitute on industrial relations. The state intervention bagan in the form of introduction of several war time measures, viz. the Defence of India Rules (Rule 81- A), National Service (Technical Personnel) Ordinance, and the Essential Service (Maintenance) Ordiance. As such, in a marked contrast to its earlier stance, the colonial government imposed extensive and pervasive controls on industrial relations by the closing years of its era20. Statutory regulation of industrial relations was on plank of its labour policy. The joint consultative institutions were established primarily to arrive at uniform and agreeable labour policy. The salient features of the colonial model of IR can be summarised as close association between political and trade union movement, dominance of ‘outsiders’ in the union movement, state intervention and federal and tripartite consultations. The eve of Independence witnessed several instances that served as threshold plank for IR during post Independence era. The prominant instances to mention are passing of Indian Trade Unions (Amendment) Act,1947, Industrial Employment (Standing Orders) Act 1946, Bombay Industrial Relations Act, 1946, and Industrial Disputes Act, 1947 and split in AITUC and formation of INTUC.

IR During Post-Independence Though Independent India got an opportunity to restructure the industrial relations system, the colonial model of IR remained in practice for sometimes due to various reasons like the social, political and economic implications of partition, social tension, continuing industrial unrest, communist insurgency, conflict, and competition in the trade union movement. In the process of consultation and confrontation, gradually the structure of the industrial relations system (IRS) evolved.

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State intervention in the IRS was a part of the interventionist approach to the management of industrial economy. Several considerations like unequal distribution of power in the labour market, neutrality of the state, incompatibility of free collective bargaining institution with economic planning etc. provided moral justification for retaining state intervention in the IRS. State intervention in the IRS is logical also when the state holds large stakes in the industrial sector of the economy. However state intervention does not mean suppression of trade unions and collective bargaining institution22. In fact, state intervention and collective bargaining were considered as complementary to each other. Gradually, various tripartite and bipartite institutions were introduced to supplement the state intervention in the IRS. The tripartite process was considered as an important instrument of involving participation of pressure groups in the state managed system. Non formal ways were evolved to do what the formal system did not legistate, for one reason or other. The political and economic forces in the mid 1960s aggravated industrial conflict and rendered non-formal system ineffective. In the process of reviewing the system, National Commission on Labour (NCL) was appointed in 1966. Now the focus of restructuring shifted from political to intellectual. However, yet another opportunity was lost when there was an impasse on the NCL recommendations in 1972. The Janta Government in 1978 made, of course, a half-hearted attempt to reform industrial relations. Unfortunately, the attempt met with strong opposition from all unions. The BMS, for example, termed it as “a piece of anti-labour, authoritarian and dangerous legislation”23. Several committes were appointed to suggest measures for reforming the IRS. In the process, tripartism was revived in 1980s. Government passed the Trade unions and the Industrial Disputes (Amendment) Bill, 1988. But, it also proved yet another legislative disaster24. The bill was severely criticised by the left parties. It was even viewed by some as a delibrate attempt to destroy “autonomous organised or mititant trade union movement25. In consequence, the tripartite deliberations held at the ILC in 1990 decided three measures to reform IR in India: (i) to constitute a bipartite committee of employers and unions to formulate proposals for a comprehensive legislation; (ii) to withdraw the Trade Union and the Industrial Disputes (Amendment) Bill, 1988; and (iii) to consider the possibility of formulating a bill on workers’ participation in management, 199026. In the 33rd session of ILC, another bipartite committee was constituted to recommend changes in the TU and ID Acts. The government introduced a Bill on Workers Participation in Management in Parliament in 1990. Thus, the striking feature of the history of IR in India has been that it is dynamic in nature. Particularly since 1991 i.e, the inauguration of liberalisation process, the IR in India is marked by new challanges like emergence of a new breed of employees (popularly termed as ‘knowledge workers’), failure of trade union leadership, economic impact, and employers’ insufficient response27. These are discussed in more details in the subsequent section.

24.10 NEW ECONOMIC POLICY (NEP) AND IR The former Finance Minister of India Dr. Manmohan Singh under the stalwardship of then Prime Minister Shri. P.V. Narsimha Rao, initiated the NEW ECONOMIC POLICY (NEP), in 1991, to integrate the Indian economy with the world market. Since then, structural changes of various dimension and intensity brought in by globalisation and liberalisation processes have been experienced in different industries and enterprises in the country. As seen earlier, IR being dynamic in nature has also been undergoing transformation, substantiating a close relationship with structural changes in the economy. The major factors that are contributing to the changing scenario of IR in the context of NEP are scanned as follows.

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Emergence of Knowledge Workers The new employees who joined organisations from the early 1980s are markedly different from their counterparts who joined earlier. On the one hand, the new employees are better educated, more career-oriented, and relatively less ideologically committed. On the other, they have no first-hand knowledge about the exploitative situations that hovered in the past. All these factors place these new employees (now popularly known as ‘knowledge workers’), who presently form the majority of employees working in the organised sector in the country, in a very different socio-psychological framework. This new breed of employees seek more meaning from their work and, that’s why is more amenable to micro-level (i.e., enterprise level) participate efforts. Unlike their (older) counter parts, these new employees do not feel satisfied merely with the traditional return of employment such as salary and other employment benefits. It fact, they value the Quality of Work Life (QWL). This has led to a paradigm shift in their relationship with the management.

Dwindling Trade Union Leadership As elsewhere, trade union leaders in India too set the focus of their struggle only on economic issues. But as just seen, modern workers/knowledge workers do not necessarily value much to such general and traditional issues. Instead, they respond to wider and vital issues like QWL. As such, their trust and confidence on trade unions to meet their objectives have been shrinking. In consequence, workers are dissociating themselves from joining trade unions. In turn, both the number of trade union membership and the number of strikes and their duration are on steady decline28. This is well demonstrated by increasing number of one day strikes’ called by trade unions which used to call indefinite strike earlier like Bombay Textile Mills Strike in 1982. Yet another shift in IR is that employees apprehend strikes as heightening the danger of loosing jobs and getting them nowhere in a highly competitive global market. This has resulted in a growing trend of alienation between workers and trade unions. These all have rendered trade unions, to a great extent, ineffective or failure.

Emergence of Consumer Economy The deregulation measures inserted in the NEP, in consequence, gave emergence to consumer economy. Speaking alternatively, the emergence of new (consumer) economy consequent on the deregulation measures offered workers avenues for the use of consumer durables like motor cycles, TV sets, VCRs, kitchen gadgets, and even automobiles through leasing arrangements. Thus, consumers once hooked to this consumerist culture found it very difficult to follow trade unions whenever they give call for strickes.

24.11 INTERNATIONAL LABOUR ORGANISATION (ILO) AND IR IN INDIA For the convenience purposes, the discussion in this section is presented in two parts: (i) ILO: its Objectives and Organisational Structure, and (ii) Impact of ILO on IR in India. ILO : Its organisational Structure and Objectives. Labour mobility across the nations has been in practice for long times. In course of time, this has led to international labour problems for various reasons and also underlined the need for understanding the problems of international labour. In 1919, the ILO came into existance as a solution to this problem.

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The ILO was born as a result of the peace conference at the end of World War I at Versailles on April 19, 1919. Being an original signatory of the treaty of peace, India became member of ILO in 1919 itself. In fact, ILO is the only international organisation that survived the Second World War even after dissolution of its parent body ‘the League of Nations’. Its main concern is to make the world know that world peace is subject to be affected by unjust conditions of its labour. Thus, ILO deals with international labour problems. Objectives of the ILO: The main objectives of ILO contained in the preamble to its constitution are to: 

Provide social justice to workers.



Avoid injustice, deprevation and exploitation of labour.



Build up human working conditions to the labour

In the 26th session of the International Labour Conference held at Philadelphia in April in 1944, during the Second World War, the principles of ILO were affirmed as follows: 

Labour is not a commodity.



Freedom of expression and of association are essential to sustained growth.



Poverty anywhere constitutes a danger to prosperity everywhere.



War against want requires to be carried out by joint efforts by government, management and workers together on equal status and with democratic traditions.

The objectives of the ILO were redefined at the Philadelphia conference in 1944. This was termed as “ Declaration of Philadelphia. The following 10 objectives were enunciated at the above Philadelphia. Conference. 1.

Full employment and the raising of standards of living.

2.

Employ workers on jobs for which they have adequate skill and satisfaction to work.

3.

Provide training and development facilities to achieve the above objective.

4.

Provide due share of profit as compensation to ensure a minimum level of living standard to all employed and protection as and when needed.

5.

Accept collective bargaining as a right of workers and a means of improving productivity between employees and management.

6.

Extend social security measures to provide a basic income to all in need and also medical cover.

7.

Protect the life and health of workers in all occupations.

8.

Provision for child welfare and maternity protection.

9.

Provide adequate nutrition, housing and facilities for recreation and culture.

10. Provision for quality education and vocational opportunity. Membership: As per the amendments of Constitution in 1945 , the membership rules of ILO are as follows. 1.

Any original member of UNO may become member of ILO by accepting its obligations of its constitutions.

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If a State is not the member of the UNO, the ILO confers on the ILC(Parliamentary Wing of the ILO) the right to admit that state to membership which it had assumed defacto during the period of ILO with League.

The membership of ILO has increased from 45 in 1919 to 151 in 2002. Organisational Structure of ILO. The ILO is a tripartite organisation consisting of representatives of the Government, the employers and the workers of the member countries. It consists of the three principle organs, namely: 1.

International Labour Conference (ILC)

2.

Governing Body

3.

International Labour Office (ILO)

They are briefly discussed one by one. International Labour Conference (ILC): This is the Apex body of ILO which makes labour policies for international labour. The ILC holds its sessions at a frequency not less than once in a year. The delegates from three groups viz. the government, the employers’ and the workers attend ILC sessions in the ratio of 2:1:1 respectively. Each representative has a vote. The representatives from the Government are mostly ministers, diplomats or officials. The conference is empowered to appoint committees to deal with different matters relating to labour during each session. Examples of such committees are the selection committee, The Credential Committee, The Resolution Committee, The Drafting Committee, The Finance Committee, etc. All committes except Finance Committee, are tripartite in nature. The functions performed by the ILC are to: 

Formulate international labour standards.



Fix the amount of contribution to be paid by the member states.



Decide budget and submit the same to the Governing Body.



Study the labour problems submitted by the Director General and assist in their solutions.



Appoint committees to deal with different problems during its sessions.



Elect the president.



Select members of the Governing Body.



Develop policies and procedures.



Seek advisory opinion from International Committee of Justice.



Confirm the powers, functions and procedure of Regional Conference.

Governing Body: It is also a tripartite body. It implements decisions of the ILC with the help of the International Labour Organisation. It consists of 56 members in the same ratio of 2:1:1, i.e. 28 representatives of the Government, 14 of the employers and 14 of the workers. Of the 28 representatives of the Government, 10 are appointed by the members of the States of Chief Industrial Importance and remaining 18 are delegates of the other governments. Industrial population is the criteria for chief Induatrial Importance. India is one of the ten states of chief Industrial Importance. The tenure of the office of this body is 3 years. It meets frequently in a year to take decisions on the programmes of the ILO. The functions of the Governing Body are to.: 

Co-ordinate work between the ILC and ILO.

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

Prepare agenda for each session of the ILC.



Appoint the Director General of the office.



Secrutinise the budget.



Follow up with member states in regard to implementation of the conventions and recommendations adopted by the ILC.



Fix the date, duration schedule and agenda for the Regional Conferences.



Seek, as and when required, advisory opinion from the International Court of Justice with the consent of the ILC.

International Labour Office: This is the secretariat of the ILO in Geneva and is the third major organ of the ILO. The Director General (DG) of the ILO is the Chief Executive Officer of the Secretariat appointed by the Governing Body. He also serves as the Secretary General of the ILC. His tenure is for 10 years and extendable by the Governing Body. The Director General is assisted by two Deputy Director Generals, six Assistant Director Generals, one Director of the International Institute of Labour Studies, one Director of the International Centre for Advanced Technical and Vocational Training, Advisors, Chief of Divisions from 100 nations. Following are the main functions of this office. 

Prepare briefs and documents for agenda of ILC.



Assist the Governments of the States to form labour legislation based on recommendations of the ILC.



Bring out publications relating to industrial labour problems of international nature and interest.



Carry out functions related to the observance of the conventions.



Collect and distribute information on international labour and social problems.

Impact of ILO on IR in India ILO affects IR broadly in two ways, viz. through influencing labour policy and labour legislation, and tracde union movement in India. Like other progressive countries, in India also labour code and labour policy are evolved based on the conventions and recommendations of the ILO. As a matter of fact, many of the labour laws passed in India since 1920 have derived their motive force from discussions at Geneva Conferances of the ILO. Both ILO and conventions and recommendations adopted by it appear to have given their impetus to the develoment of labour legislation in India especially after 1947 when the Indian National Government assumed office at the centre29. As mentioned earlier, India has been one of the founder members of the ILO. It has been taking very active part in its deliberations. In its various sessions, ILO has so far adopted 173 Conventions and 180 Recommendations. The committee on conventions set up in 1954 studies all the Conventions and Recommendations and makes recommendations for their ratifications. Accordingly, the government of India ratified these from time to time. India has so far ratified 36 conventions. These ratified conventions have been incorporated in the Indian Labour Legislation. Labour Legislations in India are discussed in the subsequent section 24.12. Modern Trade Union Movement in the country may be said to have begun after World War I and, therefore, it can be said that the beginning of the trade union movement in India coincided with the establishment of the ILO. The AITUC owes its immediate origin to ILO. ILO has influenced trade

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union or labour union in several ways. It creates a sense of solidarity among the workers by removing the feeling of isolation among them, and also by awakening the consciousness among them of their rights and privileges. Since the representatives of workers attend ILO sessions. Therefore, the necessity of electing worker delegates for attending International Labour Conferences gave emergence of the early. Federations of Trade Unions in India. Further, the close interaction of the Indian (worker) delegates with their counterparts from other countries at the annual international labour conferences strengthened international solidarity and social justice among the workers across the countries. Besides, the Indian workers’ organisations were benefited from foreign labour organisations in some other ways also. For example, the British Trade Union Congress, the International Federation of Trade Union and the Third International at Moscow rendered financial support for the relief of the Indian workers during the periods of strikes and other industrial disputes. The Information dissemination by the ILO on various aspects of labour problems to the workers and their unions also helped workers unite for the solution of their problems. Thus, the influence of the ILO on trade union/labour union movement in India has been quite perceptible and significant.

24.12 LABOUR LEGISLATION IN INDIA As mentioned earlier, India has been following the ILO conventions. As such, India has enacted several laws relating to labour matters and, it will not be an exegerration to mention that India tops the list of labour legislations among progressive countries. All the labour legislations so far enacted in India can be classified under four categories: 1.

2.

3.

4.

Laws on Working Conditions : 

Factories Act, 1948



Shops and Establishments Act



Mines Act, 1952



Plantation Labour Act, 1951



Indian Merchants Shipping Act.

Laws on Wages : 

Minimum Wages Act, 1948



Payment of Wages Act, 1936



Payment of Bonus Act, 1965



Equal Remuneration Act.

Laws on Industrial Relations : 

Industrial Disputes Act, 1947



Indian Trade Union Act,1926



Industrial Employment (Standing Orders) Act, 1946

Laws on Social Security : 

Workers Compensation Act, 1923



Maternity Benefit Act, 1961



Employees Provident Fund Act, 1952



Payment of Gratuity Act, 1972



Employees’ State Insurance Act, 1948

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Discussion on each of these law is neither possible nor relevant. Hence, keeping in view the fitness of the context, only the laws on industrial relations are discussed here.

Industrial Disputes Act, 1947 The legislation relating to industrial relations in India is contained in the Industrial Disputes Act, 1947. This is a central Act which came into operation on 1st April, 1947. According to the Notification of the Central Gazette of India, 1946, Pt.V. the Act was enacted for the following reasons: “ Experience of working of the Trade Disputes Act of 1929, has revealed that its main defect is that while restraints have been imposed on the rights of strike and lockout in public utility services, no provision has been made to render the proceedings institutable under the Act for the settlement of an industrial dispute, either by reference to a Board of Conciliation or to a Court of Inquiry conclusive and binding on either parties to the dispute”. The preamble of the Act reads, “An Act to make provision for the investigation and settlement of industrial disputes and for certain other purposes”. The principal objectives of the Act, based on the judgements given by the supreme court of India from time to time, are: 1.

To provide a machinery for the just, equitable and peaceful settlement in industrial disputes by arbitration and or adjucation

2.

To promote measures for securing and preserving amity and good relations between employers and employees.

3.

To prevent illegal strikes and lockouts.

4.

To provide relief to workers in matters of lay-offs, retrenchment, wrongful dismissal and victimization.

5.

To promote collective bargaining and conciliation.

6.

To ameliorate the condition of workers (According to Patna High Court).

Authorities Under the Act: The main objective of the ID Act, 1947 is the investigation and settlement of industrial disputes. For this purpose, the following authorities are provided from Section 3 to 9 in the ID Act. I. Conciliation (a) Works Committee (b) Conciliation Officer (c) Board of Conciliation II. Arbitration (a) Court of Inquiry III. Adjucation (a) Labour Court (b) Industrial Tribunal (c) National Tribunal These are discussed in the next chapter 25 ‘Industrial Disputes’. The Act makes is obligatory for an employer to set up a ‘Grievance Settlement Authority’ in an industrial establishment in which fifty or more workers have been employed in the preceding twelve

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months. This authority shall have the responsibility to settle industrial disputes concerning an individual worker. Obligations of an Employer: Under the Act, an employer is required to: 1.

Constitute works committees and provide required facilities for their smooth functioning.

2.

Implement all agreements, settlements and awards, and produce all relevant documents to this effect.

3.

Desist from declaring any illegal lockout.

4.

Pay compensation for lay-off and retrenchment and closure of unit.

5.

Maintain status quo during pendency of disputes in conciliation and arbitration.

Indian Trade Union Act, 1926 Indian Trade Union Act, 1926 is discussed, in detail, later in the following chapter 26 under section 26.6 ‘Trade Union Legislation’. Hence, the same is not discussed here for the sake of repetition.

Industrial Employment (Standing Orders) Act, 1946 The genesis of the Industrial Employment (Standing Orders) Act, 1946 goes to the year 1944 when the question of framing Standing Orders was considered by the Sixth Indian Labour Conference. As a result, the Industrial Employment (Standing Orders) Act came into existance on 23rd April, 1946 and came into force from 1st April, 1947. The main object of the Act, as given in its Preamble, is to require employers to define the terms and conditions of employment of workers in an industrial establishment. It is obligatory upon all employers covered by this Act to specify the conditions of employment under them which will govern relations between the employer and the employees and to make the said conditions known to the workmen employed by them. The Act is applicable to all industrial establishments employing 100 or more workers. The matters of the Act are specified in its schedules. Once the standing orders are certified by the competent authority, these become statutory terms of employment between the employer and the employees. The matters that are required to be specified in the Standing Orders section 2 (g) and 3 (2) are as follows: 1. Classification of workmen in terms of permanent, temporary, probationer 2. The mode through which workmen are informed about periods and hours of work, holidays, pay days and wage rates. 3. Work shifts with time duration 4. Workmen’s attendance and late reporting to job 5. Procedure for leaves and holidays. 6. Starting and closing of works with temporary stopages, if any 7. Procedure for suspension and /or dismissal of workmen for their misconduct. 8. Employment termination alongwith the notice thereof to be given by the both employer and workmen. 9. Means of redress for employees against unfair treatment or wrongful exaction on the part of the employer or his agent.

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10. Any other matter which may be prescribed.

24.13 SUMMARY This summary is organised by the learning objectives given on page...275: 1. IR means relations between trade unions, management and government in an industrial organisation. Its scope covers relations between parties established on account of employment. 2. The main objective of IR is to maintain industrial peace and harmony in an organisation. 3. IR, by promoting industrial peace and harmony, benefits to all concerned with organisation. 4. Unitary, pluralistic, and marxist are the three main approaches to IR. 5. Parties to IR include the employees, the employer and the government. 6. Factors like nature of work, dissatisfactory remuneration and work conditions, dysfunctional trade unions, and non-conducive organisational climate cause poor IR. 7. Developing trust between employees and employer, industrial peace, sound and democratic trade union, continuous feedback and monitoring help develop sound IR in an industrial organisation. 8. IR in India is a dynamic and evolving concept. The focus of IR over the period has shifted from political to intellectual 9. The main effects of the NEP on IR are reflected in the form of emergence of knowledge workers, weakening trade unionism, and emergence of consumer economy. 10. The ILO, through its conventions and recommenndations, has influnced the contents and intents of various labour laws and, in turn, IR in India from time to time. 11. The labour lagislation especially Industrial Disputes Act, 1947, Indian Trade Union Act, 1926, and Industrial Employment (Standing Orders) Act. 1946 contain provisions relating to IR in India.

KEY TERMS Indian Labour Conference Industrial Democracy

Quality of Work Life (QWL) Strike

Industrial Dispute

Standing Orders

Industrial Relations

Trade Union

Marxist Approach

Unitary Approach

Pluralistic Approach

REVIEW QUESTIONS 1. Define industrial relations. List out its objectives and also bring out its importance. 2. Explain the different approaches to IR. Which one is best suited to the Indian conditions and how? 3. What are the causes of poor IR in India? Suggest measures for improving industrial relations. 4. Write an essay on IR in India.

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5. Bring out the effects of the NEP on IR in India. 6. Enumerate the objectives of the ILO. Evaluate the influence of ILO on labour policy, labour legislation and trade union movement in India?

REFERENCES 1. Dale Yoder: Personnel Management and Industrial Relations, Printice Hall Inc, New Jersey, 1965. 2. Michael Armstrong: A Handbook of Personnel Management Practice, Kogan Page, London, 1995, p. 557 3. V.B. Singh: Climate for Industrial Relations, Asia Publishing House, Bomay 1968, p. 9 4. Encyclopaidia Britannica, Vol. 12, London, 1961, p. 297 5. H.S. Kirkaldy: The Spirit of Industrial Relations,Oxford University Press, New Delhi, 1947, pp. Viii-ix 6. K. Aswathappa: Human Resource and Personnel Management, Tata McGraw- Hill Publishing Company Ltd. New Delhi,1999, p. 512 7. V. S. P Rao: Human Resource Management, Excel Books, New Delhi, 2000, p. 508 8. The Week, May 28, 2000 9. The Economic Times, 20th March, 1998. 10. Raymond J. Stone: Human Resource Management, John Wiley & Sons, New York, 1995, p. 415. 11. A Fox: Man Management, Hutchinson, New York, 1974, p.10 12. G.A. Cole: Personnel Management: Theory and Practice, DD Publications, London, 1993, p. 447 13. Michael Armstrong : op. cit, p. 561 14. G.A. Cole: op. cit., 1993, p. 446 15. G.A. Forehand and B. V. H. Gilmer. Environmental Variables in Studies or Organisational Behaviour, Psychological Bulletin, No. 62, 1964, pp. 361-382. 16. John Purell: Good Industrial Relations, Macmillan, New York, 1991 17. K.R. Shyam Sunder: Structural Adjustment and Industrial Relations in India, Management & Change, Volume 1, Number 2, December 1997, pp. 78-83 18. V. Bahl: Attitude of the Indian National Congress towards the Working Class Struggle in India 1918-1947, In: Kapil Kumar (Ed.): Congress and Classes: Nationalism, Workers and Peasants, Manohar Publications, New Delhi,1988. 19. C. Myers and S. Kannappan: Industrial Relations in India, Asia Publishing House, Bombay, 1970, p. 305 20. S.D. Punekar: Aspects of State Intervention in Industrial Relations in India : An Evaluation, In: A.M. Ross (Ed.): Industrial Relations and Economic Development, Macmillan, London, 1966, p. 26 21. P.J. Philip : Adjucation and Collective Bargaining, The Economic Weekly, vol. XII, 1960, pp. 521-524

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22. T.S. Papola: The Place of Collective Bargaining in Industrial Relations Policy in India, Journal of Industrial Relations, vol. 10, 1968, pp. 3-16 23. M. Mehta: Industrial Relations Bill (n.d.), BMS, New Delhi, 1978. 24. C.K. Johri: Towards Social Dialogue : Tripartite Cooperation in National Economic and Social Policy Making, ILO, Geneva, 1944, p. 211 25. M. Desai and Jaya Chandran: Imprisoning the Union, C.G. Shah Memorial Trust Publication, Bombay, 1989, p. 28 26. C.K. Johri : op. cit, 1994, p. 212. 27. Jacob Mankidy : Quality of Work Life and Industrial Relations: Linking the Inevitables, In: Debi S. Saini and Sami A. Khan (Eds.): Human Resource Management (Persepectives for the New Era), Response Books (A Division of Sage Publications), New Delhi, 2000, p.p. 263-265 28. N.R. Seth: Some Thoughts on Our Trade Unions, Indian Institute of Management Ahmedabad, Working Paper No. 964, 1991. 29. T.N. Bhagoliwal: Economics of Labour and Industrial Economics , Sahitya Bhawan, Agra, 1995, p. 647

25 INDUSTRIAL DISPUTES (ID) Learning Objectives After studying this chapter, you should be able to : 1.

Define industrial dispute.

2.

Identify the factors that casue industrial disputes.

3.

Delineate the scenario of industrial disputes in India.

4.

Bring out the consequences of industrial disputes that cause cost to the nation.

5.

Suggest measures to prevent disputes.

6.

Examine the machinery for settling industrial disputes.

Poor industrial relations often culminate to industrial unrest disputes. They manifest in the form of go-slow, gheraos, bandh, strikes, lockouts, etc. The common consequences of industrial disputes are loss of production, loss of profit, and even closure of units. Thus, industrial disputes benefit to none. Venkata Ratnam and Srivastava1 consider industrial disputes as indemic to the industrial society. Hence, the need for understanding and resolving industrial disputes. Just what industrial disputes are, what causes them, and how they can be resolved or settled are the subject matter of this chapter.

25.1 CONCEPT OF INDUSTRIAL DISPUTES In common parlance, dispute means difference or disagreement or strife over some issues between the parties. As regards industrial dispute, since its settlement proceeds as per the legal provisions contained in the ‘Industrial Disputes Act, 1947,’ hence it seems pertinent to study the concept of industrial disputes from a legalistic angle. According to Section 2 (k) of the Industrial Disputes Act, 1947, the term ‘industrial dispute’ means “any dispute or difference between employers and employers or between employers and workmen, or between workmen and workmen, which is connected with the employment or nonemployment or the terms of employment and conditions of employment of any person”. The above definition is too broad and includes differences even between groups of workmen and employers engaged in an industry. However, in practice, industrial disputes mainly relate to the difference between the workmen and the employers. We shall also mean industrial disputes in this chapter arising between the workmen and the employers. Dispute difers from discipline and grievance. While discipline and grievance focus on individuals, as seen earlier in Chapters 22 and 23 respectively, dispute focuses on collectivity of individuals. In other words, the test of industrial dispute is that the interest of all or majority of workmen is involved in it. The following principles judge the nature of an industrial dispute : 1.

The dispute must affect a large number of workmen who have a community of interest and the rights of these workmen must be affected as a class.

2.

The dispute must be taken up either by the industry union or by a substantial number of workmen.

3.

The grievance turns from individual complaint into a general complaint. 295

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4.

There must be some nexus between the union and the dispute.

5.

According to Section 2A of the Industrial Disputes Act, 1947, a workman has a right to raise an industrial dispute with regard to termination, discharge, dismissal, or retrenchment of his or her service, even though no other workman or any trade union of workman or any trade union of workmen raises it or is a party to the dispute.

Forms of Industrial Disputes The industrial disputes are manifested in the following forms: Strikes: Strike is the most important form of industrial disputes. A strike is a spontaneous and concerted withdrawl of labour from production. The Industrial Disputes Act, 1947 defines a strike as “suspension or cessation of work by a group of persons employed in any industry, acting in combination or a concerted refusal or a refusal under a common understanding of any number of persons who are or have been so employed to continue to work or accept employment”. According to Patterson2, “Strikes constitute militant and organised protest against existing industrial relations. They are symptoms of industrial unrest in the same way that boils are symptoms of disordered system”. Depending on the purpose, Mamoria et. al.3 have classified strikes into two types : primary strikes and secondary strikes. (i) Primary Strikes: These strikes are generally aimed against the employers with whom the dispute exists. They may include the form of a stay-away strike, stay-in, sit-down, pen-down or toolsdown, go-slow and work-to-rule, token or protest strike, cat-call strike, picketing or boycott. (ii) Secondary Strikes: These strikes are also called the ‘sympathy strikes’. In this form of strike, the pressure is applied not against the employer with whom the workmen have a dispute, but against the third person who has good trade relations with the employer. However, these relations are severed and the employer incurs losses. This form of strike is popular in the USA but not in India. The reason being, in India, the third person is not believed to have any locus standi so far the dispute between workers and employer is concerned. General and political strikes and bandhs come under the category of other strikes. Lock-Outs: Lock-out is the counter-part of strikes. While a ‘strike’ is an organised or concerted withdrawal of the supply of labour, ‘lock-out’ is withholding demand for it. Lock-out is the weapon available to the employer to shut-down the place of work till the workers agree to resume work on the conditions laid down by the employer. The Industrial Disputes Act, 1947 defined lock-out as “the temporary shutting down or closing of a place of business by the employer”. Lock-out is common in educational institutions also like a University. If the University authority finds it impossible to resolve the dispute raised by the students, it decides to close-down (or say, lockout) the University till the students agree to resume to their studies on the conditions laid down by the University authority. Recall, your own University might also have declared closure sometimes for indefinite period on the eve of some unrest / dispute erupted in the campus. Gherao: Gherao means to surround. It is a physical blockade of managers by encirclement aimed at preventing the egress and ingress from and to a particular office or place. This can happen outside the organisational premises too. The managers / persons who are gheraoed are not allowed to move for a long time. Sometimes, the blockade or confinement are cruel and inhuman like confinement in a small place without light or fans and for long periods without food and water. The persons confined are humiliated with abuses and are not allowed even to answer “calls of nature”4. The object of gherao is to compel the gheraoed persons to accept the workers’ demands without recourse to the machinery provided by law.

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The National Commission on Labour has refused to accept ‘gherao’ as a form of industrial protest on the ground that it tends to inflict physical duress (as against economic press) on the persons gheraoed and endangers not only industrial harmony but also creates problems of law and order. Workmen found guilty of wrongfully restraining any person or wrongfully confining him during a gherao are guilty under Section 339 or 340 of the Indian Panel Code of having committed a cognizable offence for which they would be liable to be arrested without warrent and punishable with simple imprisonment for a term which may be extended to one month or with a fine upto Rs. 500, or with both. Gherao is a common feature even in educational institutions. You might have seen in your own University officers gheraoed by the employees / students to compel the officers to submit to their demands. Here is one such real case of gherao.

GHERAO OF THE VICE CHANCELLOR The non-teaching employees of a Central University in the North-East India had some demands with the University authority for quite some time. Non-confirmation of some of lthe employees even after completion of six years service was one of the main demands. That the Vice Chancellor was to resign on 31st October was known to all in the University. As the last pressure tactic, the employees started Vice Chancellor’s gherao on 31st December at 11.00 a.m. They shut down the entrance gate of the administrative building at 3.00 p.m. to block the egress and ingress from and to the office in the administrative building. The Vice Chancellor was kept confined in his office chamber. He was humiliated through out the gherao by using abuses, disconnecting his telephone line, not allowing him food and water and even not allowing him to answer “ calls of nature”. This scene lasted for 18 hours and was over only by 5 a.m. next day when some 50 C.R.P.F jawans with local police came from the city which is about 20 kms. away from the University Campus. They broke the entrance gate of administrative building, rescued the Vice Chancellor and arrested 117 employees wrong-fully confining the Vice Chancellor under Section 340 of lthe Indian Penal Code and kept them behind bars for a day. On 1st November, the Vice Chancellor handed over the charge of his office to the senior most Professor of the University at his residence in the city. In the wee hours on 2nd. Nov., he left for where he came from. The aftermath of gherao created a tenseful atmosphere in the University Campus for about two weeks. Picketing and Boycott: Picketing is a method designed to request workers to withdraw cooperation to the employer. In picketing, workers through display signs, banners and playcards drew the attention of the public that there is a dispute between workers and employer. Workers prevent their colleagues from entering the place of work and pursuade them to join the strike. For this, some of the union workers are posted at the factory gate to pursuade others not to enter the premises but to join the strike. Boycott, on the other hand, aims at disrupting the normal functioning of the organisation. The striking workers appeal to others for voluntary withdrawl of co-operation with the employer. Boycotting classes and examinations are seen in the Universities also. Types of Industrial Disputes: The ILO5 has classified the industrial disputes into two main types. They are : 1. Interest Disputes 2. Grievance or Right Disputes. They are discussed one by one. Interest Disputes: These disputes are also called ‘economic disputes’. Such types of disputes arise out of terms and conditions of employment either out of the claims made by the employees or offers given by the employers. Such demands or offers are generally made with a view to arrive at a

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collective agreement. Examples of interest disputes are lay offs, claims for wages and bonus, job security, fringe benefits, etc. Grievance or Right Disputes: As the name itself suggests, grievance or right disputes arise out of application or interpretation of existing agreements or contracts between the employees and the management. They relate either to individual worker or a group of workers in the same group. That’s way in some countries, such disputes are also called ‘individual disputes.’ Payment of wages and other fringe benefits, working time, over-time, seniority, promotion, demotion, dismissal, discipline, transfer, etc. are the examples of grievance or right disputes. If these grievances are not settled as per the procedure laid down for this purpose, these then result in embitterment of the working relationship and a climate for industrial strife and unrest. Such grievances are often settled through laid down standard procedures like the provisions of the collective agreement, employment contract, works rule or law, or customs /usage in this regard. Besides, Labour Courts or Tribunals also adjudicate over grievance or interest disputes. Generally, industrial disputes are considered as ‘dysfunctional’ and ‘unhealthy’. These are manifested in the forms of strikes and lock-outs, loss of production and property, sufferings to workers and consumers and so on. But, sometimes industrial disputes are beneficial as well. It is the dispute mainly which opens up the minds of employers who then provide better working conditions and emoluments to the workers. At times, disputes bring out the causes to the knowledge of the public where their opinion helps resolve them.

25.2 CAUSES OF INDUSTRIAL DISPUTE The phenomenon of industrial disputes is inherent in the industrial system. This is because of the features of industrial work, i.e., it involves division of labour, it is group work, and it is carried under control. In a capitalist economy, it is wage work generally carried on profit, causes industrial disputes. As the late Dr. Radha Kamal Mukherjee6 also observed, “The development of capitalistic industry which means the control of the tools of production by a small entrepreneur class has brought to the force the acute problem of friction between management and labour throughtout the world”. Broadly speaking, industrial disputes or differences in an industry occur owing to factors which are essential economic in nature. However, as exhibited by the recent trends, industrial disputes occur due to non-economic causes also. These mainly include psychological, ideological and political causes. Behavioural studies like Hawthorne studies of Roethlisberg and associates7 and Elton Mayo’s8 reserach findings also support that, besides economic consideration, workers contentment also depends upon the psychological and social relationships they have especially with fellow workers. This is precisely due to this reason that the social scientists like W.F. Whyte in United States and A. K. Sen and H. C. Ganguli9 in India have attempted to replace the classical model of the ‘economic man’ by that of the ‘socio-economic man’. There are host of factors that cause industrial disputes. Table 25.1 bears data on cause-wise industrial disputes in India. Table 25.1 : Cause-wise Industrial Disputes in India

(in per cent) Years

Wages

Bonus and Allowances

1961 1981 1986 1992 1996

30.4 28.1 24.3 24.6 24.4

6.8 8.0 9.1 2.2 3.6

Personnel and Retrenchment 29.3 21.2 22.0 15.5 19.8

Leave and Hours of work 2.9 1.7 1.2 1.7 2.2

Indisciple and Violence — 9.4 14.3 21.1 21.6

Others

30.4 26.2 24.6 34.9 27.8

Source : Various Issues of the Handbook of Labour Statistics and Annual Report, Ministry of Labour.

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Compared to the situation prevailing in early 1980s, it is noted from Table 25.1 that causes like wages, bonus and allowances, leave and hours of work are much less important now, while causes like indiscipline and violence have become more responsible for industrial sickness. For systematic understanding of causes of industrial disputes, these can be grouped into four categories. vis., economic causes, management practices, trade union practices, and legal and political factors.

Economic Causes Economic causes of industrial disputes relate to interest disputes as discussed earlier in this chapter. These include wages, bonus, allowances, benefits, incentives, and working conditions. History of industrial disputes reveals that the most of industrial disputes arise out of the economic reasons. Further, wages has been the major economic reason causing industrial disputes. There are two reasons attributed to this. First, the demand for wages has never been fully met because of continuously rising inflation and high cost of living. These result in never-ending demand for upward revision of wages from the trade unions. Second, wage differential among industrial sectors, regional levels, and geographical levels, as discussed in chapter 23, also become the bone of contention between the workers and the management. To quote, it was the wage differentials prevailing at different plants of the TELCO that made the Luchnow plant of TELCO pitch tents demanding parity of wages. This led to violence and lockout in he TELCO, Lucknow.

Management Practices Instances are gallore to report that the management practices too, at times, lead to industrial disputes. These include : (i) Management’s threat of use of coercion in exercising the rights of workers to organise themselves in the form of union as per the legal provisions. (ii) The management’s unwillingness to recognize a particular trade union and its dilatory tactics in verifying the representative character of the trade union. (iii) Its unwillingness to talk over any dispute with the employees or refer it to “arbitration” even when trade unions want it to do so. (iv) Forcing workers either to join a particular trade union or refrain from joining a trade union. (v) To discharge or dismiss workers by way of discrimination, victimization, or any other subjective ground. (vi) The management’s denial for consulting workers in the matters of recruitment, promotion, transfer, merit awards, etc. (vii) The benefits offered by the management to workers are far from satisfactory. (viii) Violation of norms by the management such as Code of Discipline, grievance procedures, agreements entered into between workers and management, etc. The above management practices enrage the workers and lead to industrial disputes.

Trade Union Practices Just like management practices, trade union practices also cause industrial disputes. Most of organisations in India have multiple unions. To quote, Durgapur Steel Plant has 15 unions in existence. Such multiplicity of trade unions, among other things, leads to inter-union rivalry. Each union tries to show its greater concern for the workers’ cause so as to attract more and more workers to its folds. In this tug of war, the settlement arrived at between one union and management is opposed by other (rival) union. This show remains never ending one. This has exactly happened in the Singareni Collierie which witnessed 445 strikes (or say, more than one strike each day) in the year 1990-91. As a consequence, the unit suffered from a loss of production of the order of 3.12 million tonnes and 34.19 lakh mandays.

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Added to it is the trade unions’ assumption “what they do is only right and what management does is wrong” breed strife or dispute between the workers and the management. As such, trade unions oppose settlements and the dispute remains unresolved. Ramaswamy’s10 observation in this context is apt to quote : “CITU follows a pristime model of trade unionism drawn from the theory of class conflict...... The communists love to fight, but hate to win. Victory for them appears to be defeat. CITU never signed a settlement. When we start discussion, we know what is fair settlement. Others may be willing to accept unfair terms, but we cannot. We are also opposed to long-term settlements. Our position is that no settlement should be for more than three years. In point of fact, the communists have managed to maintain their lily-white image by refusing to sign any settlement for over fifteen long years”.

Legal and Political Factors Last but no means the least, the legal and political factors also cause industrial disputes. Like multiple trade unions, we also have multiple labour laws, totalling 108, to regulate IR in our country. While there exists contradiction among these laws with regard to IR,11 on the one hand, most of the labour laws enacted long back have by now outlived their relevance to a great extent in the changed industrial environment, on the other. Consider just one contradiction. Minimum wages vary widely across different states, viz., Andhra Rs. 11, Maharashtra Rs. 8, Gujarat Rs. 15, Assam Rs. 32.80, and Haryans Rs. 51.57. So is in case of notice period also. Such a situation also at times is likely to lead to industrial disputes. Like other countries in the world, most of the trade unions is our country are also affiliated to political parties. In other words, the politicisation of trade unions is erupted very much in the country. Political parties divide unions on party lines. These also engineer strikes, gheraos and bandhs to demonstrate their strengths. The political party which is in power invariably favours a trade union which is affiliated to it. The outcome is predictable, i.e., unending disputes in the organisation.

25.3 INDUSTRIAL DISPUTES IN INDIA With a view to getting a better understanding of industrial disputes and, in turn, industrial relations in India, it seems pertinent to delineate the historical persepective of industrial disputes in the country. This section deals with the same. For the convenience of lthe readers a chronological account of industrial disputes history in India is presented under the following three heads : I. Pre-Independence Period II. Post-Independence Period III. Post-Liberalization Period A detailed description of these follows in seriatim.

Pre-Independence Period Industrial disputes gets manifestation mainly in the form of strikes and lockouts. According to the Royal Commission on Labour,12 till the First World War, strikes, on the whole, were rare. But, this does not mean that workers had no grudge or complaints against their employers. In fact, it was so becasue the workers were illiterate, unorganised, submissive, unconscious of their powers and rights, lack of organisation and leader who could fight on their behalf and deliver the goods. The first strike about which reliable information is obtainable occured in a textile factory in Bombay in 1882. Which was followed by a few occassioanl strikes. As reported by S. G. Panandiker13, the first big strike, officially recorded, occurred in Ahmedabad in 1885 as a protest against substitution of a fortnightly payment of wages in place of weekly payment that had existed before, but the strike failed.

Industrial Disputes (ID)

301

The period following the World War I experienced price hikes, workers awakening by the Russian Revolution and the ILO (1919) and the inuaguration of the trade union leadership(1926). As a result, the period 1926 to 1930 was marked by a record loss of 49 million mandays in communist dominated strikes mainly in textile mills. Subsequently, because of the split in trade union leadership, the appointment of the Royal Commission on Labour and the deepening crisis, industrial disputes witnessed pronounced decline during the next few years. But, with the breakout of the World War II in September 1939, prices begain to soar making the leving for workers miserable. This, obviously, resulted in demand for increase in dearness allowance for workerws all over the country. In consequence, the number of industrial disputes almost doubled from 406 in 1939 to 820 in 1945. During 1939-1945, the total number of industrial strikes were 4,000, involving 37 lakhs workers, and causing 31.5 million mandays lost. A bird’s eye view of industrial disputes in India during pre-Independence period is presented in Table 25.2. Table 25.2 : Industrial Disputes in India During Pr e-Independence.

Year

No of Disputes*

1921 1926 1930 1936 1940 1944 1947

396 128 148 157 322 658 1,811

No of Workers (in’000) Involved

Mandays Lost (in lakhs)

600.3 186.8 196.3 169.0 452.5 550.0 1,840.7

69.8 10.9 22.6 23.6 75.7 34.4 165.6

N.B.* : Upto 1936, the number of disputes imply number of work stoppage. Source : Ministry of Labour : Annual Report and Indian Labour Year Book of the respective years.

Post-Independence Period The Independence of India was followed by the concomitant factors like the overwhelming feeling of Independence in the minds of workers as a sequel to the transfer of power to the national government, the fear of retrenchment, the growing communist influence over the workers and rising cost of living. These all set a hell in India just after Independence for large scale industrial unrest14. This is evident from Table 25.3. Table 25.3 : Industrial Disputes in India (1951-1990)

Year 1951 1961 1971 1976 1981 1990

No of Disputes* 1,071 1,357 2,752 1,308 2,589 1,825

Workers Involved (in’000) 691.3 511.9 138.9 11,873.7 1,588.4 1,308.0

Mandays Lost (in lakhs) 128.1 49.2 165.5 127.4 365.8 240.9

Source : Various issues of the Handbook of Labour Statistics and Annual Report, Ministry of Labour.

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As seen from Table 25.3, industrial disputes showed wide fluctuations during the post-Independence period. The government measures like the Code of Discipline (in 1958) and the adoption of the Industrial Truce Resolution (in 1962) led to a decline in industrial disputes in the country. But, the ensuing decade (1964-74) witnessed rising prices, monsoon failures, Indo-Pak conflict (1965), recession and unprecedented oil price hike (1973). All these got expression in the increased number of strikes/disputes. To quote, the number of industrial disputes in 1971 rose to 2,752. 1974 was the year marked by an all India railway strike. The government’s strong measures to ensure uninterrupted production during the period of emergency (1975-1976) made the period stand apart with marked decline in the number of industrial disputes (1308). With the lifting of emergency in early 1977, industrial disputes again experienced steep increase 2589 in 1981. It was 1982 in which the nation witnessed the world’s longest strike (for over 18 months) in Bombay textile mills staged on January 13, 1982 and led by Dr. Datta Samant (a militant trade union leader). The seeds of liberalisation were sown from the mid-1980s by the Rajiv Gandhi government. This strengthened the power of management and weakend that of the trade unions. This process was accelerated since July 1991 when the Government of India introduced its New Economy Policy (NEP) to make the Indian economy a world level player.

Post-Liberalization Period The Post-liberalisation climate has brought in a perceptible shift in balance of power in favour of management/employers. This is well reflected by decline in the number of strikes and increase in number of lockouts during this period (Table 25.4) Speaking alternatively, the bargaining power of trade unions has impoverished and that of the employers has gone up. As such, management has been using lockouts to bring workers down on their knees. This is duly admitted by the militant trade union leaders like Dr. Datta Samant : Militantancy has gone down”, and Shri R. J. Mehta of Engineering Mazdoor Union : “Labour has today left its teeth”. In this context, the following excerpt from India Today15 are worth consideration: “ On January 12 this year, more than 1.5 lac insurance workers went on strike across the country to protest against the recommendation of the Malhotra Committee on reforms in the insurance sector. However, they were back at their jobs within two hours. It was an example of the softening stand of the labour sector. Half a decade ago, a nation-wide protest of this nature would have kept them away from work for several weeks”. “What’s changed the workers’ attitude is the realization that the Government is no longer going to bail them out”. Very possibly, it is due to these reasons the proportion of strikes with short duration (even less than for a day) has been on increase. For example, the percentage of strikes for less than for 5 days has declined from 66% in 1961 to 51% in 1996. Of these 51% strikes in 1996, strikes less than for a day accounted for 35%. That the incidence of industrial conflicts or disputes is much higher in the private sector than in the public sector is well indicated by the number of disputes, mandays lost and average number of mandays lost per worker between the two sectors (see Table 25.5). Table 25.5 : Industrial Disputes by Sectors

Public Sector Number of Disputes

1971

1983

1990

1995

1996 (P)

385

884

628

343

230

2353 1262

2478 1476

1644 1033

1975

4743

24 139

6 41 — 12 (1967) (1968) — — 10

3469

9950 82 —

203 148

117 80

1348 1495

1987 1304 —

1397 1158

1988 1989

1991 1992 1993

1459 1278 1011 914 1162 872 7670 6720

1990

451 275

441 —

389 206

366 146

532 470

703 435

479 282

393 220

6651

808 6260

1994

353 202

334 307

253 250

5720 3527

732 6830

1995 1996

9 4 —

6

—

4 1 —

— —

@

1 @

—

— @

3

4 6

@

1 @

—

— —

4

3 1

—

1 —

—

1 —

9947 21332 21417 21968 13446 14000 16130 14690 14332 10570 7973

218 186

2799 14026 12530 10695 10640 12428 15130 56100

1241 550

1976

34 8

5159

299 111

2962 10377 11308 16706

1240 432

1966 1971

Source : Various Issues of the Hand Book of Labour Statistics and Annual Report, Ministry of Labour 1994—95 (P) Provisional

Strikes Number Workers involved ( 000) Mandays Lost ( ’000) Lockouts Number Workers involved ( 000) Mandays Lost ( ’000) Gheraos Number Workers involved ( 000) Mandays Lost ( ’000)

1961

Table 25.4 : Disputes by Strikes, Lockuts and Ghernos (1961-1996)

Industrial Disputes (ID) 303

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Table 25.5 (contd.)

Workers involved ( ’000) Mandays Lost ( ’000) Mandays Lost per Worker Private Sector Number of Disputes Workers involved ( ’000) Mandays lost ( ’000) Mandays lost per Worker

1971

1983

1990

1995

1996 (P)

364 2253 6

757 4453 6

884 5736 6

725 4795 7

267 1156 5

2367 1252 14292 12

604 703 32406 46

1197 424 18350 46

723 264 11496 57

381 185 10343 56

P = Provisional Source : Compiled and computed from various issues of the Handbooks of the Labour Statistics.

The ratio of industrial disputes between public and private sectors has come down from 1:6 in 1971 to 1 : 2 in 1995. This is indicative of the fact that industrial disputes in the private sector have increased but at a lower rate as compared to that in the public sector. The following reasons may be advanced to explain the varying levels of industrial disputes between the public and the private sectors. Firstly, it is felt that there is a general tendency in most public enterprises to avoid strikes at any cost because the strike affects the large segments of the economy. Secondly, usually industrial disputes are settled more quickly in the public sector than in the private sector because of pressure from the public and the government. The reason being the public sector covers infrastructure facilities and public utilities. Added to it is the short tenure of the chief executives in the public sector lurring the management to be short-sighted and reach stop-gap agreements without necessarily solving problems. Thirdly, the management in the private sector usually shows greater preparedness for a show down. This is indicated by the common phenomenon of lock-outs in the private sector which is practically non-existent in the public sector. Finally, the theory of attribution still operates very much in the private sector by yielding least concessions to the workers. An analysis of industrial disputes i.e., strikes and lockouts in different states reveals that the incidence of disputes were highest in the four states of West Bengal, Tamil Nadu, Maharashtra and Gujarat. These states also happen to be the highly industrialied states of the country. These accounted for 73.4 percent of total mandays lost in 1991. West Bengal registered the maximum of disputes followed by Maharashtra, Tamil Nadu and Gujarat in that order.

25.4 CONSEQUENCES OF INDUSTRIAL DISPUTES Having identified the various causes of industrial disputes and also delineated the scenario of industrial disputes in the country, it seems pertinent let us also have an idea about the consequences, i.e., the cost of industrial disputes to the country. This is presented in Table 25.6. Table 25.6 : The Cost of Industrial Disputes to the Nation

Year

No of Industrial Disputes

No of Workers Involed (In Lakhs)

No of Mandays Lost (In Lakhs)

1961 1966 1971

1357 2556 2747

5.11 14.10 16.15

49.20 138.50 165.46

Wages Lost (Rs. Lakhs)

82.9 606.5 —

Value of Production Lost (Rs. Lakhs) 537.8 1531.3 —

Industrial Disputes (ID)

Year

1980 1986 1987 1988* 1989 1990 1991 1992 1993* 1994 1995 1996 (P)

305

No of Industrial Disputes

No of Workers Involed (In Lakhs)

No of Mandays Lost (In Lakhs)

2191 1892 1799 933 1786 1825 1810 1714 1393 1201 1066 611

11.35 16.45 17.70 7.89 13.64 13.08 13.42 12.52 9.54 8.46 9.90 4.52

12.91 327.48 353.58 179.89 326.64 240.86 264.29 315.59 203.01 209.83 162.90 115.00

Wages Lost (Rs. Lakhs)

107.3 453.2 538.8 301.9 499.7 337.4 393.6 353.2 376.8 292.4 543.1 168.8

Value of Production Lost (Rs. Lakhs) 1184.7 8135.8 6396.9 4022.4 4953.0 3437.2 5798.7 5334.1 6606.6 4819.9 4545.9 1244.1

Source : Various issues of the Hand Book of Labour Statistics. * Provisional

The common consequences of industrial disputes are loss of production, income, and employment and increase in inflation and cost of living. Alternatively speaking, industrial disputes injure economic welfare of the nation broadly in two ways. Firstly, work-stoppages impoverish the workers actually involved in the disputes and, thus, lessens their demand for the goods manufactured by other industries. Secondly, if the industry under work-stoppage manufactures items that are used in the conduct of other industries, it lessens the supply of raw materials for their production. This ultimately results in loss of output and, in turn, reduces the national income. The value of production loss, which was Rs. 537.8 lakhs in 1961, has increased to Rs. 4,545.9 lakhs in 1995, i.e., an eight-times increase in the production loss.

BOMBAY TEXTILE WORKERS STRIKE, 1982 That even a single strike badly costs to the nation is well confirmed by the Bombay Textile Workers strike in 1982. This was the longest strike in the world staged by Datta Samant on January 13, 1982 which lasted for about 18 months. In this strike, more than 2.5 lakh workers of 60 textile mills in Bombay (now Mumbai) were involved. The strike resulted in a wage loss of Rs. 300 crore to the workers and Rs. 200 crore loss to the mills, and cloth production worth about Rs. 2,000 crores was badly hit. Out of the total mandays lost of 74.61 million due to industrial disputes in 1982, 41.40 million mandays were lost in this Bombay textile strike alone16. On the whole, the strike failed miserably and workers had to suffere a lot. Thus, the cost of industrial disputes to the nation underlines the need for prevention and settlement of industrial disputes. The subsequent sections deal with the same.

25.5 PREVENTION OF INDUSTRIAL DISPUTES The frequency with industrial disputes occur and the grave costs these cause, as seen in the preceding section, underline the need for preventing industrial disputes and preserving industrial peace. Further, that prevention is better than settlement or cure also underlines the importance of preventing industrial disputes. Accordingly, a preventive mechinery is evolved that includes broadly all such measures which directly or indirectly contribute towards improvement of industrial relations and, in turn, prevention of industrial disputes. The preventive mechinery is essentially a proactive

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approach to avoid industrial disputes taking place in the organisations. The preventive mechinery includes various measures like trade, unions, collective bargaining, grievance procedure, workers, participation in management, empowerment, health and safety, and social security all these are discussed separately in fullfledged chapters. The additional preventive measures include the following: 1.

Joint Consultations

2.

Standing Orders

3.

Code of Discipline

Joint Consultations There are two important consultative arrangements made to prevent industrial disputes. These are works committees and joint management councils. Works Committees. As per the provisions of the Industrial Disputes Act, 1947, organisations employing 100 or more persons have to set up works committees at unit level. These committees have equal number of representatives from the workers and the employers. Works committees are purely consultative in nature and have been regarded as the most effective agency for the prevention of industrial disputes. The objectives of works committees are to : 1.

Remove the causes of friction in the day-to-day work situation.

2.

Foster amity and harmonious relationship between the parties.

3.

Create an atmosphere for voluntary settlement of disputes and frictions.

Issues relating to wages, benefits, bonus, terms and conditions of employment, hours of work, welfare measures, training, development, promotion, transfer, etc. fall under the purview of works committees. In countries like Britain and the USA, works committees have been very popular agencies to prevent industrial disputes. In India, works committees are set up through legislation. In India, TISCO was the first to set up works committee way back in 1920. By 1952, 2075 works committees came into existence in the country. However, only 530 works committees were operational due to various reasons at the end of 1987. Reasons like vagueness regarding their exact scope, functions, inter-union rivalries, union opposition and employees reluctance to utilize these for prevention of disputes rendered works committees ineffective. Joint Management Councils (JMC). In India, the joint management council (JMC) came into existence due to the provisions in this regard made by the Industrial Policy Resolution, 1956. These councils were set up to enable workers to participate in management and enfuse a spirit of cooperation between the workers and the management. The salient features of the JMCs are as follows: (i) The scheme is a voluntary one. (ii) The minimum and maximum number of its members are 6 and 12 respectively consisting of equal number of representatives of workers and employers. (iii) The JMCs deal with matters like information sharing, consultative, and administrative. (iv) The decisions taken by the JMC should be unanimous ones. (v) The JMCs can be set up in the units employing 500 or more persons and having strong trade unions. In India, industrial units like Hindustan Insecticides, HMT, Indian Airlines, Air India, in the public sector and TISCO, Arvind Mills, Modi Spinners and Weaving Mills, in the private sector, have been pioneers to introduce the JMC scheme. Past experience indicates that whereever the JMC schemes have been set up, there have been better industrial relations, more satisfied work force, increase in productivity, better profits, etc. This scheme has been introduced at the shop floor and plant level in 236 public sector undertakings by September 1994. However, like the works committees, the function-

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307

ing of the JMCs in India is also plagued by the factors like reluctance of workers, union rivalries, the management’s lukewarm attitude, etc.

Standing Orders A reference to the ‘Standing Orders’ has already been made in the previous chapter. The very purpose of having Standing Orders in the organisation is to regulate industrial relations. Essentially, the term ‘Standing Orders’ refers to the rules and regulations which govern the conditions of employment of workers. These standing orders are binding on the employer and the employees. The first legislative enactment, which incidentally sought to regulate the making of Standing Orders, was the Bombay Industrial Disputes Act, 1932 (Section 26 Chapter V). Recognizing the need for the standardised conditions of employment in factories to develop industrial peace in the country, the Industrial Employment (Standing Orders) Act was passed in 1946. This Act provides for the framing of standing orders in all industrial undertakings employing 100 or more workers. The Act covers employment matters like classification of employees, i.e., permanent, temporary, probationers, etc., shift working, hours of work; attendance and absence rules; leave rules; termination, suspension, and disciplinary action, etc. The Labour Commissioner or the Deputy Labour Commissioner or the Regional Labour Commissioner certifies the Standing Rules. Once the Standing Orders are certified, it is binding on the employees and the employers to abide by these Orders. Violation of Orders mentioned therein invites Penalties. The Industrial Employment (Standing Orders) Act, 1946 has been amended from time to time. As per the recent amendment made in the Act in 1982, there has been a provision for the payment of a subsistence allowance to workers who are kept under suspension.

Code of Discipline Over the years, a number of measures have been adopted in India to maintain and promote discipline and harmony between the employees and the employers. With this in view, the Second Five Year Plan suggested that a voluntary code of discipline must formulate and then abide by the same. Following this, the Indian Labour Conference in its fifteenth session held in 1958 evolved a code of Discipline in industry. This code was duly ratified by the national labour organisations like INTUC, AITUC, HMS, and UTUC and also by the employers associations such as EFI, AIOE and AIMO with effect from June 1, 1958. According to the Code of Discipline, both employees and employers voluntarily agree to maintain and create an atmosphere of mutual trust and co-operation in the industry. The code of Discipline provides for that : (i) Strikes and lockouts cannot be declared without prior notice. (ii) No party should take any direct action without consulting the other. (iii) The existing machinery for the settlement of disputes should be followed. In India, the Ministry of Labour and Employment has evolved a comprehensive code of Displine to maintain discipline and harmony in the industries. However, the code does not have any legal sanction. Only moral sanctions are behind it. By now, the Code of Discipline has been accepted by 200 employers and 170 trade unions. When industrial disputes could not be prevented even after adopting various preventive measures, as just discussed, disputes occurred need to be settled at the earliest possible so as its impending costs are minimized. This calls for a discussion on “settlement of industrial disputes”.

25.6 SETTLEMENT OF INDUSTRIAL DISPUTES Failure of the employees and the employers to sort out their differences bilaterally leads to the emergence of industrial disputes. The Industrial Disputes Act, 1947 provides a legalistic machinery for settlement of such disputes by involving the interference of a third party. The settlement machinery as provided by the Act consists of the three methods :

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1.

Conciliation

2.

Arbitration

3.

Adjudication

These are discussed one by one.

Conciliation In simple sense, conciliation means reconciliation of differences between persons. Conciliation refers to the process by which representatives of workers and employers are brought together before a third party with a view to persuading them to arrive at an agreement by mutual discussion between them. The alternative name which is used for conciliation is mediation. The third party may be one individual or a group of people. In view of its objective to settle disputes as quickly as possible, conciliation is characterised by the following features: (i) The conciliator or mediator tries to remove the difference between the parties. (ii) He/she persuades the parties to think over the matter with a problem-solving approach, i.e., with a give and take approach. (iii) He/she only persuades the disputants to reach a solution and never imposes his/her own viewpoint. (iv) The conciliator may change his approach from case to case as he/she finds fit depending on other factors. According to the Industrial Disputes Act, 1947, the conciliation machinery in India consists of the following : 1.

Conciliation Officer

2.

Board of Conciliation

3.

Court of Enquiry

A brief description of each of these follows: Conciliation Officer: The Industrial Disputes Act,1947, under its Section 4, provides for the appropriate goverment to appoint such number of persons as it thinks fit to be conciliation officers. Here, the appropriate government means one in whose jurisdiction the disputes fall. While the Commissioner /additional commissioner / deputy commissioner is appointed as conciliation officer for undertakings employing 20 or more persons, at the State level, officers from central Labour Commission office are appointed as conciliation officers, in the case of Central government. The conciliation officer enjoy the powers of a civil court. He is expected to give judgement within 14 days of the commencement of the conciliation proceedings. The judgement given by him is binding on the parties to the dispute. Board of Conciliation: In case the conciliation officer fails to resolve the dispute between the disputants, under Section 5 of the Industrial Disputes Act, 1947, the appropriate government can appoint a Board of Conciliation. Thus, the Board of Conciliation is not a permanent institution like conciliation officer. It is an adhoc body consisting of a chairman and two or four other members nominated in equal numbers by the parties to the dispute. The Board enjoys the powers of civil court. The Board admits disputes only referred to it by the government. It follows the same conciliation proceedings as is followed by the conciliation officer. The Board is expected to give its judgement within two months of the date on which the dispute was referred to it. In India, appointment of the Board of Conciliation is rare for the settlement of disputes. In practice, settling disputes through a conciliation officer is more common and flexible.

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309

Arbitration Arbitration is a process in which the conflicting parties agree to refer their dispute to a neutral third party known as ‘Arbitrator’. Arbitration differs from conciliation in the sense that in arbitration, the arbitrator gives his judgement on a dispute while in conciliation, the conciliator only facilitates the disputing parties to reach at a decision. The arbitrator does not enjoy any judicial powers. The arbitrator listens to the view points of the conflicting parties and then gives his decision which is binding on all the parties. The judgement on the dispute is given to the government. The government publishes the judgement within 30 days of its submission and the same becomes enforceable after 30 days of its publication. In India, there are two types of arbitration : Voluntary and Compulsory. Voluntary Arbitration: In voluntary arbitration both the conflicting parties appoint a neutral third party as arbitrator. The arbitrator acts only when the dispute is referred to him/her. With a view to promote voluntary arbitration, the Government of India has constituted a tripartite National Arbitration Promotion Board in July 1987, consisting of representatives of employees (trade unions), employers and the Government. However, the voluntary arbitration could not be successful because the judgements given by it are not binding on the disputants. Yes, moral binding is exception to it. Compulsory Arbitration: In compulsory arbitration, the government can force the disputing parties to go for compulsory arbitration. In other form, both the disputing parties can request the government to refer their dispute for arbitration. The judgement given by the arbitrator is binding on the parties of dispute.

Adjudication The ultimate legal remedy for the settlement of an unresolved dispute is its reference to adjudication by the government. The government can refer the dispute to adjudication with or without the consent of the disputing parties. When the dispute is referred to adjudication with the consent of the disputing parties, it is called ‘voluntary adjudication.’ When the government herself refers the dispute to adjudication without consulting the concerned parties, it is known as ‘compulsory adjudication.’ The Industrial Disputes Act, 1947 provides a three-tier machinery for the adjudication of industrial disputes : 1.

Labour Court

2.

Industrial Tribunal

3.

National Tribunal

A brief description on these follows. Labour Court: Under Section 7 of the Industrial Disputes Act, 1947, the appropriate Government by notifying in the official Gazette, may constitute Labour Court for adjudication of the industrial disputes. The labour court consists of one independent person who is the presiding officer or has been a judge of a High Court, or has been a district judge or additional district judge for not less than 3 years, or has been a presiding officer of a labour court for not less than 5 years. The labour court deals with the matters specified in the second schedule of the Industrial Disputes Act, 1947. These relate to : 1.

The property or legality of an employer to pass an order under the standing orders.

2.

The application and interpretation of standing orders.

3.

Discharge or dismissal of workers including reinstatement or grant of relief to workmen wrongfully dismissed.

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4. Withdrawl of any statutory concession or privilege. 5. Illegality or otherwise of a strike or lockout. 6. All matters other than those reserved for industrial tribunals. Industrial Tribunal: Under Section 7A of the Act, the appropriate Government may constitute one or more Industrial tribunals for the adjudication of industrial disputes. Compared to labour court, industrial tribunals have a wider jurisdiction. An industrial tribunal is also constituted for a limited period for a particular dispute on an adhoc basis. The matters that come within the jurisdiction of an industrial tribunal include the following : 1. Wages, including the period and mode of payment. 2. Compensatory and other allowances. 3. Hours of work and rest periods. 4. Leave with wages and holidays. 5. Bonus, profit sharing, provident fund, and gratuity. 6. Classification by grades. 7. Rules of discipline. 8. Rationalisation. 9. Retrenchment of employees and closure of an establishment or undertaking. 10. Any other matter that can be prescribed. National Tribunal: This is the third one man adjudicatory body appointed by the Central Government by notification in the Official Gazette for the adjudication of industrial disputes of national importance. The central Government may, if it thinks fit, appoint two persons as assessors to advise the National Tribunal. When a national tribunal has been referred to, no labour court or industrial tribunal shall have any jurisdiction to adjudicate upon such matter. Before we close this chapter, one last mention about the performance in industrial disputes’ settlement machinery in India seems pertinent. An overview of the same is presented in Table 25.7. Table 25.7 : Industrial Disputes Referred for Conciliation, Adjudication and Arbitration during 1971-1982.

Year

Taken for Conciliation

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

38,450 29,279 45,293 48,123 46,452 54,965 38,918 42,978 67,456 47,788 17,133 46,343

Reported to have failed at Conciliation

Referred for Adjudication

Referred for Arbitration

8,962 (23.3%) 9,520 (32.5%) 11,582 (25.5%) 12,182 (25.3%) 13,488 (29.0%) 15,829 (28.8%) 12,929 (33.2%) 14,713 (34.2%) 20,607 (30.6%) 15,728 (32.9%) 5,959 (34.8%) 16,889 (36.4%)

6,016 (68.2%) 5,918 (62.1%) 8,519 (73.5%) 7,804 (64.0%) 9,025 (66.9%) 9,173 (57.9%) 8,615 (66.6%) 10,472 (71.2%) 11,707 (88.5%) 13,923 (88.5%) 4,833 (81.1%) 13,054 (77.2%)

280 (3.1%) 124 (1.3%) 93 (0.8%) 109 (0.8%) 152 (1.1%) 90 (1.0%) 117 (1.4%) 87 (0.8%) 66 (0.6%) 58 (0.4%) 21 (0.4%) 100 (0.7%)

Source : Indian Labour Year Book, 1984 (Labour Bureau, Simla).

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The main highlights revealed from figures in Table 26.7. are gleaned as follows : 1.

That referring of disputes conciliation machinery is a common practice is well indicated by a large number of disputes taken for conciliation.

2.

One average, around one-third of the disputes referred for conciliation failed. Of these, about 60 to 90 per cent of cases were referred to adjudication. Only one per cent of the cases were referred for arbitration. These underline the ineffectiveness of conciliation machinery in settling industrial disputes. Thus, the existing machinery for the settlement of industrial disputes, as provided under the Industrial Disputes Act, 1947, needs to be strengthened.

3.

Adjudication has proved the most popular way of settling industrial disputes in India. This is because adjudication is the last recourse for disputing parties to settle their disputes.

Here, it is noteworthy that the data given in the Table 26.7 is incomplete in the sense that in no year did all the States and Union Territories send all the information. For example, in some years, as many as 12 States and Union Territories did not furnish information to the Union Ministry of Labour, as can be verified from the latter’s annual reports for the years under reference here. The landslide decrease in the number of disputes taken for conciliation from 47,788 in 1980 to 17,133 in 1981 is explained by the same reason, i.e. non-furnishment of information by all States and Union Territories. Finally, following are a few suggestions to make the settlement machinery more effective : 1.

The trained and experienced officers who are well acquainted with the problems of industrial workers, should be entrusted with the responsibility of dealing with conciliation machinery. Political and administrative interference should not be allowed to cloud the functioning of conciliation machinery.

2.

One way to strengthen the adjudication machinery is to substitute it by setting up Industrial Relations Commissions (IRCs), both at the central and the State level, on the lines suggested by the National Commission on Labour. The IRC should also be empowered to oversee the working of the conciliation machinery.

3.

In order to make arbitration fair, the arbitrator chosen for settling disputes be mutually acceptable to both the union and the management. This can be facilitated if the government prepares the panel of experienced arbitrators at the national and the state levels so that arbitrators are chosen from the panel, as and when required.

4.

The government should refrain from actively intervening in the matters of industrial disputes unless it is must for her to intervene in the disputes.

25.7 SUMMARY This summary is organised by the learning objectives given on page....295 1.

Industrial disputes refer to differences or disagreement between employees and employers.

2.

Industrial disputes arise because of economic reasons, management practices, trade union practices, and legal and political factors.

3.

The number of industrial disputes is continuously on increase. There has been a perceptible shift in balance of power in favour of employers during the post liberalisation period. That is why the number of strikes is on decline and that of lockouts on increase.

4.

Loss of production, lincome, employment and increase in inflation and cost of living have been the common consequences of industrial disputes. Hence, disputes are considered as endemic to the industrial society.

5.

Prevention machinery of industrial disputes comprises collective bargaining, grievance procedure, workers’ participation in management, empowerment, joint consultations, standing

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orders, and code of discipline. 6.

The machinery for settlement of industrial disputes consists of conciliation, arbitration, and adjudication.

KEY TERMS Adjudication

Grievance

Arbitration

Industrial Dispute

Attribution Theory

Lockout

Code of Discipline

Standing Orders

Conciliation

Strikes

REVIEW AND DISCUSSION QUESTIONS 1. Define the term industrial dispute. What are the important causes of industrial disputes in India? 2. Give an account for the phenomenal growth in industrial disputes in India. Also delineate the industrial disputes scenario during the post-liberalisation period. 3. “Industrial dispute or conflict is endemic to industrial society”. Explain. 4. “There are two approaches of managing industrial disputes in an organisation : preventive and curative”. Discuss the statement. 5. Discuss the major causes of industrial disputes in India and explain the machinery available for resolving them under the Industrial Disputes Act, 1947. 6. What are the legal provisions for settling industrial disputes in India? Suggest measures how to strengthen the settlement machinery. 7. Write short notes on : 1.

Standing Orders

2.

Code of Discipline

3.

Conciliation

4.

Arbitration

5.

Adjudication

REFERENCES 1. C. S. Venkata Ratnam and B. K. Srivastava : Personnel Management and Human Resources, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1996, p. 290. 2. Patterson : Social Aspects of Industry, p. 388 as quoted by Mamoria, Mamoria and Gankar : Dynamics of Industrial Relations, Himalays Publishing House, Nagpur, 2000, p. 241. 3. Mamoria, Mamoria and Gankar : Ibid, 2000, p. 250. 4. Jay Engineering Works Ltd. vs State of West Bengal, AIR, 1968, Calcutta 407. 5. I.L.O. : Conciliation of Industrial Disputes, First Indian Edition, 1980, pp.13-14. 6. Radha Kamal Mukherjee : Indian Working Class, p. 372. 7. F. J. Roethlisberg and William J. Dickson : Management and the Worker, Harvard University Press, Cambridge, Mass, 1939.

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8. Elton Mayo : The Human Problems of an Industrial Civilisation, The Macmillan Company, New York, 1933. 9. Cited by T. N. Bhagoliwal : Economics of Labour and Industrial Relations, Sahitya Bhawan, Agra, 1995, p. 244. 10. E. A. Ramaswamy : The Rayan Spinners, Oxford University Press, New Delhi, 1994, p.57. 11. C. S. Venkataratnam : Competitive Labour Policies and Labour Laws in Indian States, The Indian Journal of Labour Economics,Vol. 43, No. 4, October - December 2000, pp. 1049-1060. 12. Royal Commission on Labour, 1931, p. 333. 13. S. C. Panandikar : Industrial Labour in India p. 257. 14. S. K. G. Sundaram : Strikes and Lockouts in India : Past Experience and Future Persepectives, The Indian Journal of Labour Economics,October-December 1992, p. 371. 15. India Today, February 15, 1994, p. 110. 16. Mamoria, Mamoria and Gankar : op. cit., 2000, p. 269.

26 TRADE UNIONISM Learning Objectives After studying this chapter, your shold be able to : 1. Define the term ‘trade union.’ 2. Specify the reasons that motivate workers to join a union. 3. Classify the unions into types. 4. Discuss the proceducre involved in the registration and recognition of a trade union. 5. Outline the main provisions of trade union legislation in India. 6. List the various approaches/theories of trade unionism. 7. Delineate the scenario of trade union movement in India. 8. List the problems the trade union has been suffering from. 9. Suggest the measures to strengthen the trade union movement in the country. 10. State the recommendations made by the National Commission on Labour on trade unionism in India. In the beginning when business was in its family ownership form called ‘family business’, the workers’ relations with the employer were simple and straight. However, these relations gradually changed to complex and strained with the advent of industrial revolution. The growth of modern industrial establishments involving the employment of a large number of workers in conditions which make them helpless in bargaining individually for their terms of contract. As such, the workers felt the need for having some organisation to establish contacts with the employer to protect their interest. This gave birth to trade unions in the industrial organisations. Trade union has emerged over the period as a major institutional mechanism for resolving conflicts of interest between the workers and the employers in a free society like ours. It is against this background, the objective of this chapter is to provide a persepective on the trade union scenario in the Indian context. Accordingly, the aspects discussed include the meaning, evolution and development, theories and problems of trade unions.

26.1 MEANING OF TRADE UNION Like all other economic terms, it seems in the fitness of the context to first delineate the contours of the expression “trade union” for the better understanding of it. Different authors have defined trade union in different ways. The Webbs1 defined a trade union as “a continuous association of wage earners for the purpose of maintaining or improving the conditions of their working lives.” For Cole,2 “a trade union means an association of workers in one or more occupations — an association carried on mainly for the purpose of protecting and advancing the members’ economic interests in connection with their daily work”. According to Section 2(h) of the Trade Union Act, 1928, a trade union means, “any combination, whether temporary or permanent, formed primarily for the purpose of (a) regulating the relations (1) between workmen and employers, or (2) between workemen and workmen, or (3) between employers and employers; or (b) for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more trade unions”. The British Ministry of Labour has defined trade unions as “all organisations of employees 314

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including those of salaried and professional workers as well as those of manual wage earners which are known to include among their functions that of negotiating with their employers with the object of regulating conditions of employment”. After going through above definitions, now trade union can be defined as a continuous and voluntary association of the salary or wage earners and engaged in whatever industry or trade, formed for protecting the members’ interests, improving the conditions of their working lives, and ensuring better relations between them and their employers, through collective bargaining. Thus, trade union is an organisation of workers formed to further the social, economic, and political interests of its members. An analysis of above definitions of trade unions reveals the following characteristics of a trade union : 1.

It is a voluntary association of workers formed to protect and promote their interests through collective bargaining.

2.

Such an assoication of workers could be temporary or permanent.

3.

Trade unions being voluntary ones, a worker has choice to join or not to join a union.

4.

A trade union has also choice to affiliate or not to affiliate itself with an apex body of trade unions, federation of unions.

As just mentioned, trade unions are voluntary associations to which a worker may or may not join. If still workers join a trade union, then a pertinent question arises is that “why do workers join a trade union?” The subsequent section addresses to this question only.

26.2 WHY DO WORKERS JOIN A TRADE UNION ? Human beings are rational creature. They usually act upon rationally in different spheres of their lives. Similarly, workers join a union with a rationale approach whether joining a union will be beneficial or not. This can simply be decided by making a cost-benefit analysis in this regard. The excess of benefits over costs, i.e., profit or reward, justifies workers’ joining to a trade union. Researchers have devoted a great deal of time and effort to study “why do employees choose to join a union”? They have failed to report a common list of reasons that apply to all organising efforts. Nonetheless, there is a general agreement among the labour experts that certain issues are likely to lead to an organising drive by workers3. Major ones among them are the following :

Job Security Employees need to have a sense of job security and want to be sure that management will not make unfair and arbitrary decisions about their employment. They look unions to ensure that their jobs are duly protected against lay offs, recall, promotion, etc.

Wages and Benefits Employees work for livelihood, i.e., bread-and-butter. Obviously, bread-and-butter issues of employees are always important issues in their unionization. The employees may think that the union, with its united strength, will ensure fair wages at par with those of other workers in the community, benefits such as medical facility, pensions, paid sick leave, vacations and holidays for them.

Working Conditions Employees like to work in a healthy and safe environment. Although there are statutory provisions for providing employees a safe work environment4 as discussed in Chapter 20, employees still feel more secured knowing that trade union is directly involved in safety and health issues relating to them.

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Fair and Just Supervision The days are long gone when managers / leaders could rule employees with an iron fist. Thanks to the trade unions that brought about a change or shift in leadership styles from autocractic to democratic, or say, people oriented to ensure that the managers treat their employees fairly, justly, and respectfully. Employees can only be disciplined for “just cause.” In case of mistreatment from the employer, the employee may file a written grievance against the employer. The complaint will be heard and resolved through a formal grievance procedure involving collective discussion by both union and management representatives. The grievance procedure is already discussed in Chapter 23.

Powerlessness Employees individually often feel voiceless or powerless to bring about changes that will benefit them5. But, it is union that provides them a powerful, collective voice to communicate to management their dissatisfaction and frustration. This is based on labour phiolosophy ‘unity is the strength”.

Need to Belong Man is a social animal. Hence, need to belong is strong in both his personal and work lives. The union, from this point of view, provides a mechanism for bringing people together not only to promote common job-related interests but also to organise programmes, functions, and social events from time to time, to create a strong bond among the union members6. To conclude, the management’s failure in ensuring job security, fair remuneration, safe and healthy working conditions, fair supervision, involvement in decision making, sense of belonging etc., to employees motivates them to join a union. This is corroborated by well investigated reserarch studies also as is shown by Table 26.1. Table 26.1 : What Union Employees Believe Their Unions Provide Compared to Non-union Employees

Item Benefits Pay Job Security Fair Treatment by Supervisors Participation in Decision Making Health and Safety Conditions

% Responding 67 62 56 46 38 38

Source : Karol Keegan : How Union Members and Non-Union View the Role of Unions, Monthly Labour Review, No. 8, August 1987, pp. 50-51.

26.3 TYPES OF TRADE UNIONS In general, there are three types of labour unions : the industrial unions, the trade unions, and the employee associations. An industrial union is a union composed primarily of semi-skilled blue-collar employees in the manufacturing industries. The industrial union is often referred to vertical union. It is vertical in the sense that it includes all workers in a particular company or industry regardless of their occupation. It, thus, constitutes a mixture of skills and lacks the homegeneity in skill. A trade union, also called craft union, is an association of workers cutting across many companies and industries. It is called a horizontal union in the sense that its members belong to one craft or a closely related group of occupations. Examples of this type of unions are ones that have organised by carpenters, electricians, and machinists.

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An employee association, also known as fraternal order, is generally composed of white-collar or professional employees, such as teachers, police officers, administrative, technical, and health care employees. Fedration of Central Universities Teachers Association (FEDCUTA) is such an example.

26.4 REGISTRATION OF TRADE UNIONS The registration of a trade union involves the following procedure :

Appointment of Registrar Section 3 of the Trade Union Act, 1926 empowers the appropriate Goverment to appoint a person to be registrar of Trade Unions. The appropriate Government be it State or Central, as the case may be, is also empowered to appoint additional and Deputy Registrars as it thinks fit for the purpose of exercising and discharging the powers and duties of the Registrar. However, such person will work under the superintendence and direction of the Registrar. He may exercise such powers and functions of Registrar with local limit as may be specified for this purpose.

Mode of Registration Any seven or more persons who want to form trade union, can apply for its registration to the Registrar of Trade Unions under Section 4 (1) of the Trade Unions Act, 1926. These applicants must be members of a trade union. In order to check the multiplicity of trade unions, one school of thought has proposed the number of persons forming a trade union for the purposes of registration be reasonably increased to 10 per cent of employees of the unit, subject to minimum of seven persons employed therein8. This is expected to strengthen the trade union movement. The application for registration must be sent to the Registrar of Trade Unions in Form “A” as required by the Trade Union Act, 1926 under Section 5. Every application must be accompanied with the following particulars : 1.

The names, occupations and addresses of the members making application.

2.

The name of the trade union and the address of its head office.

3.

The titles, names, ages, addresses and occupations of the office bearers of the trade union.

4.

If a trade union has been in existence for more than one year prior to application of its registration, a financial statement showing its assets and liabilites prepared in the prescribed form has also to be submitted to the Registrar alongwith the application for registration.

5.

Besides, every application must be accompanied with a copy of Rules of Trade Union complying the items as specifed under Section 6 of the Trade Unions Act, 1926.

Rules of a Trade Union: A trade union can be registered only when its constitution fulfils the following rules : 1. Name of the trade union; 2. The whole of the objects for which the trade union has been established; 3. The whole of the purposes for which the general funds of a trade union shall be applicable; 4. The maintenance of a list of the members of the trade union and adequate facilities for the inspection thereof by the office-bearers and members of trade union; 5. The payment of a subscription by members of the trade union which shall be not less than 25 naya paise per month per member; 6. The manner in which rules will be amended, varied and /or rescinded; 7. The manner in which the members of the executive and the other office-bearers of the trade union shall be appointed and removed;

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8.

The manner in which the funds of the trade union shall be kept and audited and inspection of the books of accounts by the office bearers and members of the trade union be made;

9.

The conditions under which any member shall be entitled to have benefits under the rules and under which fine or forfeiture shall be imposed on the members; and

10. The manner in which the trade union shall be dissolved.

Rights and Duties of Registrar Section 7 of the Act empowers the Registrar of Trade Union to make, if required so, further enquiries on receipt of an application for registration to fully satisfy himself that the application complies with the provisions of section 59. However, such enquiries can be made only from the application and not from any other source. The duties of the Registrar of Trade Unions in matters of registration of trade union are laid down under Section 8 of the Act. On having being satisfied with the requirements for the registration of the union, the Registrar shall register the trade union by entering in a register. The letter to this effect will be issued to the Trade Union. In case of non-satisfaction of registrar with the compliance of requirements, the refusal for registration will be issued to the trade union. No time limit for the grant or refusal of registration has been prescribed in the Trade Union Act, 1926. However, there are legal directives10 issued by the Court to the Registrar of Trade unions to perform the statutory duty imposed upon him under sections 7 and 8 to deal with the application of the Trade Union according to law at an early date. The National Commiossion on Labour has suggested 30 days excluding the time which the Union takes in answering queries from the Registrar for the grant or refusal of registration by the Registrar. The Trade Unions (Amendment) Bill, 1982 has provided for insertion of the words “within a period of 60 days from the date of such compliance” after the words “Register the Trade Unions” in Section 8 of lthe Trade Unions Act, 1926. Where, however, Registrar refuses to grant registration to a trade union, he is under an obligation to state reasons for refusing to grant registration. The Societies of Registration Act, 1860, Co-operative Societies Act, 1912 and the Companies Act, 1956 do not apply to trade unions and registration thereof under any of these Act is void ab initio.

Legal Status of Register ed Trade Union Upon the registration, a trade union assumes to a corporate body by the name under which it is registered. A registered trade union shall have perpetual succession and its common seal. A registered trade union is an entity distinct from the members of which the trade union is composed of. It enjoys power to contract and to hold property both moveable and immoveable and to sue and be sued by the name in which it is registered.

26.5 RECOGNITION OF TRADE UNION Before we dwell with the recognition of Trade Union, let us first appreciate the need for recognition of Trade Union.

Need for Recognition of Trade Union In practice, management allows the recognized Trade Union only for negotiations and collective bargaining. As such, recognition of trade union serves as backbone of collective bargaining. It has been debated time and again whether a trade union should be recognized or not. This is because there is so far no enforced central legislation on this subject, i.e., recognition of trade union. In the absence of any central legislation, management at times have refused to recognize trade union mainly on five grounds that :

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1.

Most of the office bearers of the union were outsiders.

2.

The trade union keeps outsiders disapproved by management and particularly politicians and ex-employees11.

3.

The union consists of only small number of employees.

4.

There are in existence multiplicity of unions leading to rival unions.

5.

The trade union is not registered under the Trade Unions Act, 192612.

Be that as it may, the recognition of trade unions refused by the employers has been considered as the major stumbling block to the healthy growth of trade unions and, in turn, collective bargaining in India13. Realizing the need for recognition of Trade Unions, some stray and sporadic attempts have been made by various organisations such as International Labour Organisation, the Royal Commission on Labour, and the National Commission on Labour from time to time to advise the employers to accord recognition to the trade unions14. Nonetheless, the absence of any central legislation on the subject, on the one hand, and the Trade Union Act, 1926 having no provisions in this regard, on the other. Recognition of trade unions by employers has so far remained voluntary. There are, however Voluntary Code of Discipline and Legislation in some of the States which recognize trade union following the criteria prescribed in its Annexure I. Under the provisions of the Annexure I, trade union is recognized only after it fulfills the following conditions, namely : 1.

The union duly observes the code of Discipline.

2.

It is a registered trade union and has complied with all provisions of the Trade Unions Act, 1926.

3.

In case of more than one union in existence, the union claiming its recognition has been functioning for at least one year after registration. This condition would not apply if there is only one union.

4.

All its ordinary members are workers employed in the same industry.

5.

A union may claim recognition only when it has a membership of at least 25 % of the workers of that industry.

6.

Its rules provide that a meeting of its executives shall be held at least once in every six months.

7.

A trade union once recognized can not make any change in its position for a period of two years. On satisfaction of above conditions, a trade union gets recognition from its employer.

Rights of Recognized Trade Union In its 20th Sesssion of the Indian Labour Conference (August 1962) has agreed that a Trade Union which is granted recognition under the Code of Discipline can enjoy the following rights, namely : 1. 2. 3. 4. 5. 6.

To negotiate with employers in respect of matters connected with employment conditions. To collect membership fees from the members on the premises of the industry. To nominate its member-representatives on the Grievances Committee constituted in an establishment. To nominate its representatives on the Joint Management Councils. To receive replies from employers in response to their letters. To conduct interviews of employers.

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26.6 TRADE UNION LEGISLATION In order to govern the trade unions in the country, the Government of India passed the Trade Unions Act in 1926, which was put into force on June 1, 1927. It was a landmark in the history of the trade union movement in the country. The main objective of the Act was to provide for the registration of trade unions and to confer a legal and corporate status on registered trade unions. Its purpose was also to grant them immunity from certain criminal and civil liability and enable them to undertake and discharge their normal and legitimate functions to safeguard union funds, and to facilitate the working of unions. Since then, it has been as amended several times. The Trade Unions Act, 1926 is a Central Legislation. In pursuit of the main objective, it contains as many as 33 sections. All the provisions contained in the Act can be broadly classified into eight categories. These are : 1.

Definitions (Section 2)

2.

Registration (Sections 3 to 12)

3.

Duties and liabilities of registered units (Sections 13 to 16)

4.

Rights and liabilities of registered units (Sections 17 to 21)

5.

Amalgamation and dissolution of unions (Sections 24 to 27)

6.

Submission of returns (Section 28)

7.

Power to frame regulations (Sections 29 to 30)

8.

Penalties and fines (Sections 31 to 33).

However, the Act does not contain any provision for statutory recognition of unions. The Act is administered by the State Governments. Nonetheless, the Central Government has also its role to paly. It handles those trade unions which operate in more than one State. The power of amending the Act is also vested with the Central Government. Here is a small mention about the amendment in the Act.

Amendment in the Act The Act has been amended from time to time to make it more effective as per the changing conditions. Accordingly, in order to give effect to certain recommendations of the Tripartite Indian Labour Conference, the Government introduced an amendment by authorizing the appropriate government to appoint as many additional and deputy registrars of trade unions as it thinks fit so as to obviate delays in the disposal of applications for registration. The Government has made some amendments recently in the Act. These are : 1.

As per the amendments, a minimum of 7 employees can form a union in an establishment. There should be 10 per cent or 100 workers, whichever is less, to register the union. However, the Act also proposes to register a union with seven members only if there are only 70 workers working in an establishment so that the interest of the workers in small units as well is protected.

2.

The government has made it mandatory to hold elections of office bearers and the members of the executive committee once in every three years with a view to maintain discipline in unions. Elections can be held before three years also if the members so desire.

3.

In order to marginalise the outsiders influence on trade unions, it has been recommended that the number of outside members be reduced from earlier 50 per cent to one-third only.

4.

The government also proposes to increase membership fee by three-times, i.e., from 25 paise to Re. 1.

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26.7 THEORIES OF TRADE UNION A cross-country examination of trade unions reveals different ideologies influencing the evolution and development of trade unions depending on social, economic and political conditions prevalent therein. That is precisely the reason the objectives of trade unions and their place have been emphasized differently by different thinkers. The various approaches / theories of trade unions can be classified into the following five types: 1. Revolutionary Theory: The revolutionary approach/theory of trade union is developed by Karl Marx. This theory is also known as “the theory of class war and dialectical materialism”. According to Marx, trade union was the foremost organising centre to provide locus for streamlining the forces of working classes. The trade unions are, for Marx, the instruments to overthrow capitalism. These are, thus, prime instruments of the class struggle between proletarian workers and capitalist businessmen. Marx advocated that the working class must not divert itself from its revolutionary programme because it is labour struggle only that can abolish capitalism. To Marx, workers’ emancipation involves abolition of capitalism. 2. Evolutionary Theory: This theory also known as “theory of industrial democracy” was enunciated by Sydney and Beatrice Webbs15. To Webbs, trade unionism is an extension of the principle of democracy in the industrial sphere. In other words, trade unionism is not an instrument to overthrow the capitalism, but a means of equalizing the bargaining power of labour and capital. Trade unionism provides a means by which workers overcome managerial dictatorship, on the one hand, and express their voice in the determination of the conditions under which they have to work, on the other. 3. Theory of Industrial Jurisprudence: According to S. H. Slitcher16, the propounder of the “Theory of Industrial Jurisprudence”, workers individually fail in bargaining with employers for protecting their interests. In his view, trade unionism served as a means for workers to protect them in work. Such an approach of trade unionism, Slitcher termed as “a system of industrial jurisprudence”. 4. Rebellion Theory: To Frank Tannenbaum17, the propounder of “Rebellion Theory”, trade unionism is a spontaneous outcome in the growth of mechanisation. He believes that the use of machines leads to exploitation of workers. Thus, machine is the cause and labour movement, i.e., trade unionism is the result. In other words, trade unionism is a rebellion approach against mechanisation / automatization of industrial society to protect workers’ interest in the enterprise. 5. The Gandhian Approach: The Gandhian approach of trade unionism is based on “class collaboration rather than class conflict and struggle”. The idea to take from capitalist worker’s due share by reform and self-consciousness among workers led to the emergence of trade unionism. Thus, the Gandhian approach of trade unionism is not only related to material aspect but also moral and intellectual aspects. Gandhi emphasised that the direct aim of a trade unionism is not, in the last degree, political. Instead, its direct aim is internal reform and also evolution of internal strength. Also, trade unionism, according to the Gandhian approach, is not anti-capitalistic as is generally viewed.

26.8 TRADE UNION MOVEMENT IN INDIA Trade unionism is a world-wide movement. The evolution and growth of trade unionism has been sine qua non with growth in industrialisation. Accordingly, the evolution of trade unionism in India is traced back towards the later half of the nineteenth century. The origin and development of trade union movement in India may well be studied under distinct phases with their distinguishing features from others. Accordingly : a historical account of the various phases of trade union movement in India is presented now:-

A. Pre-1918 Phase The setting up of textiles and jute mills and laying of the railways since 1850 paved the way for the emergence of industrial activity and, in turn, labour movement in India. Some researchers18 have

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traced the origin of labour movement in India dated back to 1860. However, most of the writers19 on the subject trace the history of labour movement in India since 1875. The first labour agitation, under the guidance and leadership of Mr. S. S. Bengalee, a social reformist and philanthropist, started in Bombay in 1875 to protect against the appalling conditions of workers in factories, especially those of women and children and appealed to the authorities to introduce legislation for the amelioration of their working conditions. As a result, the first Factory Commission was appointed in Bombay in the year 1875 and the first Factories Act was passed in 1881. Mr. N. M. Lokhande may be said to be the founder of organised labour movement in India who founded the first trade union in the country, namely, the Bombay Mill Hands Association (1890). This was followed by a series of associations such as the Amalgamated Society of Railway Servants in India (1897), The Printers’ Union of Calcutta (1905), The Madras and Calcutta Postal Union (1907), and the Kamgar Hitwardhak Sabha (1910). All these unions aimed at promoting welfare facilities for workers and spreading literacy among them. The broad features of the labour movement during the pre-1918 phase may be subsumed as : (i) The movement was led mostly by the social reformers and philanthropists and not by the workers. (ii) There was, in fact, no trade union in existence in the true sense. (iii) The labour movement was for the workers rather than by the workers. (iv) The movement was confined to the revolt against the conditions of child labour and women workers working in various industries under appalling conditions.

B . 1918-1924 Phase The phase 1918-1924 is considered as the era of formation of modern trade unionism in the country. The trade union movement got momentum just after the close of the World War I. The postwar economic and political conditions contributed to the new awakening of class consciousness among the workers. This led to the formation of trade unions in the truly modern sense of the term. As a result, Ahmedabad Textile Labour Association (1917), led by Shrimati Ansuyaben Sarabhai ; the Madras Labour Union (1918), led by B. P. Wadia; Indian Seamen’s Union, Calcutta Clerk’s Union; and All India Postal and RMS Association were formed. The various factors that influenced the growth of trade union movement in India during this phase may be briefly catalogued as follows: 1.

The wretched conditions of workers on account of spiralling prices of essential commodities during the post-World-War I led workers to form trade unions to improve their bargaining power and, in turn, living conditions.

2.

The political scenario characterized by the home-rule movement and the martial law in Punjab made the politicians to recognize the workers movement as an asset to their cause. At the same time, workers also needed able guidance and leadership from the politicians to settle their grievances with the employers.

3.

The Russian Revolution also swayed the labour movement in India showing a new social order to the common man in the country.

4.

The setting up of the International Labour Organisation (ILO) in 1919 also gave a big fillip to the labour movement in India. India becoming a founder-member of the ILO required to depute delegates to the ILO. Mr. N. M. Joshi for the first time was deputed as the representative from India to International Labour Conferences and Sessions. It ignited workers’ anxiety to organize. As a result, the All India Trade Union Congress (AITUC) was formed in 1920. By 1924, the trade union movement in India proliferated to the extent of 167 trade unions with a quarter million members20.

This period in the history of trade union movement has been desribed as the Early Trade Union Period.

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C. 1925-1934 Phase With increasing hardships of workers, the signs of militant tendencies and revolutionary approach in trade unionism got expression into violent strikes since 1924. The communists gained influence in the trade union movement during this period. They split the Trade Union Congress twice with their widening differences with the left-wing unionists20. The moderate section under the leadership of Mr. N. M. Joshi and Mr. V. V. Giri seceded from the Congress and set up a separate organization named the National Trade Unions Federation (NTUF). Another split in AITUC took place in 1931 at its Calcutta session when the extreme left wing under the leadership of Messrs S. V. Deshpande and B. T. Randive broke away and formed a separate organization, namely, the All India Red Trade Union Congress. Two Years later, the National Federation of Labour was formed to facilitate unity among all the left-wing organizations of labour. As a result, the AITUF and NFL merged to form the National Trade Union Federation (NTUF). Another important feature of this period was the passing of two Acts, namely, the Trade Unions Act, 1926 and the Trade Disputes Act, 1929 which also gave a fillip to the growth of trade unionism in India. The former Act provided for voluntary registration and conferred certain rights and privileges upon registered unions in return for obligations. The later Act provided for the settlement of trade unions. This phase of the Indian labour movement may be described as The Period of Left W ing Trade Unionism.

D. 1935-1938 Phase The Indian National Congress was in power in seven provinces in 1937. This injected unity in trade unions. As a result, the All India Red Trade Union Congress merged itself with the AITUC in 1935. After three years in 1938, the National Trade Union Congress (NTUC) also affiliated with the AITUC. Other factors that contributed to the revival of trade unions were increasing awakening among the workers to their rights and change in the managerial attitute towards trade unions. In 1938, one of the most developments took place was the enactment of the Bombay Industrial Disputes Act, 1938. An important provision of the Act, inter alia, to accord compulsory recognition of unions by the employers gave a big fillip to the growth of trade unionism21.

E. 1939-1946 Phase Like World War I, the World War II also brought chaos in industrial front of the country. Mass retrenchment witnessed during the post-World War II led to the problem of unemployment. This compelled workers to join unions to secure their jobs. This resulted in big spurt in the membership of registered trade unions from 667 in 1939-40 to 1087 in 1945-46. Somuchso, the number of women workers in the registered trade unions witnessed a phenomenal increase from 18,612 to 38,570 during the same period. The AITUC again split in 1941 when Dr. Aftab Ali, President of the Seamen’s Association, Calcutta disaffiliated his union from the Congress and formed a new organization known as the “Indian Federation of Labour”. The year 1946 was also marked by two important enactments, namely, the Industrial Employment (Standing Orders) Act, 194622 and the Bombay Industrial Relations Act, 1946. Both the Acts, through their provisions, contributed to strengthen the trade unionism in the country.

F. 1947 and Since Proliferation of trade unions in the pattern of proliferation of political parties has been a distinguishing feature in the trade union history of India during the post-Independence period. In May 1947, the Indian National Trade Union Congress (INTUC) was formed by the nationalists and moderates and was controlled by the Congress Party. Since by then, the AITUC is controlled by the Communists. The Congress socialists who stayed in AITUC at the time of the formation of INTUC

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subsequently formed the Hind Mazdoor Sabha (HMS) in 1948 under the banner of the Praja Socialist Party. Subsequently, the HMS was split up with a group of socialist and formed a separate association, namely, “Bhartiya Mazdoor Sabha” (BMS) which is now an affiliate of the Bhartiya Janata Party (BJP). Years after, the communist party split into various fractions forming the United Trade Union Congress (UTUC) and the Center of Indian Trade Unions (CITU). Later again, a group disassociated itself from the UTUC and formed another UTUC—Lenin Sarani. Of late, with the emergence of regional parties since 1960, most of the regional parties have shown its inclination to a trade union wing, thus, adding to the proliferation of trade unions in the country. Thus, it is clear that the origin and growth of trade union movement in India is riddled with fragmented politicization. At present, there are 8 central trade union organisations. Of these, four major federations with their national network are : 1.

All India Trade Union Congress (AITUC)

2.

Indian National Trade Union Congress (INTUC)

3.

Bhartiya Mazdoor Sangh (BMS)

4.

Centre of Indian Trade Unions (CITU)

Table 26.2 : gives some idea about the growth of the trade union movement in India. Table 26.2 : Growth of the Trade Union Movement in India

Year

Number of Registered Trade Unions

1951-52 1961-62 1971 1981 1987 1990 1993

4,623 11,614 22,484 35,539 49,329 52,016 55,784

Number of unions Membership of the furnishing unions information submitting Returns (in lakhs) 2,556 7,087 9,029 6,082 11,063 8,828 6,806

20 40 55 54 79 70 49.8

Source : Indian Labour Yearbook (1987) : and (1996)

The membership scenario of the major central trade unions is borne out by the following Table 26.3. Table 26.3 : Union Membership as on end March, 1994

Trade Union INTUC AITUC HMS CITU BMS

Membership Claimed 54,35,705 29,73,933 43,56,034 23,86,242 40,81,424

Membership Verified 25,87,378 9,05,975 13,18,804 17,68,044 27,69,556

Source : Business India, Aug. 29 –Sept. 11, 1994.

Political Affiliation Congress CPI PSP CPI(M) BJP

Year of Establishment 1947 1920 1948 1970 1955

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It is clear from the Table 26.3 that the BMS which is an affiliate of the Bhartiya Janata Party has secured the top position in terms of membership of 27.69 lakh accounting for 30.10% of the total membership. INTUC, CITU and HMS follow in that order in terms of their share in total membership.

Recent Trends in Trade Union Movement Industrial economy of the country has undergone changes after the liberalization process started from 1990. Concomitantly, the trade unionism in the country has also undergone changes. Some of the important changes taken place in the trade union movement in India in the recent times are outlined as follows: 1. Attitudinal Change. One perceptible trend witnessed of late is the change in the attitude of trade unions towards management, industry and government. This is evident from the following facts : (i) There is a decreasing trend in the number of trade union members. For example, the membership of INTUC has come down to 54.05 lakh in 1993 from 54.35 lakh in 1989. So is the case of CITU also. Of course, decreasing membership in trade union is very much evident elsewhere as well e. g., Australia, France, Japan etc. (ii) Gone are days of cat-call strikes, bandhs, gheraoes and violence. With increasing education and awareness of workers, trade unions have become more mature, rational, realistic in their approach and action. As such, trade unions now do not oppose economic reforms but the adverse effects of reforms. (iii) With such reconciling attitude, they have started accepting the new human resource practices like voluntary retirement scheme (VR), golden handshake, and like which used to be bone of contention till the other day. 2. Depolitization of Unions.Days are also gone when trade unions seem relish affiliations and confirming the trite saying “Nature abhors vacuum.” Having realised the evils of political affiliations of union, they have started to insulate themselves against the political influence. Trade unions in leading organizations like Blue Star, Philips, Hindustan Lever, Siemens, Telco, Tomco, Voltas and the like are not affiliated with any political party. That depolitization of unions is beneficial for employees is evident from the Kamani Industries experience where the internal union is running it successfully through workers’ co-operative. 3. Multiplicity of Unions. Formation of trade unions on fragmented basis has, of late, led to multiplicity of unions23. The multiplicity of unions in some organizations has assumed to mind boggling stage. For example, the number of unions in Bokaro Steel Plant is 68, in Delhi Transport Corporation 50, in Singareni Colleries 36, in Calcutta Corporation 100 and in Steel Authority of India Limited (SAIL) 240. To sum up, the attitude of trade unions is changing, the membership is declining, the political affiliation is wanning, the number is multiplying and, in turn, the people sympathy is receding.

26.9 PROBLEMS OF TRADE UNIONS The trade union movement in India could not make its expected headway due to one reason or the other. Following are the major ones from which trade union movement in India has suffered: 1. Small Size: According to the veteran trade union leader V. V. Giri24, “the trade union movement in India is plagued by the predominance of small sized unions”. To quote, there were 9,023 trade unions submitting returns during the year 1992. The total membership of these unions was 57.4 lakhs, with an average membership of 632 per union. Nearly three-fourths of the unions have a membership of less than 500. Smallness in size of the union implies, among other things, weakness in bargaining power.

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2. Poor Finance: Small size of unions has its direct bearing on its financial health. Total income and total expenditure of 9,073 trade unions with a membership of 57.4 lakhs were Rs. 3,238 lakhs and Rs. 2,532 lakhs respectively in 1992. The per member income and expenditure, thus, come to Rs. 56.4 and Rs. 44.1 respectively25. These are, by all means, very low. It is the small size of trade unions accompanied by small subscriptions, the trade unions cannot undertake welfare activites. 3. Politicisation: A serious defect of the trade union movement in India is that the leadership has been provided by outsiders especially professional politicians. Leaders being affiliated to one or the other party, the unions were more engrossed in toeing the lines of their political leaders than protecting workers’ interests. Ironically, in many cases, the political leaders possess little knowledge of the background of labour problems, fundamentals of trade unionism, the techniques of industry, and even little general education. Naturally, unions cannot be expected to function efficiently and on a sound basis under the guidance of such leaders. 4. Multiplicity of Unions: Of late, trade unionism in India is also characterised by multiplicity of unions based on craft, creed and religion. This is well indicated by the socio-political realities after the mandalisation of polity and heightened sectarian consciousness after the demolition of the disputed structure of Ayodhya26. As noted earlier, the multiplicity of unions is mind-boggling in the DTC (50), the SAIL (240) and the Calcutta Corporations (100). The implication of multiplicity of trade unions is that it leads to unions rivalry in the organization. Obviously, multiplicity of unions contributes to fragmentation to workers leading to small-sized unions. 5. Lack of Enlightened Labour Force: The lack of an enlightened labour force capable of manning and conducting the movement efficiently, purposefully and effectively has been a major problem in the development of trade unions in the country. Lack of education, division by race, religion, language and caste, migratory nature, lack of self consciousness, and non-permanent class of workers have been attributed as the causes for the lack of enlightened labour force in India. 6. Miscellaneous Problems: The other problems from which trade union movement has suffered include:(i) The majority of registered unions are independent unions as only 16,000 units out of 50,000 registered unions are affiliated to the Central Trade Unions (CTUs). One possible reason for this is the educated workers’ preference to the independent unions. (ii) It is also found that about 90% of workers in the public sector are unionized while in case of the private sector, only 30 % workers are unionized27. This is a World-Wide trend, not only featuring in India. But it has a serious implication for trade union movement in India as more and more public sector undertakings are privatized. In turn, the trade union membership is to decline, a trend already visible by now. (iii) Given the fast changing industrial scenario, jobs are moving from the organized formal sector to informal sector. However, the unorganised sector which constitutes about 90% of the total work force do not come under the purview of the trade unions28. The Second Five-Year Plan scanned the defects of the trade union movement in India as follows: “Multiplicity of trade unions, political rivalries, lack of resources, disunity in the ranks of workers etc., are some of the major weaknesses in a number of existing unions”29.

26.10 MEASURES TO STRENGTHEN THE TRADE UNION MOVEMENT IN INDIA The veteran trade union leader V. V. Giri30 has appreciated the need for strengthening the trade union movement in India by stating that, “If the trade union movement is not united and strongenough to achieve its objectives, the industrial structure to be built in India on the basis of fullfledged socialist democracy would not have firm foundations and the state, in spite of its best ideals and designs, would find it difficult to ensure fundamental rights to the working class”. At present , trade unions lack vitality, due to one reason or the other, as stated earlier. Their vitality, therefore,

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needs to be strengthened. And, the real strength must come from within itself . Given below are some measures that can strengthen the trade union movement in India : 1. Mantaining Unity: Past experiences indicate that multiplicity of unions, political rivalries, disunity among the ranks of workers, etc. have been responsible for lack of strength of trade unions in India. Unity in the movement is, therefore, a necessity because “Unity is the strength.” Unity in trade unions can be striken and maintained in different ways : (i) All workers should join hands to form a single union to represent all their demands. (ii) All unions with different political affiliations should have one policy, one programme, one objective and one method for the labour movement. Here, the role of unity among workers in the TISCO, Jamshedpur is worth citing : “ TISCO has a reputation in the country for cordial industrial relations which is the envy of other corporations. There has been no strike in Jamshedput over an industrial dispute for more than fifty years. The Tata Workers’ Union, which is the recognized union in Jamshedpur, has such excellent relations with the management that when a move was made by interested politicians in 1978 to nationalize the company, the union, on its own, made a strong representation to the Prime Minister against such a move31. 2. Free from Political Influence: At present, trade union leadership is in the hands of politicians who have more concern for their political ideologies than for the interest of working class. This has weakened the movement. Therefore, one way to strengthen the trade union movement is the provision of leaders from the ranks of the workers themselves. These union leaders should be full-time paid officers of the unions having qualities such as literate, organising capacity, hardworking, cool in temper and patience. Leadership qualities among the workers can also be developed through education and training. It is this realisation that the Asian Trade Union College, at Kolkata is set up to train educated young men, particulary from the working classes, in trade unions. 3. Workers’ Education: So far trade unions have confined their attention to its members’ demands only. It is now high time for trade unions to assume the responsibility of inculcating in the workers a sense of descipline and responsibility to perform their jobs satisfactorily. The workers need to be made understand fully first their duties and responsibilities and then their rights and privileges. Or say, the workers need to be taught “first deserve, then desire”. 4. Adequacy of Funds: Particularly, small-sized firms suffer from their weak financial position. On account of poor financial resources, the workers movements/strikes did not prolong and ended in failure. Therefore, the maintenance of strike funds by the union is a necessity. This strike fund would be used to help workers during strikes – as “ strike pay”. This will not only strengthen the bargaining position of the unions, but they will also get the loyalty of the workers. 5. Walfare Activities for Workers: Alongwith efforts to improve the financial status, the trade unions may effectively start activities such as the provision of day schools for children, creches at work place, night schools for adults, reading rooms, libraries, co-operative stores, gymnasiums, etc. It is gratifying that various labour organisations like the Textile Labour Association, Ahmedabad, the Hindustan Mazdoor Sewak Sangh and the INTUC have been doing some works in this direction. These efforts help make workers loyal to their unions.

26.11 RECOMMENDATIONS OF NATIONAL COMMISSION ON LABOUR The National Commission on Labour (NCL) has made some valuable recommendations on differtent aspects of trade unionism in India. The major ones are given below :

Functional Enlargement The NCL has recommended that the unions must enlarge their sphare of activities to meet the basic needs of its members. These include to :

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(i) secure fair wages for the workers; (ii) safeguard security of tenure and better job conditions; (iii) enlarge promotional and training opportunities; (iv) provide for educational, cultural and recreational facilities; (v) cooperate in and facilitate technological advances; (vi) promote individual and group welfare; (vii) promote the national integration; and (viii) instil a sense of responsibility in their members towards industry and society.

Union Membership It has recommended that the formation of craft and occupation trade unions should be discouraged. To the extent possible, the formation of industrial trade unions, also called ‘vertical unions, and industrial federations should be encouraged. The number of outsiders in a trade union should be limited to 30 per cent in industries having total membership of more than 10,000, 20 per cent having membership between 1,000 and 10,000 and 10 per cent which have a membership of less than 1000. Ex-employees should not be treated as outsiders.

Leadership As regards leadership, the Commission recommended that there should be no ban on nonemployees holding a position in the executive of the union. At the same time, steps should also be taken to promote leadership from among the members of the working class and enable them to assume a responsible role in trade union activity. It should also be ensured that when such leaders are developed, they are not victimised by their employers.

Union Rivalries In regard to union rivalries, these should be left for settlement to the central organisation concerned and if it is unable to resolve the dispute, a Labour Court should be set up at the request of either group or on a motion by the Government.

Registration The Commission has further recommended that registration of a trade union should be cancelled if its membership falls below the minimum prescribed for registration, fails to submit its annual returns and does not rectify the defects in time when defective returns are submitted. The Commission has also recommended that an application for re-registration should not be entertained within six months of the date of cancellation of registration.

Financial Condition In regard to improve the financial conditions of the unions, the Commission has recommended that membership fees should be increased to Rs. 1 per month. It did not favour the existing arrangement of collecting one per cent or even more by way of membership fee on the ground that it would mean different amounts within each slab for the same group of employees.

Recognition The Commission has also suggested that a trade union seeking recognition as a bargaining agent from an individual employer should have a membership of at least 30 per cent of workers in that establishment. The minimum membership should be 25 per cent, if recognition is sought for an industry in a local area. Where more than one union seek for recognition, the union with largest membership should be accorded recognition.

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26.12 SUMMARY This summary is organised by the learning objectives given on page...314 : 1. Trade unions are the voluntary organisations of employees formed to protect and promote their interests through collective actions. 2. Employees join unions because they provide job security, wages and benefits, fair and just supervision, need to belong, etc. 3. There are three types of unions, namely, industrial union (vertical union), trade union (horizontal union) and employee associations (fraternal order). 4. The steps involved in registeration of a union include appointment of registrar, mode of registration, rights and duties of registrar, issuance of registration certificate to the union. 5. The provisions of trade union legislation relate to definitions; registration; duties, responsibilities, liabilities and rights of registered trade unions; amalgamation and dissolution, and penalties and fines. 6. There are five theories/approaches of trade unions, namely, revolutionary, evolutionary, industrial jurisprudence, rebellion, and Gandhian approaches. 7. In India, trade union movement started sine 1875. It received impetus during the post-World Wars and proliferated during the post-Independence period in the lines of political philosophies. 8. Multiplicity of trade unions, political rivalries, lack of resources, poor financial structure, small in size, and lack of enlightened labour force are some of the major problems from which a number of trade unions are suffering. 9. Measures like maintenance of unity, depoliticization, workers’ training, adequacy of funds, welfare activities for workers, etc., can help strengthen the trade union movement in India. 10. To strengthen the trade unionism in the country, the National Commission on Labour made some valuable recommendations on different aspects of trade unionism such as its functions, membership, leadership, politicization, registration, recognition, funds etc.

KEY TERMS Trade Union

Job Security

Industrial Democracy

Industrial Jurisprudence Revolutionary Union

Lockouts Martial Law

Recognition of Trade Union

REVIEW AND DISCUSSION QUESTIONS 1. Define trade union. Why do employees join unions? 2. What is meant by registered trade union ? Delineate the process involved in registration of a trade union. 3. How does a trade union gets recognition? Bring out the rights of a recognized trade unions. 4. Discuss the various theories of trade unionism. Which one theory do you find into practice in India? Give justification as well. 5. Delineate briefly the trade union movement in India. Also bring out the recent features that mark trade unionism in India.

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6. “The trade union movement in India is plagued by several problems”. Explain. 7. What measures will you suggest to strengthen the trade unionism in India? 8. What are the major recommendations made by the National Commission on Labour on different aspects of trade unionism in India ?

REFERENCES 1. Sydney Webb and Beatrice Webb : History of Trade Unionism, London 1920. P. 1. 2. G. D. H. Cole : An Introduction to Trade Unionism, p. 13. 3. J. M. Brett : Why Employees Want Unions, Organisational Dynamics, Spring 8 (4) 1980, pp. 47-59. 4. The Factories Act, 1948, Central Law Agency, Allahabad, 1977, p. 52. 5. Randall S. Schuler et al. : Effective Personnel Management, West Publishing, New York, 1993, p. 570. 6. Michael R. Carrell et al. : Personnel /Human Resource Management, Maxwell Macmillan International’ Singapore, 1992. P. 541 7. Under Section 2 of the Trade Unions Act, 1926, the Central Government is the appropriate Government in relation to Trade Unions whose objects are not confined to one State. The State Government is the appropriate Government in relation to other Trade Unions. 8. Report of the Study Group on Industrial Relations (Eastern Region), National Commission on Labour, 1968. 9. Trade Union Act, 1926, Section 7. 10. A. C. C. Rajanka Lime S tone Quarries Mazdoor Union v . Registrar of T rade Unions, Government of Bihar, AIR, 1958, Pat. 475. 11. Report of the Royal Commission on Labour, 1931, p. 325. 12. Ibid, p. 326. 13. Suresh C. Srivastava : Trade Unionism in India, Review of Contemporary Law, Brussels and Paris, 1970, p. 83. 14. S. C. Srivastava : Industrial Relations and Labour Laws, Vikas Publishing House Pvt. Ltd., New Delhi, 1996, pp. 94-98. 15. Sydney Webb and Beatrice Webb : History of Trade Unionism, London, 1920, p. 1 16. Summer H. Slitcher : The Challenge of Industrial Relations, 1947. 17. Frank Tannenbaum : A Philosophy of Labour, 1951. 18. N. M. Joshi : The Trade Union Movement in India , Also see R. F. Rustomji : The Law of Industrial Disputes in India, Law Publishing House, 1961, p. XCIV. 19. Ahmad Mukhtar : Trade Unionism and Labour Disputes in India , Longmans Green & Co. Ltd.; 1935, V. V. Giri : Labour Problems in Indian Industry, Asia Pulishing House, Bombay, 1959, A. S. Mathur and J. S. Mathur : Trade Union Movement in India, Chaitanya Publishing House, Allahabad, 1962, T. N. Bhangoliwal : Economics of Labour and Social Welfare, Sahitya Bhawan, Agra 1966. 20. V. Agnihotri : Some Aspects of Trade Unionism in India, Indian Labour Journal, June 1962, p. 438. 21. Ruby Roy : Strikes and Indian Labour Movement : A Retrospective Overview, The Indian Journal of Labour Economics, October-December 1992, p. 405.

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22. Government of India : Report of the National Commission of Labour, New Delhi, 1969, p. 319. 23. Preamble of the Industrial Employment (Standing Orders) Act, 1946. 24. The Economic Times, April 9, 1995. 25. V. V. Giri : op. Cit. 1959, p. 42. 26. The Economic Times, April 9, 1995. 27. Ruddar Dutt and K.P.M. Sundharam : Indian Economy, S. Chand & Company Ltd., New Delhi, 2001, p. 680. 28. T. N. Bhangoliwal : op. Cit., 1966, p. 223. 29. S. S. Khanka : New Role for Trade Unions, Yojana, Vol.37, No.4, March 15, 1993, p.21. 30. Planning Commission : Second Five Year Plan, p. 572. 31. V. V. Giri : op. Cit., 1959, p. 44. 32. The Tata Iron and Steel Company Limited : Social Audit Committee Report, Mumbai, 1980, p. 28. 33. Report of the National Commission on Labour, 1969, p. XXIV.

27 COLLECTIVE BARGAINING Learning Objectives After studying this chapter, you should be able to : 1.

Define the term collective bargaining and state its meaning.

2.

Appreciate the importance of collective bargaining.

3.

Discuss the bargaining strategies employed for resolving industrial disputes.

4.

Delineate the process involved in collective bargaining.

5.

Discuss bargaining impasse, mediation and strikes.

6.

Identify the conditions necessary for collective bargaining.

Recall, we mentioned in the Chapter 23 that the job related matters causing dissatisfaction to the most of or all of employees are called “collective grievances” and these are resolved through “Collective Bargaining”. Industrial history is witness that collective bargainng has become sine qua non with increase in organised labour and their grievances. We also mentioned in the just concluded Chapter 26 that trade unions protect and promote the social, economic, and political interests of workers through collective bargaining. This, therefore, underlines the need for knowing all about collective bargaining so that a congenial and harmonious atmosphere is maintained in the organisation to achieve the organisational goals. With this in view, the present chapter discusses all the relevant aspects of collective bargaining in India specifically its meaning, objectives, importance and strategies. The scenario of collective bargaining in India is also delineated at the end of the chapter.

27.1 MEANING Collective bargaining is a process of negotiating betwen 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. According to Dale Yoder1, “Collective bargaining is essentially a process in which employees act as a group in seeking to shape conditions and relationships in their employment”. Michael J. Jucious2 has defined collective bargaining as “a process by which employers, on the one hand, and representatives of employees, on the other, attempt to arrive at agreements covering the conditions under which employees will contribute and be compensated for their services”. Thus, collective bargaining can simply be defined as an agreement collectively arrived at by the representatives of the employees and the employers. By collective bargaining we mean the ‘good faith bargaining’. It means that proposals are matched with counterproposals and that both parties make every reasonable effort to arrive at an agreement 3. It does not mean either party is compelled to agree to a proposal. Nor does it require that either party make any specific concessions. 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. 332

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27.2 OBJECTIVES 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 harmonius 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.

27.3 IMPORTANCE 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 organisational 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. 3. It benefits the both-employer and employees:The negotiation arrived at is acceptable to both parties—the employer and the employees. 4. It is adjustable to the changing conditions: A dynamic environment leads to changes in employment conditions. This requires changes in organisational processes to match with the changed conditions. Among other alternatives available, collective bargaining is found as a better approach to bring changes more amicably. 5. It facilitates the speedy implementation of decisions arrived at collective negotiation: The direct participation of both parties—the employer and the employees—in collective decision making process provides an in-built mechanism for speedy implementation of decissions arrived at collective bargaining.

27.4 BARGAINING STRATEGIES The actual bargaining process, discussed later, and the events that take place during negotiation depend, to a great degree, upon the relationship between management and the union. Depending on the strength of the employer and the union and also on the degree of cooperation that characterizes their relationship, Walton and McKersie4 have identified the following four types of bargaining strategies that may be employed to arrive at an agreement: 1.

Distributive Bargaining

2.

Intergrative Bargaining

3.

Attitudinal Bargaining

4.

Intraorganisational Bargaining

Now, these are discussed one by one.

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Distributive Bargaining Distributive bargaining, perhaps the most common form of bargaining, takes place when labour and management are in disagreement over the issues in the proposed contract, such as wages, bonus, benefits, work rules, and so on. It involves haggling over the distribution of surplus. In it, the gains of one party are achieved at the expense of the other. So to say, a wage increase won by labour may be considered a loss suffered by management as reduction is profits. Therefore, this form of bargaining is sometimes referred to as win-lose bargaining. Under it, each party is preoccupied with narrow sectoral gain of grabbing the bigger share of the cake. It, thus, lacks holistic approach.

Integrative Bargaining The purpose of integrative bargaining is to create a cooperative negotiating relationship that benefits both parties. In such bargaining, both labour and management win or gain or atleast neither party loses. The issues of bargaining involved in such strategy may be such as better job evaluation process, better training programmes, better working conditions, etc. Such negotiations result in increase in the size of cake and, in turn, larger share for each party. This is considered the best bargaining strategy. Although integrative bargaining is not nearly as common as the distributive process, signs seem to indicate a steadily growing trend toward this cooperative form of bargaining.

Attitudinal Structuring Such a bargaining involves shaping and reshaping of attitudes to positive and cooperative. Examples of attitudinal structuring and shaping may be from hostile to friendly, from non-cooperative to cooperative, from untrust to trust, and so on. The need for attitudinal structuring or shaping is understood by the fact that any backlog of bitterness between the parties leads to bargaining impasse by erupting and destroying negotiations. Therefore, attitudinal structuring is required to maintain smooth and harmonious industrial relations. The attitudinal structuring helps achieve ‘good-faith bargaining’.

Intraorganisational Bargaining In practice, there are different groups in an organisation by department-wise and level -wise. At times, different groups may perceive the outcomes of collective bargaining process differently. For example, the unskilled workers may feel that they are neglected or women workers may feel that their interests are not taken into consideration. Not only that, there may be differences even within the management. While personnel manager may support increase in wages, the finance manager may oppose the same on the ground that it will disturb the company’s financial position. Given such situation, intraorganisational consensus is required for the smooth acceptance of the agreements arrived at collective bargaining. Thus, intraorganisational bargaining involves manoeuvring to achieve consensus with the workers and management.

27.5 BARGAINING PROCESS The actual bargaining goes through a process consisting of certain stages. However, the number of stages and sequencing of these may vary from organisation to organisation depending on the nature of parties involved in bargaining process. According to Mondy and Noe5, the following four types of structures decide the nature of parties involved in bargaining process. 1.

One company dealing with a single union.

2.

Several companies dealing with a single union.

3.

Several unions dealing with a single company.

4.

Several companies dealing with several unions.

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Generally, a bargaining process consists of the following five stages: 1.

Prenegotiation

2.

Negotiators

3.

Negotiation

4.

Agreement or Contract

5.

Implementation of Agreement. Now, these are discussed one by one.

Prenegotiation This is the first stage involved in a bargaining process is also known as ‘preparation for negotiation’. In other words, it refers to homework for negotiation. That the prenegotiation stage of the bargaining process is vital is duly confirmed by the fact that “up to 83 per cent of the outcomes of the negotiations are greatly influenced by prenegotiation stage”6. Both parties, i.e., the management and the workers need to make preparation for bargaining. This is discussed separately as follows: Preparation by Management: It is very important for the management to study very carefully the labour organisation, or say, labour union with which they are to negotiate or bargain. This may include studying the strength of the union, their contracts with other industries, the background and personality characteristics of the union negotiators, etc. The management should also know what similar organisations are doing in the particular matter, and what is expected from the economy in the near future. What can it expect the union to ask for? What is management prepared to acquisce on? The management should understand the bargaining power of the union and should devise its bargaining strategy accordingly. For example, if the demand for the company’s product or service has been high, management will be reluctant to absorb a strike, even one of short duration. On the other hand, if the business is passing through slackness, management will be least willing to concede to union demands and may be prepared to accept a lengthy strike7. Finally, the likely decisions should be chalked out, their impact be analysed, and the drafts for the likely decisions be prepared in advance to facilitate the immediate preparation of final agreement draft as soon as the negotiation comes to an end. Preparation by the Labour Union: The labour union also needs to collect data on relevant aspects of organisation to facilitate its negotiating power and tactics. It should be aware of its contracts with other companies, the practices followed by other companies in the same region, and so on. Employees expectations over various issues should also be assessed in order to avboid their resistance to the agreement arrived at with the management. Due care should also be taken in selecting negotiator representatives of the Union.

Negotiators On the company side, the particular negotiator may be any one of a number of persons. It may be the industrial relations officer, the head of the particular area such as production area, an office bearer like executive vice-president, or even the company lawyer. In order to broaden the base of participation, the practice of allowing all major divisional heads to participate and a few supervisors to observe on a rotating basis has great advantages in bargaining process8. On the union side, the team approach is customarily used. The team may consist of business agents, some shop stewards, the president of the local union, and when the negotiation is vital, the president of the national union.

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Negotiation Once the first two stages are completed, both the parties come to the negotiation table at a time and place for this purpose. Customarily, negotiation process starts by the union representatives delivering an extravagant and long list of demands. Expectedly, the initial response from the management is usually as extreme as that of the union. The managementl counters the union demands by offering little more than what was agreed in the previous contract. This tug of war goes on from both the sides. In the process, each party assesses the relative priorities of the other’s demands. This takes them in a situation when attempt is made to get management’s highest offer to approximate the lowest demands that the union is willing to accept. Thus, each group compromises by giving up some of its demands so that an agreement can be arrived at when they actually arrive at an agreement, this is converted into a written contract. In case, both parties do not reach to any agreement, then it is called deadlock or breakdown or bargaining impasse. This is discussed, in some more detail, later in this chapter.

Agreement or Contract After both parties have arrived at an informal agreement either in the normal/initial process or through overcoming bargaining impasse, it is written. The written form of the agreement usually consists of the terms and conditions of agreement, the date from which it comes into effect, the duration for which it will remain in operation and the names of the signatories of the agreement. The agreement so prepared is then sent to the labourers and management for its ratification and approval. The representatives of both the parties may not have ultimate authority to decide some issues referred to collective bargaining and included in the agreement. These need to be ratified by both the parties. The agreement needs to be duly ratified because of legal provisions. According to the Section 18 (1) of the Industrial Disputes Act, 1947, “an agreement shall be binding only on the parties to the agreement.” This implies that any collective bargaining agreement does not apply automatically to all workers of an organisation. The agreement becomes official once approved, ratified, and signed by labour and management representatives. The collective agreement is variously known as “labour contract”, “union contract”, or “labourmanagement agreement”. Union members and members of management all receive copies of the agreement or contract. The agreement stipulates in formal terms the nature of the relationship between labour and management for the ensuing period of time as agreed in negotiation.

Implementation of Agreement Once an agreement is ratified and approved,what next remains left is its implementation. The way it will be implemented is indicated in the agreement itself. The agreement must be implemented with full magnanimity in terms of its letter and spirit by both the parties from the date of its operation as mentioned in the agreement. This is the duty of the Human Resource Department to ensure the proper and full implementation of all provisions given in the agreement. One of the most important element involved in agreement implementation is spelling out of a procedure for handling grievances arisen out of collective agreement. In practice, almost all collectivebargaining agreements contain formal procedures to be used in resolving grievances over the interpretation and application of the agreement. Hence, the grievances, if any, need to be resolved accordingly.

27.6 BARGAINING IMPASSE, MEDIATION AND STRIKES Bargaining Impasse Sometimes serious conflicts occur during the course of negotiations. As such, labour and management become simply unable to reach an accord or agreement over certain issues such as wages,

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overtime, or other work provisions. Thus, when negotiations break down and the labour and management have been unable to reach an agreement, a bargaining impasse results. An impasse usually occurs when one party is demanding more than the other will offer. As and when an impasse occurs, there can be three options: 1.

The parties may ask a third party, known as mediator or arbitrator, to resolve the impasse.

2.

The labour union may resort to work stoppage or strikes to exert their force on management.

3.

The employer may also, through several pressure techniques may exert a show of force to suppress union demands.

Let us reflect on these one by one. Third-Party Involvement: Three types of third-party interventions are used to overcome impasse: Mediation, Arbitration, and Fact-finding. (i) Mediation: A neutral third party acts as a mediator to lead the two parties to an agreement as a go-between for the labour and the employer. The mediator usually holds meetings with each party to determine where each party stands regarding its position. Then, grounds are prepared for settling the issues. Importantly, the mediator does not have the authority to impose his/her decision. To be successful in his mediating role, the mediator must have the confidence of both parties and is perceived as truly impartial and unbiased. (ii) Arbitration: Arbitration is the commonly used and most definitive type of third party intervention in resolving disputes. Unlike the mediator, an arbitrator is empowered to determine and dictate the terms of negotiation. This facilitates the arbitrator to guarantee a solution to an impasse. Arbitrations may be either binding or non-binding. In case of binding arbitration, both parties are bound to accept the arbitrator’s decision/award. The parties are not committed to the arbitrator’s award in case of non-binding arbitration. (iii) Fact-finding: In certain situations of emergency type, a fact-finder is appointed to resolve an impasse. Like mediator, a fact-finder is also a neutral party who dissects and studies the issues involved in dispute and then, based on this, makes a public recommendation of what a reasonable settlement ought to be. Fact-finding is rarely used in the private sector. This is commonly used in public sector to settle disputes.

Union Power Tactics Strikes: A strike is a concerted and temporary withdrawl of labour from the work. The possibility of a strike is the ultimate economic force that the union can bring to bear upon the employer 9. Flippo10 views that without the possibility of a strike in the background, there can be no true collective bargaining. Various types of strikes are the following : 1. Economic Strike: An economic strike is a strike over an economic issue such as demand for better wages, benefits, hours, and working conditions than the employer is willing to grant. 2. Recognition Strike: This is the typical strike to force the employer to recognize and deal with the union. 3. Sympathy Strike: A sympathy strike occurs when one union strikes in support of the strike of another11. 4. Wildcat Strike: A wildcat strike is an unauthorised strike not approved by the union leadership. 5. Sit-down Strike: This is a strike when the employees strike but remain at their jobs in the plant. Such strike is illegal since they constitute an invasion of private property. Picketing: Picketing is one of the activities occuring during a strike. The picket, a line of strikers

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who patrol the employer’s place of business, helps keep a plant or building site closed during a strike. The purpose of picketing is to make the society know about labour dispute going on in the organisation. It also aims at discouraging others to refrain from doing business with the struck employer. Boycott: A boycott is the combined refusal by employees and other interested parties to buy or use the employer’s products. There are two types of boycotts : (i) Primary Boycott. A primary boycott involves only those parties directly involved in a dispute. The union exerts pressures on members to avoid patronizing an employer, even going as far as to levy fines against members that do. (ii) Secondary Boycott : This involves a third party not directly involved in a dispute. For example, an electrician’s union can persuade retailers not to buy employer’s product.

Employer Power Tactics At times, employers do also use a number of tactics designed to overcome a bargaining impasse on their terms. These may include the lockout of employees, hiring nonunion employees, hiring replacement employees and filing for bankruptcy. Lockout: A lockout is refusal by the employer to provide opportunities to employees to work. The employees are, sometimes literally, locked out and prohibited from doing their jobs, and thus, stop from getting paid. Because an employer normally halts operations with this tactic, the lockout sees only limited use in resolving bargaining impasse. Non-union Workers: One way to maintain operations is let the non-union employees such as supervisors perform the duties of striking employees. However, this tactic may be successful where operations are highly automated or routine and where little training is required to perform the strikers’ jobs. During 2000 strike of Telephone and Telegraph Workers Union of India, for example, supervisors and administrators were able to keep phone lines open and force the striking employees back to work with no pay increase12. Replacement Employees: Yet another anti-strike tactic is to hire replacement employees for strikers. However, this strategy is not without problems. First, many workers will be hesitant to accept a shrort-term employment. Second, many workers will hesitate to cross picket lines to be rediculed by the picketers. Third, the practice is sure to impair labour-management relations and lower workers morale if a settlement is reached. Bankruptcy: In extreme case, an employer can go to the extent to cancel a union contract and declare oneself, under the provisions of the Bankruptcy Law, as bankrupt to get rid of striking workers.

27.7 CONDITIONS FOR EFFECTIVE COLLECTIVE BARGAINING As has been seen, collective bargainning is one of the important means to settle the industrial disputes. However, its effectiveness depends much on the environment in which collective bargaining takes place. The following conditions make environment conducive for collective bargaining : 1. Favourable Political and Social Climate:That existence of a favourable political and social climate is a necessary condition for effective collective bargaining, is well confirmed by the history of collective bargaining worldwide. Collective bargaining has made headways in settling industrial disputes in the countries where it has been duly supported by the government and favoured by the public. From this point of view, the political climate has not been much favourable for collective bargaining in India. The reason is not far to seek. There has been a multiplicity of trade unions in the countries sponsored by different political parties. These trade unions favour employees not based on the merit of issues involved in disputes but based on their differing

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political considerations. Added to these is a plethora of legal laws also creating unfavourable climate for collective bargaining in the country. 2. Trade Unions: Like in a democratic country like ours, employees should have fundamental rights to form trade unions for protecting their interests. More the stronger the trade union is, the more the effective collective bargaining and vice versa. The employer should also recongnize a trade union and its representatives. 3. Problem Solving Attitude:Both the parties while negotiating should adopt a problem solving, or say, compromising attitude to reach an agreement. Neither party should adopt an adament or fighting attitude. The negotiating teams should follow give and take approach. It means that one party may win concessions over the other depending upon their relative strengths. 4. Availability of Data: Data and information serve as inputs for decision-making. Hence, the availability of required data serves as a pre requisite for successful collective bargaining. While the employer must make available data required for collective discussion, the union representatives also must accept and trust on data supplied by the employer. 5. Continuous Dialogue: Collective bargaining sometimes may not reach to an agreement. Instead, there may be deadlock, or say, bargaining impasse. In such case, dialogue must not end but continue with problem solving aproach. Keeping the controversial issues aside for the time being may help narrow down disagreement and continue the dialogue. Possibility for agreement may increase with continuation of dialogue.

27.8 COLLECTIVE BARGANING IN INDIA The expression “ collective bargaining” was coined by Sydney and Beartrice 13. This was widely accepted and used in the United States of America for settling industrial disputes. Thus, the USA is considered as the motherland of collective bargaining. Collective bargaining as a method of settling industrial disputes is comparatively of recent origin in India. Though attention was paid to adopt collective bargaining as a method to resolve industrial disputes since the dawn of planning era in India, it received increasing emphasis since the days of the National Commission of Labour. The origin and development of collective bargaining in India is delineated as follows:

Plans and Collective Bargaining The First Five-Year Plan duly recongnized the need for collective bargaining to resolve labour disputes and maintain peaceful industrial relations in the country. It clearly stated that collective bargaining can derive reality only from the organised strength of workers, on the one hand, and a genuine desire on the part of the employer to co-operate with employees’ representatives, on the other. The state wishes to encourage collective bargaining for peaceful settlement of industrial disputes in order to minimize and avoid, to the extent possible, its intervention in union-management relations. Increasing emphasis was given to collective bargaining in the subsequent Second Five-Year Plan. It noted that for the development of an undertaking or an industry, industrial peace is indispensable. Obviously this can best be achieved by the parties themselves. The best solution to the common problems, however, can be found by mutual agreement or collective bargaining14. The concern for collective bargaining continued in the Third Five-Year Plan also. The main emphasis was given to the adoption of voluntary arbitration in the place of compulsory adjudication. Similarly, the Fourth Five-Year Plan stressed the need for greater emphasis on collective bargaining as also a strong trade union to ensure better relations between the employer and employees15.

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National Commission on Labour and Collective Bargaining The emergence of the National Commission on Labour in 1966 was a epoch-making in the history of collective bargaining in India. The Commission made comprehensive investigations in almost all the problems relating to labour. The role of collective bargaining in solving labour problems was duly appreciated by making a series of recommendations to make collective bargaining more effective in future. The important among several recommendations it made are : (i) Collective bargaining as it has developed in the West may not be quite suitable for India given its different socio-industrial background. (ii) There is a need to evolve satisfactory arrangements for union recognition by statute as also to create favourable conditions to make such arrangements succeed. (iii) No collective bargaining can exist and succeed without the right to strike or lockout. However, in spite of all these, collective bargaining in India could not make much headway due to various reasons. Important among them are: (i) There has been lack of strong trade unions and employers’ organisations to represent the national interests. (ii) There has been increasing inclination to compulsory adjudication for the settlement of industrial disputes. (iii) Multiplicity of trade unions have resulted in union-rivalry in solving labour problems. (iv) The Government has shown its lukewarm attitude towards promotion of collective bargaining culture in the country. (v) The Governments initiatives to encourage collective bargaining are only on papers, not in spirit and practice.

27.9 SUMMARY This summary is organised by the learning objectives given on page ......332 : 1. Collective bargaining is the process through which representatives of management and the union meet to negotiate a labour agreement. The main objective of collective bargaining is to ensure cordial relations in an industry. 2. Its role in developing better understanding between the employer and the employees, in fostering industrial democracy, and in making adjustable to the changing conditions appreciate the importance of collective bargaining. 3. There are four bargaining strategies, namely, distributive bargaining, integrative bargaining, attiudinal structuring and intraorganisational bargaining. 4. The steps involved in the bargaining process are prenegotiation, negotiators, negotiation, agreement, and implementation of agreement. 5. Bargaining impasse is the breakdown of negotiation when the union and employer are unable to reach an agreement. The intervention of a neutral third party into collective bargaining is called mediation. A strike is withdrawal of labour from work. 6. Favourable political climate, strong trade union, problem solving attitude, availability of required data, and continuous dialogue are considered as necessary conditions for effective collective bargaining.

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KEY TERMS Arbitration

Attitudinal Structuring

Bargaining Impasse

Boycott

Collective Bargaining

Distributive Bargaining

Good Faith Bargaining

Industrial Democracy

Industrial Relations

Integrative Bargaining

Intra-Organisational Bargaining

Lockout

Mediation

Sympathy Strike

Wildcat Strike

REVIEW AND DISCUSSION QUESTIONS 1. What is meant by collective bargaining? What are its objectives? 2. Appreciate the need for and importance of collective bargaining in resolving industrial disputes. 3. Discuss various strategies of collective bargaining. Which one do you consider the best and why? 4. What are the necessary conditions for effective collective bargaining? 5. Write notes on : (a) Bargaining Impasse (b) Mediation (c) Strikes (d) Employer Power Tactics 6. Give an overview of collective bargaining in India.

REFERENCES 1. Dale Yoder : Personnel Management and Industrial Relation, Printice-Hall of India Pvt. Ltd., New Delhi, 1977 2. Michael J. Jucious : Personnnel Management, Richard D. Irwin, Illinois, 1963. 3. Dale Yoder : op. cit., 1977, p. 486. See also Michael Ballot : Labour Management Relations in a Changing Environment, John Wiley and Sons, New York, 1992, pp. 169-425. 4. Richard E. Walton and Robert B. Mckersie : A Behavioural Theory of Labour Negotiations, McGraw-Hill, New York, 1965. 5. R. Wayne Mondy and Robert M. Noe III : Personnel : The Management of Human Resources, Allyn and Bacon, Boston, 1981, p. 406. 6. Quoted in Nitin Mathur : Negotiate to the Top, The Hindustan Times, June 29, 2000, p.1 (Supplement). 7. David A. DeCenzo and Stephen P. Robbins : Personnel / Human Resource Management, Printice–Hall of India Private Limited, New Delhi, 1996, pp 561-562. 8. Edwin B. Flippo : Personnel Management, McGraw-Hill Book Company, New York, 1984, p. 445.

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9. Linda Babcock and Craig Olson : The Causes of Impasses in Labour Disputes, Industrial Relations, Vol. 31, No. 2 (Spring) 1992, pp 348-360. 10. Edwin B. Flippo : op. cit., 1984, p. 448. 11. Thomas Atkins : Assessing Arbitrator Competence, Arbitration Journal, Vol. 47, No. 2, June 1992, pp. 43-48. 12. The Economic Times, November 23, 2000, Thursday. 13. Sydney and Beatrice : Industrial Democracy, 1897. 14. Second Five-Year Plan, Government of India, New Delhi, 1956, p. 574. 15. Fourth Five-Year Plan : A Draft Outline, Government of India, 1966, p 387.

28 PERFORMANCE AND POTENTIAL APPRAISAL Learning Objectives After studying this chapter, you should be able to : 1.

Define performance appraisal and state its purposes.

2.

List the common approaches to performance appraisal.

3.

Outline the steps involved in a performance appraisal process.

4.

Describe the methods used to appraise employees’ performance.

5.

Discuss the problems assocciated with employee performance appraisal.

6.

Explain how performance appraisals can be more effective.

7.

Define potential appraisal and justify the need for potential appraisal.

You have so far learnt the various ways and means managers apply to maintain and retain and, then, to extract the maximum results from the employees working in the organisation. As organisational effectiveness is often equated with managerial efficiency, a manager has to ensure the full utilization of employees working under him to achieve organisational effectiveness. This underlines the need for measuring and appraising the performance of employees. Accordingly, just what, why and how to make performance appraisal of employees are the major issues addressed in this chapter. Also examined are the problems faced in performance appraisal and look at the possibilities of overcoming these problems to make the performance appraisal more effective. Also discussed, towards the end of chapter, is potential appraisal.

28.1 WHAT IS PERFORMANCE APPRAISAL? To begin with, let us peep into the history of performance apraisal. In an informal sense, performance appraisal is as old as mankind itself. In a formal sense, performance appraisal of an individual began in the Wei dynasty (A.D. 261-265) in China, where an Imperial Rater appraised the performance of members of the official family1. In 1883, the New York City Civil Service in USA introduced a formal appraisal programme shortly before World War I. However, formal appraisal of employees’ performance is believed to have been started for the first time during the First World War, when at the instance of Walter Dill Scott, the US Army: adopted the “Man-to-man” rating system for evaluating military personnel2. This early employee appraisal system was called ‘merit rating’. In the early fifties, attention shifted to the performance appraisal of technical, professional and managerial personnel. Since then, the philosophy of performance appraisal has undergone tremendous changes 3. Different experts have used different terms to describe this philosophy or concept. The common terms used include merit rating, behavioural assessment, employee evaluation, personnel review, staff assessment, progress report and performance appraisal. Notwithstanding, the term ‘performance evaluation’/ ‘appraisal’ is most widely used. To appraise is to assess the worth or value. In the context of an industrial organisation, performance appraisal is a systematic evaluation of personnel by supervisors or those familiar with their performance. In other words, performance appraisal is a systematic and objective way of judging the relative worth or ability of an employee in performing his/her task. 343

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According to Flippo4, “performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in matters pertaining to his present job and his potential for a better job”. To Beach5, “performance appraisal is the systematic evaluation of the individual with regard to his or her performance on the job and his potential for development”. Thus, performance appraisal is a systematic way of judging the relative worth of an employee in performing his task. It helps identify employees who are performing their tasks well and also those who are not and the reasons for such (poor) performance. Over the period since its formal introduction in 1920, performance appraisal has undergone tremendous changes in terms of its concept, philosophy and methods. In this context, W. F. Cascio 6 observes that : “ Performance appraisal has many facets. It is an exercise in observation and judgement, it is feedback process, and it is an organisational intervention. It is a measurement process as well as an intensely emotional process. After all, it is an inexact human process. While it is fairly easy to prescribe how the process should work, descriptions of how it actually works in practice are rather discouraging”. Dale Beach7 has identified changes in performance appraisal taken place since 1920. These are summarised in the following Table 28.1. Table 28.1 : Trends in Performance Appraisal

Item

Earlier Emphasis

Present Emphasis

Terminology

Merit rating

Employee appraisal/performance appraisal

Purpose

Determining qualifications for wage increase, transfer, promotion, layoff

Development of personnel, improved performance on the job, and providing emotional security

Application

Hourly-paid workers

Technical, professional and managerial personnel

Factors rated

Heavy emphasis on personal attributes

Results, accomplishments, performance

Techniques

Rating scales, statistical manipulation of data for comparison purposes

Mutual goal-setting, critical incidents, group appraisal, performance standards, less quantitative

Post-appraisal interview

Superior communicates his rating to employee and tries to sell his evaluation to him; seeks to have employee conform to his view

Superior stimulates employee to analyse himself and set own objectives in line with job requirements; superior is helper and counsellor

How Does Performance Appraisal Differ from Job Evaluation? Having undergone the meaning of performance appraisal just now and job evaluation, in Chapter 14, let us examine how the former differs from the latter. Table 28.2 bears out the difference between performance appraisal and job evaluation.

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Table 28.2: Difference between Job Evaluation and Performance Appraisal

Job Evaluation

Performance Appraisal

1.

It rates a job.

It rates a job holder.

2.

It rates a job keeping in view the responsibility, qualification, experience, working conditions, etc., required to perform a job.

It rates a job holder on the basis of his or her performance.

3.

Its purpose is to determine wage levels for different jobs.

It is done for the purpose to give effect to promotions, transfers, assess training needs, offer rewards, award, punishments, etc.

4.

It is rated before an employee is appointed to hold it.

It is evaluated only after the employee has been hired and placed on a job.

5.

Conducting job evaluation is not compulsory. It is done by a committee consisting of internal and external experts.

It is compulsory to conduct it on regular basis.

6.

It is done by employees themselves, peers, supervisors or combination of them.

28.2 PURPOSE OF PERFORMANCE APPRAISAL A cross-examination of organisational practices reveals that performance appraisal is undertaken for variety of purpsoses. Performance appraisal is broadly used for meeting the following purposes : 1.

To indentify employees for salary increases, promotion, transfer and lay-off or termination of services.

2.

To determine training and development needs of the employees.

3.

To motivate employees by providing feedback on their performance levels.

4.

To establish a basis for research and reference for personnel decisions in future.

The above purposes of performance appraisal can be devided into two broad categories : evaluative and developmental, as illustrated in Figure 28.1 Purposes of Performance Appraisal

Developmental

Evaluative 1. Compensation Decisions 2. Staffing Decisions 3. Evaluate Selection System

1. Performance Feedback 2. Training and Development Needs 3. Feedback for Improvement

Fig. 28.1: Evaluative and Developmental Purposes of Performance Appraisal

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That the purpose of performance appraisal may vary from country to country and from organisation to organisation within a country is reported by the two research studies8,9. Table 28-3 gives a summary of these two research studies in India. Table 28.3: Purpose of Formal Appraisal in India and USA

Purpose of Appraisal

Promotion and transfer Determining wage increase Training and development Informing employee where he stands Follow-up interviews Discovering supervisory personnel Personnel research To help supervisors know their employees

American Indian Indian American companies companies companies companies (public) (private) (sector) sector) N=12 N=9 N=6 N=4 Shetty8 Rudrabasavaraj9 (1970) (1969) 9 (75.0) 12 (100.0) 4 (33.3) 4 (33.3) — (17.0) 6 (50.0) —

7 (77.6) 9 (100.0) 1 (11.1) 1 (11.1) — (21.0) 2 (22.2) —

6 (100.0) 5 (83.0) 5 (83.0) 5 (83.0) 1 (17.0)

11 (79.0) 11 (79.0) 11 (79.0) 9 (64.0) 3 (21.0)

— —

—

—

5 (83.0)

— 7 (50.0) 10 (71.0)

1.

Inasmuch as some of the firms use a formal performance appraisal programme for more than one purpose, the totals do not match with number of samples in each study.

2.

Brackets give percentage.

It highlights that the American companies use performance appraisal mainly to determine wage increases, promotion and transfers. In contrast, the Indian companies use performance appraisal for training and development, providing feedback to the employees, and personnel research besides using it for determining wages, promotions and transfers as do their American counterparts. Also pointed out by it is wide variations in the practice of performance apraisal between the private and public companies in India.

28.3 APPROACHES TO PERFORMANCE APPRAISAL In our social life, we appraise or evaluate, in our own ways, the worth of others. We select a tailor, hairdresser, doctor or architect through our evaluation of their worth. So do the organisations as well. All employees are appraised on their job performance in some manner or another. In general, industries make performance appraisal of their employees using three possible approaches: 1.

A casual, unsystematic, and often haphazard appraisal.

2.

A traditional and highly systematic apraisal

3.

Appraisal through mutual goal setting, i.e. Management by Objectives (MBO)

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A brief description of these follows: The Casual Approach: The casual approach of performance appraisal was perhaps the most commonly used one in the past. It, however, lost its popularity with the need for quantitative and qualitative measurement of output for the rank-and-file personnel. The Traditional Approach: This aproach is used to evaluate (a) employee characteristics, (b) employee contributions, or (c) both. All employees are apraised in the same manner using the same approach. As such,employees’ ratings so obtained become comparable. That the use of traditional and highly systematic approach is on increase is revealed by a survey of 426 firms resulting in 67 per cent reporting a formal rather than casual attempt to evaluate employees10. It also highlighted that the size of the firm and extent of formal evaluation of employees are positively related, as 87 per cent of the firms having more than 5,000 employees were using a systematic approach to performance appraisal. The Mutual Goal Setting Approach: This is also called “ the behavioural aproach”. This is an improvement over the traditional approach in which the supervisor was placed in the position of “all in all”. As such, his evaluation becomes subjective and biased11. Therefore, to overcome this problem, a new approach giving emphasis on mutual goal setting and appraisal of progress by both the appraiser and the appraisee is evolved. This is popularly known as ‘Management by Objectives’ (MBO). The use of the MBO as an appraisal approach is gaining popularty in the organisation. The MBO is discussed in detail later in this chapter under the ‘methods of performance appraisal’.

28.4 PROCESS OF PERFORMANCE APPRAISAL Though the specific steps that an organisation will follow in developing an appraisal system may vary somewhat from organisation to organisation, yet the following are the common steps usually followed by organisations while developing an appraisal system for them : 1.

Establish Performance Standards

2.

Communicate Performance Expectation to Employee

3.

Measure Actual Performance

4.

Compare Actual Performance with Standards

5.

Discuss the Appraisal with the Employee

6.

Initiate Corrective Actions

Their discussion follows in turn. Establish Performance Standards: The appraisal process begins with the establishment of performance standards. The managers must determine what outputs, accomplishments and skills will be evaluated. These standards should have evolved out of job analysis and job descriptions. These performance standards should also be clear and objective to be understood and measured. Standards should not be expressed in an articulated or vague manner such as “a good job” or “ a full day’s work” as vague phrases tell nothing. Communicate Performance Expectations to Employees :Once the performance standards are established, these need to be communicated to the respective employees so that they come to know what is expected of them. Past experience indicates that not communicating standards to the employees compounds the appraisal problem. Here, it must be noted that mere transference of information (relating to performance standards, for example) from the manager to the employees is not communication. It becomes communication only when the transference of informantion has taken place and has been received and understood by the employees12. The feedback from the employees on the standards communicated to them must be obtained. If required, the standards may be modified or revised in the light of feedback obtained from the employees. It is important to note that communication is a two-way street.

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Measure Actual Performance: This is the third step involved in the appraisal process. In this stage, the actual performance of the employee is measured on the basis of information available from various sources such as personal observation, statistical reports, oral reports, and written reports. Needless to mention, the evaluator’s feelings should not influence the performance measurement of the employee. Measurement must be objective based on facts and findings. This is because what we measure is more critical and important to the evaluation process than how we measure. Compare Actual Performance with Standards:In this stage, the actual performance is compared with the predetermined standards. Such a comparison may reveal the deviation between standard performance and actual performance and will enable the evaluator to proceed to the fifth step in the process, i.e., the discussion of the appraisal with the concerned employees. Discuss the Appraisal with the Employee:The fifth step in the appraisal process is to communicate to and discuss with the employees the results of the appraisal. This is, in fact, one of the most challanging tasks the managers face to present an accurate appraisal to the employees and then make them accept the appraisal in a constructive manner. A discussion on appraisal enables employees to know their strengths and weaknesses. This has, in turn, impact on their future performance. Yes, the impact may be positive or negative depending upon how the appraisal is presented and discussed with the employees. Initiate Corrective Action : The final step in the appraisal process is the initiation of corrective action when it is necessary. The areas needing improvement are identified and then, the measures to correct or improve the performance are identified and intitiated. The corrective action can be of two types. One is immediate and deals predominantly with symptoms. This action is often called as “putting out fires.” The other is basic and delves into causes of deviations and seeks to adjust the difference permanently. This type of action involves time to analyse deviations. Hence, managers often opt for the immediate action, or say, “put out fires”. Training, coaching, counselling, etc. are the common examples of corrective actions that managers initiate to improve the employee performance.

28.5 METHODS OF PERFORMANCE APPRAISAL In the previous section, we described appraisal process in general terms. In this section, we now want to describe in specific terms how management can devise instruments, i.e., methods that can be used to measure and appraise employees’ performance. By now, a number of performance appraisal methods are available. In fact, each organisation has its own. Each method with its strengths and weaknesses may be suitable for one organisation and non-suitable for another one. As such, there is no single appraisal method accepted and used by all organisations to measure their employees’ performance. All the methods of appraisal devised so far have been classified differently by different authors. While DeCenzo and Robbins13 have classified appraisal methods into three categories : absolute methods, relative methods and objective methods; Aswathappa14 has classified these into two categories : past-oriented and future-oriented. Michael R Carrell15 et. al. have classified all appraisal methods into as many as six categories : rating scales, comparative methods, critical incidents, essay, MBO and combination methods. Rock and Levis16 have classified the methods into two broad categories: narrow interpretation and broad interpretation. Beatty and Schneier17 have categorised various methods of appraisal into four groups : comparative methods, absolute methods, goal setting, and direct indices. A more widely used classification of appraisal methods into two categories, viz., traditional methods and modern methods, is given by Strauss and Sayles18. While traditional methods lay emphasis on the rating of the individual’s personality traits, such as initiative, dependability, drive, creativity, integrity, intelligence, leadership potential, etc.; the modern method, on the other hand, place more emphasis on the evaluation of work results, i.e., job achievements than the personal traits. Modern methods tend to be more objective and worthwhile. The various methods included in each of the two categories are given in Table 28.4.

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Table 28.4 : Methods of Performance Appraisal

Traditional Methods 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Modern Methods

Ranking method Paired comparison Grading Forced distribution method Forced choice method Checklist method Critical incidents method Graphic scale method Essay method Field review method Confidential report

1. 2. 3. 4. 5.

Management by Objectives (MBO) Behaviourally Anchored rating scales Assessment centres 360-degree appraisal Cost accounting method

In the discussion that follows, each method under both categories will be described briefly.

28.5.1 Traditional Methods Ranking Method: It is the oldest and simplest formal systematic method of performance appraisal in which one employee is compared with all others for the purpose of placing them in a simple rank order of worth. The employees are ranked from the highest to the lowest or from the best to the worst. In doing this, the employee who is the highest on the characteristic being measured and also the one who is the lowest, are indicated. Then, the next highest and the next lowest are chosen, alternating between next highest and lowest until all the employees to be rated have been ranked. Thus, if there are ten employees to be appraised, there will be ten ranks from 1 to 10. However, the greatest limitations of this appraisal method are that (i) it does not tell that how much better or worse one is than another, (ii) the task of ranking individuals is difficult when a large number of employees are rated, and (iii) it is very difficult to compare one individual with others having varying behavioural traits. To remedy these defects, the paired comparison method of performance appraisal has been evolved. Paired Comparison: In this method, each employee is compared with other employees on oneon-one basis, usually based on one trait only. The rater is provided with a bunch of slips each containing a pair of names, the rater puts a tick mark against the employee whom he considers the better of the two. The number of times this employee is compared as better with others determines his or her final ranking. The number of possible pairs for a given number of employees is ascertained by the following formula: N (N – 1) / 2 Where N = the total number of employees to be evaluated. Let this be exemplified with an imaginary example. If the following five teachers have to be evaluated by the Vice Chanceller of a University : Khanka (K), Mohapatra (M), Raul (R), Venkat (V), and Barman (B), the above formula gives 5 (5 – 1) / 2 or 10 pairs. These are : K with M K with R K with V K with B

M with R M with V M with B

R with V R with B

V with B

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Thus, the pairs so ascertained give the maximum possible permutations and combinations. The number of times a worker is considered better, makes his/her score. Such scores are determined for each worker and he/she is ranked according to his/her score. One obvious disadvantage of this method is that the method can become unwieldy when large numbers of employees are being compared. Grading Method: In this method, certain categories of worth are established in advance and carefully defined. There can be three categories established for employees : outstanding, satisfactory, and unsatisfactory. There can be more than three grades. Employee performance is compared with grade definitions. The employee is, then, allocated to the grade that best describes his or her performance. Such type of grading is done is Semester pattern of examinations and in the selection of a candidate in the public service sector. One of the major drawback of this method is that the rater may rate most of the employees on the higher side of their performance. Forced Distribution Method. This method was evolved by Tiffen 18 to eliminate the central tendency of rating most of the employees at a higher end of the scale. The method assumes that employees performance level confirms to a normal statistical distribution i. e., 10, 20, 40, 20, and 10 per cent. This is useful for rating a large number of employees’ job performance and promotability. It tends to eliminate or reduce bias. It is also highly simple to understand and easy to apply in appraising, performance of employees in organisations. It suffers from the drawback that if all distribution grades improve similarly, no single grade would rise in a ratings. Forced-Choice Method. The forced-choice method is developed by J. P. Guilford 19. It contains a series of groups of statements, and rater rates how effectively a statement describes each individual being evaluated. Common method of forced-choice method contains two statements, both positive or negative. Examples of positive statements are : 1.

Gives good and clear instructions to the subordinates.

2.

Can be depended upon to complete any job assigned.

A pair of negative statements may be as follows: 1.

Makes promises beyond his limit to keep these.

2.

Inclines to favour some employees. Each statement carries a score or weight, which is not made known to the rater. The human resource section does rating for all sets of statements— both positive and negative. The final rating is done on the basis of all sets of statements. Thus, employee rating in this manner makes the method more objective. The only problem associated with this method is that the actual constructing of several evaluative statements, also called ‘forced-choice scales’, takes a lot of time and effort.

Check-List Method. The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater. In this method, a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’ are prepared by the HR department (see Figure 27-2). The check-list is, then, presented to the rater to tick appropriate answers relevant to the appraisee. Each question carries a weightage in relationship to their importance. When the check-list is completed, it is sent to the HR department to prepare the final scores for all appraisees based on all questions. While preparing questions, an attempt is made to determine the degree of consistency of the rater by asking the same question twice, but in a different manner (see, numbers 3 and 6 in Figure 28-2). However, one of the disadvantages of the check-list method is that it is difficult to assemble, analyse and weigh a number of statements about employee characteristics and contributions 20. From a cost stand point also, this method may be inefficient particuarly if there are a number of job categories in the organisation, because a check-list of questions must be prepared for each category of job. It will involve a lot of money, time and efforts.

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Fig. 28.2: Sample Check-list for Appraising University Teachers

1. 2. 3. 4. 5. 6. 7.

Is regular on the job? Does maintain discipline well? Does show consistent behaviour to all students? Is interested in (teaching) job? Does ever make mistakes? Does show favouritism to particular students? Is willing to help colleagues?

Yes — — — — — — —

No — — — — — — —

Critical Incidents Mehtod: In this method, the rater focuses his or her attention on those key or critical behaviours that make the difference between performing a job in a noteworthy manner (effectively or ineffectively). There are three steps involved in appraising employees using this method. First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared. Second, a group of experts then assisgns weightage or score to these incidents, depending upon their degree of desirability to perform a job. Third, finally a check-list indicating incidents that describe workers as “good” or “bad” is constructed. Then, the check-list is given to the rater for evaluating the workers. The basic idea behind this rating is to appraise the workers who can perform their jobs effectively in critical situations. This is so because most people work alike in normal situation. The strength of cirtical incidents method is that it focuses on behaviours and, thus, judges performance rather than personalities. Its drawbacks are to regularly write down the critical incidents which become time-consuming and burdensome for evaluators, i.e., managers. Generally, negative incidents are more noticeable than positive ones. It is rater’s inference that determines which incidents are critical to job performance. Hence, the method is subject to all the limitations relating to subjective judgements. Graphic Rating Scale Method: The graphic rating scale is one of the most popular and simplest technique for appraising performance. It is also known as linear rating scale. In this method, the printed appraisal form is used to appraise each employee. The form lists traits (such as quality and reliability) and a range of job performance characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on the basis of points on the continuum. The common practice is to follow five point scale. The rater rates each appraisee by checking the score that best describes his or her performance for each trait. At last, all assigned values for the traits are then totaled. Figure 28-3 shows a typical graphic rating scale. Fig. 28.3: Sample of Graphic Rating Scale Items and Format

Performance Factor

Performance Rating

Quality of work is the accuracy, skill, and completeness of work.

Consistently unsatisfactory

Occasionally C o n s i s t e n t l y Sometimes su- C o n s i s tently supeunsatisfactory satisfactory perior rior

Quantity of work is the volume of work done in a normal workday.

Consistently unsatisfactory

Consistently C o n s i s t e n t l y Sometimes su- C o n s i s tently supeunsatisfactory satisfactory perior rior

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Performance Factor

Performance Rating

Job knowledge Poorly inis information formed about pertinent to the work duties job that an individual should have for satisfactory job performance.

Occasionally un- Can answer satisfactory most questions about the job

Understands all phases of the job

Has complete mastery of all phases of the job

Dependability Required conin following di- stant supervirections and sion company policies without supervision.

Requires occa- Usually can sional follow-up be counted on

Requires very little supervision

Requires absolute minimum of supervision

This method is good for measuring various job behaviours of an employee. However, it is also subjected to rater’s bias while rating employee’s behaviour at job. Occurance of ambiguity in designing the graphic scale results in bias in appraising employee’s performance21. Essay Method. Essay method is the simplest one among various appraisal methods available. In this method, the rater writes a narrative description on an employee’s strengths, weaknesses, past performance, potential and suggestions for improvement. Its positive point is that it is simple in use. It does not require complex formats and extensive/specific training to complete it. However, essay method, like other methods, is not free from drawbacks. In the absence of any prescribed structure, the essays are likely to vary widely in terms of length and content. And, of course, the quality of appraisal depends more upon rater’s writing skill than the appraisee’s actual level of performance. Moreover, because the essays are descriptive, the method provides only qualitative informantion about the employee. In the absence of quantitative data, the evaluation suffers from subjectivity problem. Nonetheless, the essay method is a good start and is beneficial also if used in conjunction with other appraisal methods. Field Review Method. When there is a reason to suspect rater’s biasedness or his or her rating appears to be quite higher than others, these are neutralised with the help of a review process. The review process is usually conduted by the personnel officer in the HR department. The review process involves the following activities : (a) Identify areas of inter-rater disagreement. (b) Help the group arrive at a consensus. (c) Ensure that each rater conceives of the standard similarity. However, the process is a time-consuming one. The supervisors generally resent what they consider the staff interference. Hence, the method is not widely used. Confidential Report. It is the traditional way of appraising employees mainly in the Government Departments. Evaluation is made by the immediate boss or supervisor for giving effect to promotion and transfer. Usually a structured format is devised to collect information on employee’s strength, weakness, intelligence, attitude, character, attendance, discipline, etc..

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Its drawbacks include it is a subjective evaluation based on evaluatior’s impression about the appraisee rather than on facts and figures. As the feedback is not given to the appraisee, the appraisal remains confined to evaluation than development. Feedback, if any, is given only in case of adverse report.

28.5.2 Modern Methods Management by Objectives (MBO): Most of the traditional methods of performance appraisal are subject to the antagonistic judgements of the raters. It was to overcome this problem, Peter F. Drucker22 propounded a new concept, namely, management by objectives (MBO) way back in 1954 in his book. The Practice of Management. The concept of MBO as was conceived by Drucker, can be described as a “process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual’s major areas of responsiblity in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members”. In other words, stripped to its essentials, MBO requires the manager to get specific measurable goals with each employee and then peridoically discuss his or her progress toward these goals. In fact, MBO is not only a method of performance evaluation. It is viewed by the practicing managers and pedagogues as a philosophy of managerial practice because it is a method by which managers and subordinates plan, organise, communicate, control and debate. An MBO programme consists of four main steps : goal setting, performance standard, comparison, and periodic review. In goal-setting, goals are set which each individual is to attain. The superior and subordinate jointly establish these goals. The goals refer to the desired outcome to be achieved by each individual employee. In performance standards, the standards are set for the employees as per the previously arranged time period. When the employees start performaing their jobs, they come to know what is to be done, what has been done, and what remains to be done. In the third step, the actual level of goals attained are compared with the goals agreed upon. This enables the evaluator to find out the reasons for variation between the actual and standard performance of the employees. Such a comparison helps devise training needs for increasing employees’ performance. Somuchso, it can also explore the conditions having their bearings on employees’ performance but over which the employees have no control. Finally, in the periodic review step, corrective measure is initiated when actual performance deviates from the standards established in the first step-goal-setting stage. Consistent with the MBO philosophy, periodic progress reviews are conducted in a constructive rather than punitive manner. The purpose of conducting reviews is not to degrade the performer but to aid in his/her future performance. From a motivational point of view, this would be representative of McGregor’s theories23 as discussed earlier. Figure 28.4 present the MBO method of performance appraisal presently used by an engineering giant i.e., Larsen and Turbro Limited. Limitation of MBO: MBO is not a panacea, cure for all organisational problems. As with other methods, it also suffers from some limitations as catalogued below : (i) Setting Unmeasurable Objectives : One of the problems MBO suffers from is unclear and unmeasurable objectives set for attainment. An objective such as “will do a better job of training” is useless as it is unmeasurable. Instead, “well have four subordinates promoted during the year” is a clear and measurable objective. (ii) Time-Consuming: The activities involved in an MBO programme such as setting goals, measuring progress, and providing feedback can take a great deal of time.

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NAME

CONFIDENTIAL PA Form: 2B

EMP. P. S. No.

CADRE

GROUP

DEPT.

EXECUTIVES & SUPERVISORS

LARSEN & TOUBRO LIMITED HUMAN RESOURCE DEVELOPMENT—PERFORMANCE APPRAISAL SYSTEM PERFORMANCE ANALYSIS AND REVIEW APRIL ... TO MARCH .....

NAME

DATE

SIGNATURE

EMPLOYEE

IMMEDIATE. SUPERIOR 1. 2.

NEXT SUPERIOR PERSONNEL/HRD DEPT.

Inadequate

RESULTS ACHIEVED

Adequate

AGREED OBJECTIVES & TARGETS (Not more than five)

Good

By Employee

By Immediate Superior V. Good

A1

Outstanding

A PERFORMANCE REVIEW AGAINST OBJECTIVES B1

1. 2. 3. 4. 5. A2

SELF REVIEW (By Employee)

SIGNIFICANT CONTRIBUTORS (JOB OR PROFESSION RELATED–NOT COVERED ABOVE)

IMPORTANT FACTORS FACILITATING PERFORMANCE IMPORTANT FACTORS HINDERING PERFORMANCE

B2

PERFORMANCE AGAINST OBJECTIVES (By Immediate Superior) OUTSTANDING

V. GOOD

GOOD

ADEQUATE

INADEQUATE

(Contd..)

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1. INNOVATIVENESS 2. INITIATIVE 3. INTERPERSONAL &

TEAM RELATIONSHIP

4. RESOURCEFULNESS

Ability to think new and better ways of doing things that result in introduction of new ideas or improvements of the systems and operations. Ability to determine and initiate actions that result in improved handiling of jobs, without waiting to be told. Ability to interact effectively with people at all levels to gain their confidence and respect and work in a collaborative and participative manner. Ability to muster resources to achieve desired results and devise ways and means of solving problems in difficult situations.

Ability to convey thoughts and feelings clearly both through oral as well as written expresSKILLS sions for better understanding. Specific role related attributes (Identified in the beginning of the year)

5. COMMUNICATION

PPG:B5:F45: P4

6. 7. C2

Areas of Strengths & Improvements(By Immediate Superior)

MAJOR STRENGTHS AREAS OF IMPROVEMENTS

C3 D D1

Potential Areas for Growth (By Immediate Superior)

Recommendations for Training & Development (By Immediate Superior) IN- COMPANY TRAINING PROGRAMMES Description

Code

1. D2

Code

2. OTHER TRAINING PROGRAMMES

1. D3

Description

2. SPECIFIC DEVELOPMENT PLANS Proposed Action (Tick as applicable) Job Rotation Deputation to Other Dept.

Details of Actions Required Job Enlargement Other (Please Specify)

E

Comments by Next Superior (S)

E1 E2 F

On Specific Development Plans Stated Above in D3 Overall Observations:

Special Assignment

For Use by Personnel/HRD Co-ordinator Fig. 28.4 : MBO Method of Performance Appraisal at Larsen and Toubro Limited

INADEQUATE

Critical Attributes

C1

V. GOOD GOOD ADEQUATE

Appraisal of Critical Attributes(By Immediate Superior)

OUTSTANDING

C

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(iii) Tug of War: Setting objectives with the subordinates sometimes turns into a tug of war in the sense that the manager pushes for higher quotas and the subordinates push for lower ones. As such, goals so set are likely to be unrealistic. (iv) Lack of Trust: MBO is likely to be ineffective in an environment where management has little trust in its employees. Or say, management makes decisions autocratically and relies heavily on external controls. Behaviourally Anchored Rating Scales (BARS):The problem of judgemental performance evaluation inherent in the traditional methods of performance evaluation led to some organisations to go for objective evaluation by developeing a technique known as “Behaviourally Anchored Rating Scales (BARS)” around 1960s. BARS are descriptions of various degrees of behaviour with regard to a specific performance dimension. It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified scale with specific behavioural examples of good or poor performance. The proponents of BARS claim that it offers better and more equitable appraisals than do the other techniques of performance appraisal we discussed so far24. Developing a BARS typically involves five steps25: 1. Generating Critical Incidents: Critical incidents (or say, behaviours) are those which are essential for the performance of the job effectively. Persons who are knowledgeable of the job in question (jobholders and/or supervisors) are asked to describe specific critical incidents of effective and ineffective performance. These critical incidents may be described in a few short sentences or phrases using the terminology. 2. Developing Performance Dimensions: The critical incidents are then clustered into a smaller set of performance dimensions, usually five to ten. Each cluster, or say, dimension is then defined. 3. Reallocating Incidents: Various critical incidents are reallocated dimensions by another group of people who also know the job in question. Various critical incidents so reallocated to original dimensions are clustered into various categories, with each cluster showing similar critical incidents. Those critical incidents are retained which meet 50 to 80% of agreement with the cluster as classified in step 2. 4. Scaling Incidents: The same second group as in step 3 rates the behaviour described in each incident in terms of effectiveness or ineffectiveness on the appropriate dimension by using seven to nine points scale. Then, average effectiveness ratings for each incident are determined to decide which incidents will be included in the final anchored scales. 5. Developing Final BARS Instrument: A subset of the incidents (usually six or seven per cluster) is used as a behavioural anchor for the final performance dimensions. Finally, a BARS instrument with vertical scales is drawn to be used for performance appraisal, as in Figure 27-5. How BARS is developed can be exemplified with an example of grocery checkout clerks working in a large grocery chain. A number of critical incidents involved in checking out of grocery can be clustered into seven performance dimensions : Knowledge and Judgement Conscientiousness Skill in Human Relations Skill in Operation of Register Skill in Bagging Organisational Ability of Checkstand Work Skill in Monetary Transactions Observational Ability Now, a BARS for one of these performance dimensions, namely, “knowledge and judgement” can be developed, as in Figure 28-5. Notice how the typical BARS is behaviourally anchored with specific critical incidents.

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Extermely good 7 performance Good 6 performance

357

By knowing the price of items, this checker would be expected to look for mismarked and unmarked items. You can expect this checker to be aware of items that constantly fluctuate in price. You can expect this checker to know the various sizes of cans.

Slightly 5 poor performance Neither poor nor good 4 performance Slightly good 3 performance

When in doubt, this checker would ask the other clerk if the item is taxable. This checker can be expected to verify with another checker discrepancy between the shelf and the marked price before ringing up that item. When operating the “Quick Check” this checker can be expected to check out a customer with 15 items. You could expect this checker to ask the customer the price of an item that he does not know. In the daily course of personal relationships, this checker may be expected to linger in long conversations with a customer or another checker.

Poor 2 performance

In order to take a break, this checker can be expected to block off the checkstand with people in line

Extremely poor 1 performance Fig. 28.5 : BARS for Appraising of a Grocery Checker’s Job Source : Adopted from Lawrance Fogil, Charles W. Hulin and Milton R. Blood : Development of First Level Behavioural Job Criteria, Journal of Applied Psychology, February 1971, pp. 3-8.

BARS method of performance appraisal is considered better than the traditional ones because it provides advantages like a more accurate gauge, clearer standards, better feedback, and consistency in evaluation. However, BARS is not free from limitations. The research on BARS indicates that it too suffers from distortions inherent in most rating scales. The research study concluded that “it is clear that research on BARS to date does not support the high promise regarding scale independence..... In

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short, while BARS may outperform conventional rating techniques, it is clear that they are not a panacea for obtaining high interrater reliability” Assessment Centres: The introduction of the concept of assessment centres as a method of performance method is traced back in 1930s in the Germany used to appraise its army officers. The concept gradually spread to the US and the UK in 1940s, and to the Britain in 1960s. The concept, then, traversed from the army to business arena during 1960s. The concept of assessment centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher, Hindustan Lever and Modi Xerox have adopted this technique of performance evaluation. In business field, assessment centres are mainly used for evaluating executive or supervisory potential. By definition, an assessment centre is a central location where managers come together to participate in well-designed simulated exercises. They are assessed by senior managers supplemented by the psychologists and the HR specialists for 2-3 days. Assessee are asked to participate in in-basket exercises, work groups, simulations, and role playing which are essential for successful performance of actual job. Having recorded the assessee’s behaviour the raters meet to discuss their pooled information and observations and, based on it, they give their assessment about the assesee. At the end of the process, feedback in terms of strengths and weaknesses, is also provided to the assesees. The distinct advantages the assesment centres provide include more accurate evaluation, minimum biasedness, right selection and promotion of executives, and so on. Nonetheless, the technique of assessment centres is also plagued by certain limitations and problems. The technique is relatively costly and time consuming, causes suffocation to the solid performers, discourages to the poor performers (rejected), breeds unhealthy competition among the assessees, and bears adverse effects on those not selected for assessment. 360 - Degree Appraisal: Yet another method used to appraise the employee’s performance is 360 - degree appraisal. This method was first developed and formally used by General Electric Company of USA in 1992. Then, it travelled to other countries including India. In India, companies like Reliance Industries, Wipro Corporation, Infosys Technologies, Thermax, Thomas Cook etc., have been using this method for appraising the performance of their employees. This feedback based method is generaly used for ascertaining training and development requirements, rather than for pay increases. Under 360 - degree appraisal, performance informantion such as employee’s skills, abilities and behaviours, is collected “all around” an employee, i.e., from his/her supervisors, subordinates,peers and even customers and clients27. In other worlds, in 360-degree feedback appraisal system, an employee is apraised by his supervisor, subordinates, peers, and customers with whom he interacts in the course of his job performance. All these appraisers provide informantion or feedback on an employee by completing survey questionnaires designed for this purpose. All informantion so gathered is then complied through the computerised system to prepare individualized reports. These reports are presented to the employees being rated. They then meet the appraiser—be it one’s superior, subordinates or peers—and share the information they feel as pertinent and useful for developing a self-improvement plan. In 360 - degree feedback, performance appraisal being based on feedback “all around”, an employee is likely to be more correct and realistic. Nonetheless, like other traditional methods, this method is also subject to suffer from the subjectivity on the part of the appraiser. For example, while supervisor may penalise the employee by providing negative feedback, a peer, being influenced by ‘give and take feeling’ may give a rave review on his/her colleague. Cost Accounting Method: This method evaluates an employee’s performance from the monetary benefits the employee yields to his/her organisation. This is ascertained by etablishing a relationship between the cost involved in retaining the employee, and the benefits an organisation derives from

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him/her. While evaluating an employee’s performance under this method, the following factors are also taken into consideration : 1.

Unitwise average value of production or service.

2.

Quality of product produced or service rendered.

3.

Overhead cost incurred.

4.

Accidents, damages,errors, spoilage, wastage,caused through unusual wear and tear.

5.

Human relationship with others.

6.

Cost of the time supervisor spent in appraising the employee.

28.6 PROBLEMS IN PERFORMANCE APPRAISAL None of the methods of performance appraisal discussed so far is absolutely valid and reliable. As is seen, each method has its own strengths and weaknesses. There are some problems and issues associated with the formal appraisal methods that make appraisal ineffective. This section highlights the major problems in the formal appraisal methods. Judgemental Bias: As is already seen, most of the appraisal method involve rater’s judgement of one kind or the other. These could be within or beyond the rater’s control. The inherent error of “central tendency” and “leniency” involved in the process cause the judgements bias. The error of central tendency, for example, refers to the rater’s tendency of not using extreme scale scores on the judgement scale to discriminate between the superior and inferior ratees. The rates are clustered in the middle in such a manner that all or almost ratees are rated as average. Leniency occurs when the rater puts most of the ratees on the higher side of the scale. Contrary to it, the tough raters tend to rate low. Again, there are some raters who rate on recently observed performance, while others tend to rate on potential performance. In such cases, the apraisal results of the two raters become highly incomparable. The rater’s liking or disliking for the people/ratees may also cause the judgemental biasedness. Awarding high rating to the people whom the rater likes and low rating whom they dislike is not unlikely. Another source of error in performance appraisal leading to judgemental bias is “halo effect”, or a tendency to assess the ratee on one or two traits to influence assessment on others. Character traits cause such error more often than others. Besides, there are some other biases which Blum and Naylor 28 term as “critical biases”, beyond the control of both the rater and the ratee. These too cause error of judgemental bias. Opportunity conditions i.e., supportive supervisors, more experienced co-workers, better working conditions; cohesive group and the rater’s knowledge predictor bias are the examples of critical bias making their dent in the performance appraisal. Let us exemplify how the knowledge of predictor bias makes its dent in performance apraisal. A student who topped in the admission selection test might leave the impression that he/she is the best among the sudents and hence railroad the rater-teacher to better evaluation despite a moderate performance in the subsequent internal tests. This may happen in case of employee evaluation also. Faulty Managerial Assumptions: Employee performance appraisal also suffers from faulty managerial assumptions. That managers wish to apraise their subordinates on a fair and accurate basis, based on a criterion once and for all the times, and make appraisal by instincts are untenable. Also, managers’ assumption that employees really want to know where they do stand often turns to be a myth, not a reality. Criterion Problem: The objectives of performance appraisal vary from organisation to organisation. Hence, criteria used to appraise employee too vary from one organisation to another.

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Since criteria are hard to define mainly in measurable terms, these suffer form ambiguity, vaguness and generality. As such, the results of performance appraisal based on different criteria are hardly comparable. Research studies also report, by and large, similar problems of performance appraisal. For example, Dayal 29 in his on-the-spot investigation of two Indian manufacturing companies finds the following : 1.

No significant relationship was found between employees performance evaluation and their promotions, transfers, placements, etc.

2.

Low reliability was noticed what the rater reported on paper about the performance of a subordinate and what he/she reported in face-to-face discussion.

3.

Supervisors took only a few minutes to complete the appraisal before its submission.

4.

Supervisiors revealed some sort of anxiety in apraising their subordinates.

5.

The evaluation of an employee made by the two raters revealed remarkable variation.

Closely related to Dayal’s findings were the problems reported by some other studies 30 also. 1.

Wider variation between raters than between ratees.

2.

Feedback on employee appraisal is found pleasant neither for rater nor ratee.

3.

Most supervisor-raters do not possess the required tact and insight to convey employees constructively how to improve their performance.

28.7 MAKING PERFORMANCE APPRAISAL MORE EFFECTIVE Performance appraisal, being a behavioural activity, is inevitable to suffer from certain problems. There is no panacea for eliminating altogether the problems of performance appraisal. Taking the following measures can help minimize the impact of appraisal problems and, in turn, make performance appraisal more effective:

Standard Appraisal Scheme Standard appraisal scheme, also known as ‘result-oriented schemes’, implies a more positive approach for performance appraisal. This is based on the Management by Objectives (MBO) philosophy based on the writings of Peter F. Drucker 31. According to this approach, the emphasis in performance appraisal should be shifted from apraisal to analysis. In other words, the job of superior who is evaluator, shifts from that of criticising the subordinate to that of helping him or her to improve his or her performance. The employee evaluates himself or herself and, thus, becomes an active agent in the evaluation process. Now, he/she does not remain just a passive object. The employee performance is examined against specific targets and standards of performance already agreed jointly by the superior and the subordinate. This approach is, thus, very much in consistent with the belief that people work better when they have definite goals which they must meet in specified periods.

Performance Reviews The term ‘performance review implies a deliberate stock taking exercise. The basic purpsoe of performance reivew is to anlyse what a person has done and is doing in his job in order to help him perform better by developing his strengths or / and overcoming his weaknesses. It is always better to review employee performance with employee himself/herself. One way of doing so is through counselling sessions. A seriously designed and carefully handled counselling session can enable the employee to know where he stands, what he is expected to do, what are his strengths and weaknesses, and what further actions he should take. It is important to mention that the effectiveness of counselling inter

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alia depends on the use of skills which few managers are likely to possess in the normal course of the work. Therefore, it is essential that the managers should acquire the necessary skills through proper training and orientation courses.

Multiple Appraisals Most of the methods of performance apraisals being judgemental in nature, suffer from the problem of subjectivity and, in turn, from reliability. One way to minimize the problem of reliability is to use multiple evaluations rather than single evaluation. The greatest strength of multiple apraisals is that it provides an indication of overall performance and also potential for employee development. Multiple appraisals include appraisal of the same employee by superiors, peers, subordinates, and employee himself. In a sense, multiple appraisal approach seems like ‘360-degree feedback’ method of performance appraisal.

Trained Appraisers No one is born with the ability to appraise others’ performance accurately. Experience itself also does not prepare one to conduct performance appraisals. Rather, formal training is the most effective way to prepare managers and supervisors to conduct successful employee appraisal 32. Topics normally included in appraisal training are: 

Purpose of performance appraisal.



How to avoid problems like halo, bias, central tendency, and so on.



How to conduct nondiscriminatory appraisals.



How to conduct effective appraisal interviews.

28.8 POTENTIAL APPRAISAL So far we have read the actual performance performed by an employee but not what he/she can perform. Evaluating what a person can perform or do is called ‘potential appraisal or evaluation.’ Potential refers to the abilities present but not currently utilized. It is the latent capacity in a person to discharge a responsibity. Here, the views of K Ramchandran, Director and Senior Vice-President (Human Resource and Operational Policy), Philips India Limited, where potential appraisal is under taken in a very systematic way seem worth citing. K Ramchandran observes: “People are like icebergs. What you see above the surface (performance) is only a small part. A large part of the attributes needed to perform excellently in a future job, which I call potential, is not immediately visible. It is hidden below surface”. Potential represents latent capacities and qualities in a person which mainfests while performing the job.

Why Potential Evaluation? The objectives of potential evaluation are to : 1.

Promote an employee to higher levels of jobs involving higher order or responsibilities which the employee can effectively discharge without being over-burdened and stretched.

2.

Assist the organisation to allocate jobs among employees as per their capabilities so that organisational responsibilities are discharged effectively

There are some other justifications also for conducting potential evaluation of employees in an organisation. 1. Past performance i.e., performance appraisal cannot be considerred as a criterion for promotion on higher posts mainly for two reasons. First, performance appraisal report may not be true and fair for

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various reasons such as favouritism, imcompetency on the part of appraiser, etc. Second, high level of performance in the lower level job is no guarantee of a similar level of performance in the higher/next level of job. The reason is not difficult to seek. The role requirements at different levels of jobs are dfferent and no two levels of jobs are evenly equal or matched. Hence, the need for potential evaluation of an employee to know what he /she can do / perform. A potential employee is characterised by the following attributes : 1.

Ability to foresee future opportunities.

2.

Consistency in approach and performance.

3.

Responsive to conditions whatever come in the way.

4.

Person with high level of integrity.

5.

Broader vision and micro perception.

How to Evaluate Employee Potential? The polential of employees can be evaluated by following the following steps : 1. Determination of Role Dimensions:The process of potential evaluation starts with determining the role dimensions of the employee whose potential is to be evaluated. Job description and job specification help determine the role dimensions. The former provides information about the responsibilities involved in a job, while the latter provides information on attributes the job holder should possess. Some big organisations have readily updated job description and job specification that serves as a source for determining role dimensions, as and when required. 2. Determination of Mechanism: Having determined the role dimensions, a mechanism to evaluate these attributes in an employee is evolved. Obviously, the mechanism should be appropriate to appraise the potential of employee by a designated appraiser. 3. Linking Potential with otherElements: In order to evaluate potential in a meaningful manner, other elements of human resource management such as feedback, counselling, training, job rotation, etc., should also be linked with it. Here, we are presenting the potential appraisal as followed by Philips India. Go through it. It will help you better understand about potential appraisal.

Potential Appraisal at Philips India Philips India has combined performance and potential appraisal together. It is basically based on the conceptual background as used by Philips N. V. for potential appraisal. The various creteria used by Philips N.V. are divided into four types : 1.

Conceptual Effectiveness: Vision, business orientation, entrepreneurial orientation and sense of reality.

2.

Operational Effectiveness: Result orientation, individual effectiveness, risk taking and control.

3.

Interpersonal Effectiveness: Network directedness, negotiating power, personal influence and verbal behaviour.

4.

Achievement Motivation: Drive, personal ambition, innovativeness, and stability.

Each of the criterion is then measured on five-point scale. The final grading is based on the appraisal by management development review team that consists of members from functional areas with whom the appraisees have close interaction in the normal course of their job. A 2 × 2 matrix is used to demonstrate the combination of performance and potential appraisal as shown in the figure 28.6.

Potential Low High

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Problem Children

Stars

? Planned Separation Low

Preformance

Solid Citizens High

Fig. 28.6: Potential Appraisal at Philips India

Let us give a brief description of four classifications of appraisees. 1. Low Potential – Low Performance.These employees are low on both dimensions. These can be advised to improve performance otherwise the result will be planned separation. 2. High Potential – Low Performance.In order to utilize their high potential, these employees are shifted either to new locations or new departments. If still they do not improve their performance, they are reclassified as question mark for planned separation. 3. Low Potential – High Performance.They are performers termed as solid citizens. They lack potential for higher job. Therefore, they are encouraged to do their presnet jobs better. 4. High Potential – High Performance.They are termed as stars. More developmental efforts are directed towards them

28.9 SUMMARY This summary is organised by the learning objectives given on page, ......343 : 1. Performance appraisal is systematic way of judging the relative importance of an employee in performing his/her task. It is undertaken for variety of purposes such as to consider employees for salary increases, promotions, transfer and termination of services, to determine training and development needs of the employees, and to establish basis for research and reference relating to employee matters. 2. The common approaches of performance appraisal include casual approach, traditional approach, and mutual goal setting approach, i.e, ‘Management by Objectives’ (MBO). 3. Establishing performance standards, communicating these to employees, measuring actual performance, comparing actual with standard performance, discussing appraisal with employees, and initiating corrective measures are the various steps involved in performance appraisal process. 4. Performance appraisal methods include the ranking method, force distribution method, checklist method, critical incidents method, field review method, management by objectives (MBO) behaviourally anchored rating scales (BARS), assessment centres, 360 - degree appraisal, and so on. 5. Problems assoicated with performance appraisal include judgemental bias, central tendency, halo effect, leniency, unclear standards, faulty managerial assumptions, and criterion problems. 6. Actions such as standard appraisal system, performance reviews, multiple appraisals, and trained appraisers can make performance appraisal more effective.

KEY TERMS Ambiguity

Leniency

Assessment Centres

MBO

Bias

Merit Rating

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Central Tendency

Performance Apraisal

Counselling

Performance Review

Halo Effect

Training

REVIEW AND DISCUSSION QUESTIONS 1. What do you mean by performance appraisal? Discuss the three purposes performance appraisal can meet. 2. Discuss the various steps involved in performance appraisal process. 3. What is BARS ? How will you develop this scale for one of your teacher? 4. “Performance appraisal is not merely for appraisal but is for accomplishment and improvement of performance”. Discuss. 5. Describe an optimum performance appraisal system. 6. “Performance appraisal should be a two-way street. Supervisors evaluate their subordinates, and subordinates should evaluate their supervisors”. Do you agree or disagree? Discuss. 7. Discuss 360-degree appraisal with its relative merits and demerits. 8. Which method will you use to appraise the performance of one of your teacher and why? What will you suggest to improve his performance? 9. Develop a set of critical incidents covering the classroom performance of the teacher you like the most . 10. What are the major problems that distort performance appraisal? 11. Write short notes on the following : (a) Appraisal by Objectives (b) Forced Choice Method (c) Critical Incidents Method (d) BARS (e) 360 - Degree Appraisal.

REFERENCES 1. Arun Monappa and Mirza S. Saiyadain : Personnel Management, Tata MacGraw-Hill Publishing Company Limited, New Delhi, 1997, p. 207. 2. Wonston Oberg : Making Performance Relevant, Harvard Business Review, Vol., 50 No.1, 1972, p. 61. 3. Dale S. Beach : Personnel – The Management of People at W ork, Macmillan Publishing Company, New York, 1975, p. 258. 4. Edwin B. Flippo : Personnel Management, MacGraw-Hill Book Company, New York, 1984, p. 225. 5. Dale S. Beach : op. cit., 1975, p. 290. 6. Wayne F. Cascio : Managing Human Resources, McGraw-Hill, New York, 1995, p. 274. 7. Dale S. Beach : op. cit., 1975, p. 280. 8. Y. K. Shetty : Personnel Management Practices : A Comparative Study, Indian Journal of Social Work, 1970, 31, pp. 101-114. 9. M. N. Rudrabasavaraj : Personnel Administrative Practices in India, V.M. NICM, Poona, 1969.

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10. National Industrial Conference Board : Personnel Practices in Factory and Office : Manufacturing, Studies in Personnel Policy, No. 194, New York, 1964, p. 17. 11. Douglas McGregor : An Uneasy Look at Performance Appraisal, Harvard Business Review, May-June 1957, pp. 89-94. 12. David A Decenzo and Stephen P. Robbins : Personnel / Human Resource Management, Printice - Hall of India Private Limited, New Delhi, 1996, p. 362. 13. Ibid, 1996, p. 365. 14. K. Aswathappa : Human Resource and Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1999, p. 238. 15. Michael R. Carrell, Frank E. Kuzmits and Norbert E. Elbert : Personnel / Human Resource Management, Macmillan Publishing Company, New York, 1992, p. 240. 16. H. L. Rock and L. M. Lewis : Appraising Managerial Performance, In : H. B. Maynard (Ed.) Handbook of Business Administration, 1970, pp. 480-488. 17. R. W. Beatly and C.E. Schneier : Personnel Administration, Addison-Wesley, Reading, Mass, 1989. 18. G. Strauss and L. R. Sayles : Personnel – The Human Problems of Management, 1971, pp. 550567. 19. Joseph Tiffin : Merit Rating : Its Validity and Techniques, In : Joseph Dooher and Viviene Marquis (Eds.) : Rating Employee and Supervisory Performance , American Management Association, New York, pp. 17-19. 20. J.P. Guilford : Psychometric Methods, McGraw-Hill, New York, 1954. 21. Edwin B. Flippo : op. cit., 1984, p. 231. 22. Fred Luthans : Organisational Behaviour, McGraw-Hill Publishing Company, New York, 1985, p. 245. 23. Peter F. Drucker : The Practice of Management, Mercury Books, London, 1961. 24. Douglas McGregor : The Human Side of Enterprise,McGraw-Hill, New York, 1967. 25. Timothy Keaveny and Anthony Mcgann : A Comparison of Behavioural Expectation Scales and Graphic Rating Scales, Journal of Applied Psychology, Vol. 60, 1975. pp. 695-703. 26. Donald Schwab, Herbert Heneman III, and Thomas DeCotiis : Behaviourally Anchored Scales: A Review of the Literature; Personnel Psychology, Vol. 28, 1975, pp. 549-562. 27. Paul O. Kingstrom and Alan R. Bass : A critical Analysis of Studies comparing Behaviourally Anchaored Rating Scales (BARS) and other Rating Formats, Personnel Psychology, Vol. 34 No. 2, Summer 1984, pp. 263 - 289. 28. Kenneth Nowack : 360-Degree Feedback : The Whole Story, Training and Developemnt, January 1993, p. 69. 29. M. L. Blum and J. C. Nylor : Industrial Psychology : Its Theoretical and Social Foundations, Harper & Row, New York, 1968. 30. I. Dayal : Some Issues in Performance Appraisal, Personnel Administration, 1969, 32, pp. 27-30. 31. A. Zavala : Development of the Forced Choice Rating Scale Technique, Psychological Bulletin, 1965, 63, pp. 117-124. Also Arun Monappa : Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1997, pp. 217-218. 32. Peter F. Drucker : op. cit., 1961. 33. Edwin B. Flippo : Personnel Management, McGraw-Hill Book Company, New Delhi, 1980, p. 239.

SECTION – 5

CONTROL 29. Personnel Research and Audit 30. Human Resource Accounting (HRA) 31. Human Resource Information System (HRIS)

29 PERSONNEL RESEARCH AND AUDIT Learning Objectives: After studying this chapter, you should be able to: 1.

Appreciate the purpose of personnel research in an organisation.

2.

Discuss major approaches employed for personnel research.

3.

Delineate the process followed in conducting personnel research.

4.

Define personnel audit and outline its scope.

5.

Discuss the process of personnel audit.

In order to run the organisaion effectively, the human resource manager has not only to acquire the people/personnel but also to retain them in the organisation. But, the retention of employees especially of qualified and competent ones in a competitive environment has not been simple. It requires systematized and accurate knowledge about the people to be employed in the organisation. People need to be taken less by guess and by gosh and more by accurate prediction of their behaviour in an industrial environment. They should be taken less on faith and more on proofs of operating results. But, the problem is how to do so? Personnel research is the solution to this problem. Whether the personnel are acquired, promoted, transferred, dismissed, etc. as per procedure and rules and how they have been performing, need to be verified for the effective functioning of organisation. This is done through personnel audit. This chapter discusses personnel research and audit, in detail.

29.1 PERSONNEL RESEARCH What is research? In common parlance, research refers to search for knowledge. Advanced Learner’s Dictionary of current English1 lays down the meaning of research as a careful investigation or inquiry specially through search for new facts in any branch of knowledge. Redman and Mory2 define research as a systematized effort to gain new knowledge According to Flippo3, “ research is a systematic and purposive investigation of facts with the object of determining cause-and-effect relationships among such facts.” In fact, it is an activity seeking to gain greater understanding of a phenomenon and is directed towards the solution or elucidation of a problem. It is an art of scientific investigation and a voyage of discovery. Now, personnel research can be defined as a systematized investigation into the matters of employees with an objective to solve their problems. According to Dale Yoder4, “personnel research implies searching, investigation, re-examination, reassessment and revaluation”. Jucius5 has defined personnel research as “the task of searching for, and analysing, facts to the end that personnel problems may be solved or principles or laws governing their solution derived”. Thus, personnel research can be defined as systematic investigation and analysis into any aspect of managing personnel in an organisation. The basic purpose of personnel research is to seek answers to problems through the application of scientific methodology which guarantees that the information is reliable and unbiased. In this regard, some managers believe that “figures do not lie but lies can figure”. So to say, it is 369

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true that scientific findings may be valid but there is no proof that they may not be the result of manipulations to meet certain ends through,for example, biased sampling or presentation of certain kinds of selected results only6. It is also important to note that simply conducting a research is not sufficient unless the usable results are not implemented. Hence, human resource manager has an obligation to see that the results of research are implemented in his organisaion. Otherwise, research by itself will remain sterile if its results are not implemented to solve the personnel problems of the organisation. According to Monappa and Saiyadain7, a scientific research is characterised by the following features: 1.

It is objective.

2.

It is systematic.

3.

It is generalizable.

4.

it is purposive.

5.

It is parsimonious.

6.

It is replicable.

29.1.1 Why Personnel Research? Why is personnel research conducted ? The answer to this question is implied in what Michael J. Jucius7 views: “Personnel research is the task of searching for and analysing of facts to the end that personnel problems may be solved or principles and laws governing their solution derived”. Human problems at work are no longer simple but have been becoming more and more complex with crowded organisations, competitive business environment and complex technology. It is against this background, human resource managers have started to realize the need for scientific approach and solutions to the personnel problems in their organisations. This requires facts and figures relating to personnel matters. Personnel research provides such factual information about the personnel matters. Such personnel information enable a human resource manager to take an active look at problems and also develop policies and procedures based on facts obtained through scientific study rather than opinions resulting from personal experiences. The various purposes of personnel research can be listed as follows: 1.

To build upon existing knowledge about the personnel matters in the organisation.

2.

To evaluate the present conditions in human resource management.

3.

To appraise proposed personnel programmes and activities in the organisation.

4.

To predict future problems.

5.

To evaluate current policies, programmes and practices.

6.

To offer an objective and justified basis for modification and revision of current policies, programmes and practices.

7.

To keep management abreast of its competitors and replace absolete techniques by new ones.

8.

Discover ways and means how to keep employees at a high level of morale on continuous basis.

29.1.2 Approaches to Personnel Research You have just learned that personnel research is the scientific collection of factual information on a given problem and analyse it and draw conclusion to solve the problem. Then, the question is how to do it? There is no single approach to conduct personnel research. In fact, there can be different

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approaches to be employed for personnel research depending on the nature of the problem, the nature and availability of data/information, and time-cost-resource constraint. The approach to personnel research will mainly differ with its purpose. Here, we will briefly discuss some major approaches usually employed for personnel research in the Indian business organisations. 1. Historical Studies: Historical studies are used to trace the origin and development of a problem in order to isolate and understand causative factors. Thus, these studies are based on past records and documents and are in a way a throwback on. One characteristic feature of historical studies is that they offer a perspective of current events in view of similar past experiences. Yet another essential feature of historical studies is their systematic investigation on a time-span or longitudinal dimension. Some researchers consider the time-gap between the occurance of an event and its analysis as a major problem. They view that the validity of the time-gap data becomes sometimes questionable unless it is empirically demonstrated. As historical studies take a long time, hence they become costly ones. Nonetheless, historical studies are found useful in understanding the development of a problem and then seeking suitable solution for it. 2. Case Studies: Case studies investigate and present the related facts and the context of a specific problem. The main objective of case study is to understand and appreciate how a problem is handled by an individual or by an organisation, and how it could have been handled more effectively. Individual case studies may enable a researcher to formulate general hypotheses which would help conduct good research for similar problems arising in future8 . However, case studies also suffer from certain shortcomings. No two cases can be meaningfully compared because each presents a unique contextual perspective. 3. Survey Research: The approach of survey research is used for problems requiring a systematic collection of data from the related population, or a representative sample of population through personal contact. Data is collected by administering a questionnaire or conducting a structured interview. Before collecting data, certain hypotheses are formed and survey questions are designed accordingly. Data collected is tabulated, analysed and conclusions are derived. Since a survey necessarily entails direct contact with the sample of population or entire universe, it becomes time-consuming and costly. Researchers9 also report that in survey researches, researchers tend to emphasise more on importance of collection of data and not the importance of analysis of data and formulating a theory on their data. 4. Experimental Studies: Experimental studies investigate how one variable affects the result. In other words, one variable changes while other variables do not and then casual relationship is established between one variable and its effect on the result/output. Let it be exemplified by an example. In order to establish a relationship between incentive and output, other variables like personality and environment must be controlled. Now, the worker can be asked to perform the same job for a number of days under absolutely identical conditions except for a variation of incentive. If it is found that output varies with an incentive, it can be concluded that other things/variables remaining the same, incentives affect output. 5. Exploratory Studies: Such studies emphasize the discovery of new ideas and insights either to have closer familiarity with a phenomenon or to achieve new/greater insights into the problem in order to formulate hypotheses. For example, the Head of the Department of Business Administration concerned with high absenteeism among female lecturers might discuss problem with some of them to discover the reasons. Once he seeks insight into the problem, he can frame specific hypotheses to be tested in a more empirical fashion. Thus, exaploratory studies serve as precursors for large studies. With their flexible nature in data collection, they are less demanding in terms of time and cost.

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29.1.3 Process of Personnel Research In order to make personnel research a systematic and scientific one, the researcher needs to follow a certain process or procedure while conducting personnel research. All research, including personnel research, can broadly be classified into applied and pure. Applied research is one that is carried out to understand and solve a specific problem of the organisation and the results of research lead to specific action plan. From this point of view, all industrial research is applied one. On the other hand, pure research, also called theoretical research, is carried out to establish relationship between two sets of variables, i.e., how independent variable affects dependent variables, controlling other variables. The findings of pure research may not lead to specific action plans but can be used to develop certain concepts and hypotheses. Be it an applied or pure research, the following steps must be followed while carrying out personnel research:

Statement of Purpose In simple words, statement of purpose is a statement to justify the present research. In orther words, the researcher has to state what he/she actually proposes to study and why. It also needs to be pointed out that given the problem, the present research is the most parsimonious way of seeking answers to the problem.

Statement of Problem Research, including personnel research, is carried out to solve problem faced by an organisation/individual. Therefore, the foremost step involved in carrying out personnel research is to state the problem to be studied clearly and concretely. Better the problem is stated, better will be possibility of realistic reasearch. Problem can be identified by going through the existing literature, discussion with knowledgeable persons in the subject and getting first-hand information and observation on the matter. The problem so identified should be reduced to manageable size. Once the problem is clearly identified, the next step is to develop the hypotheses, also called ‘suggested answers’.

Statement of Method Method refers to the manner followed to collect data / information for the study. Yes, the method will differ across researches depending upon the nature of research problems and hypotheses set for them. An important aspect of methodology is the identification and selection of study group. In case of large universe, it may be difficult to contact each unit/individual of the universe. Hence, either random or purposive sample can be selected for the study. What are the dependent and independent variables of the study should be clarified. Dependent variables are the responses, reactions and behaviour, whereas independent variables are ones that affect dependent variables. Method of data collection with its justification must also be clearly decided.

Statement of Results Results, based on information gathered, refer to the relationship between dependent and independent variables of the study. They may support or reject the hypotheses set in the beginning of the study. The results can be found out by applying statistical tools and, then, can be presented in the form of tables, graphs, charts, bar grams, etc.

Statement of Analysis and Implications No doubt, results of the research can be utilized to solve the specific problem. Besides, the concern of a personnel research is also to visualize the implications of the results and also utilize them for policy formulation and decision-making.

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29.2 PERSONNEL AUDIT Let us first try to trace out the origin of the term ‘audit’ . The word ‘audit is derived from the Latin word ‘audire’ which means to hear. In the olden days, whenever the proprietors of a business concern suspected fraud, they appointed a person to check the accounts and to hear the explanations given by the persons responsible for keeping the accounts. The audit during those days was interested in ascertaining whether the persons responsible for maintaining accounts had properly accounted for all receitps and payments to his principal and to locate frauds and errors. Then, it was merely a cash audit. The object of modern audit is not confined to cash verification but to report on financial position of the undertaking as disclosed by its Balance Sheet and the Profit and Loss Account. Now, auditing has been used as a part of control function. It can be defined as the examination and evaluation of policies, procedures and practices in all phases of a business to achieve the most effective administration of the organisation10. Let us now define personnel audit.

29.2.1 Meaning and Objectives “Extending the general meaning of auditing to the field of personnel management, personnel auditing may be defined as the analysis and evaluation of personnel policies, procedures and practices to determine the effectiveness of personnel/human resource management in an organisation. In other words, personnel audit is a periodic review to measure the effectiveness of personnel management and to determine the steps required for more effective utilization of human resources. Outlining the need for personnel evaluation,Gordon11 states that a major objective of personnel management is to “improve productivity” of individual employees and thus increase “organisation effectiveness” by better utilization of a firm’s human resources. According to Gray12, “the primary objective of personnel audit is to know how the various units are functioning and how they have been able to meet the policies and guidelines which were agreed upon; and to assist the rest of the organisation by identifying the gaps between objectives and results, for the end product of an evaluation should be to formulate plans for corrections of adjustments.” The objectives of personnel audit can be listed in a more orderly manner as follows: 1.

To review the whole organisational system of human resource practices, i.e., acquiring, developing, allocating and utilizing human resources in the organisation.

2.

To evaluate the effectiveness of various personnel policies and practices.

3.

To identify shortcomings in the implementation of human resource practices in the organisation.

4.

To modify the existing human resource practices to meet the challanges of personnel/human resource management.

29.2.2 Scope The scope of personnel audit is very wide. It represents the encompassing approach; that is, it assumes that the management of human resources involves much more than the practice of recruiting, hiring, retaining and firing employees. In other words, personnel audit is interested in all the programmes relating to employees regardless of where they originate. In this way, the areas personnel audit includes are recruitment, selection, job analysis, training, management development, promotions and transfers, labour relations, morale development, employee benefits, wage and salary administration, collective bargaining, industrial relations and communication. Further, the areas like leadership, grievances, performance appraisal and employee mobility are also included within the scope of personnel audit.

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Dale Yoder13 has outlined the area wise and level-wise scope of personnel audit as follows: Table 29.1: Personnel Audit–Areas and Levels

Levels & Examples of Audit Data Major Areas

Level I - Results

Level II-Programmes Level III- Policy & Procedures

Planning: Forecosting & scheduling to meet organisation & personnel needs.

Personnel shortages Time bound or net- Explicit statement to supplies, layoff, etc. work cost/benefit provide inclusive budget, etc. plans for present & future

Staffing & Development : Defined requirements & careers; sources, requirement, selection, training, promotions

Recruitment times costs; In house & out house Let cream rise; nontraining times cost, training programmes, discrimination, etc. labour turnover etc. guidance in careers, etc.

Organising : Maintaining structures for co-ordinating, communicating, collaborating, etc.

Motivation & Commitment : Individual & group motivation, interest, effort, contribution

Administration : Style of leadership and supervision; delegation, negotiation.

Research & Innovation : Experiments & theory testing in all areas.

Feedback, reader interest, extent of formal, organisation, reports, records, etc.

Job definitions for individuals, departments, task forces, house organs, etc.

Encourage flexibility, reduce resistance to change, effective three-way communication, etc.

Productivity, perfor- Job enlargement, mance norms compara- wage & salary admintive costs, etc. istration; morale survey; exit interviews; fringe benefits, etc.

Gain high personal identification, ensure wholeman satisfactions.

Suggestions, promotions grievances, discipline, union-management coorperation.

Style adopted to changing expectations; participative involvement, collective bargaining, etc.

Consultative supervision; collective barganing, unionmanagement committees, etc.

Changes, experiments, R & D approach in all Test old & new research reports, publi- areas; suggestion theory; encourage cations. plans, etc. creativity in management.

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29.2.3 Process The personnel audit should probe much deeper, evaluating personnel programmes, policies, philosophy and theory. For this, it is necessary to decide the appropriate levels of audit such as results, programmes, policies, philosophy, etc., before actually initiating the personnel audit. Experience suggests that evaluation by results sometimes becomes just superficial. For example, high absentee rates may result from a variety of causes. In order to make deeper probe, the process of personnel audit includes the following steps: (i) Identifying indices, indicators, statistical ratios and gross numbers in some cases. (ii) Examining the variations in a time frame in comparison with a similar previous corresponding period. (iii) Comparing the variations of different departments during different time periods. (iv) Examining the variations of different periods and then comparing them with the similar units working in the region. (v) Drawing trends, ascertaining frequency distribution and correlations between them. (vi) Preparing a report and send it to the top management for information and action. According to VSP Rao14, the following questions can be asked to evaluate personnel policies, procedures and practices: (i) What are they? (i.e., policies/procedures/practices). (ii) How are they established? (iii) How are they communicated to various managers and employers concerned? (iv) How are they understood by individual employers, supervisors and managers at different levels? (v) Are they consistent with the management’s organisational philosophy and human resource management philosophy? (vi) Are they consistent with the existing trends towards human resource management and research? (vii) What are the controls that exist for ensuring their effective and uniform application? (viii) What measures exist to modify them to meet the organisational requirements?

29.3 SUMMARY This summary is organised by the learning objectives given on page.......369 : 1.

The main purpose of personnel research is to analyse the problem and seek solutions to it through the application of scientific methodology.

2.

The major approaches employed to conduct personnel research include case studies, survery research, exploratory studies, experimental studies and historical studies.

3.

The process of personnel research includes statement of purpose, statement of problem, methodology, results, analysis and interpretation.

4.

Personnel audit refers to an examination and evaluation of policies, procedures and practices to determine the effectiveness of personnel/human resource management. The scope of personnel research is encompassing that covers all personnel aspects like planning, staffing and development, organising, motivation and commitment, administration, research and innovation.

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5.

The process of personnel audit consists of identifying indicators, indexes, statistical ratios and gross numbers in some cases, and examining the variations in a time frame in comparison with a similar previous corresponding period.

KEY TERMS Case Study

Personnel Management

Personnel Audit

Personnel Research

REVIEW AND DISCUSSION QUESTIONS 1. Define the term ‘personnel research”. Also appreciate the need for it. 2. Explain the approaches or techniques that are employed for conducting personnel research. 3. What is personnel audit? List its objectives and outline its scope also. 4. Outline the process involved in conducting personnel audit.

REFERENCES 1. The Advanced Learner’s Dictionary of Curr ent English, Oxford University Press, 1952, p. 1069. 2. L. V. Redman and A. V. H. Mory: The Romance of Research, 1923, p. 10. 3. Edwin B. Flippo: Personnel Management, McGraw-Hill Book Company, New Delhi, 1976 (Sixth Edition) p. 568. 4. Dale Yoder: Personnel Management and Industrial Relations, Printice Hall of India Pvt. Ltd., New Delhi, 1959, pp. 627. 5. M. J. Jucius: Personnel Management, Richard D. Irwin, Ilinois, 1963, p. 488. 6. Arun Monappa and Mirza S. Saiyadain. Personnel Management, Tata McGraw-Hill Publishing Company Limited, New Delhi, 1996 (Second Edition), p. 331. 7. Michael J. Jucius: op. cit., 1963, Chapter 30. 8. I. Dayal and B. R. Sharma: Strike of Supervisory Staff in the State Bank of India, Progressive Corporation Pvt. Ltd., Bombay, 1971. 9. Robert O. Hayes: Qualitative Insights from Quantitative Methods, Haward Business Review Vol. 47, No. 4, 1969, pp. 108-117. 10. G. Seybold: Personnel Audit and Reports to Top Management, Studies in Personnel Policy, No. 191, National Industrial Conference Board, 1964. 11. M. F. Gordon: Three Ways to Effectively Evaluate Personnel Programmes, Personnel Journal, Vol 51 (7), 1972, pp. 498-510. 12. R. D. Gray: Evaluating the Personnel Department, Personnel,Vol. 42, No. 2, 1965. 13. Dale Yoder: Personnel Management and Industrial Relations, Printice Hall of India Pvt. Ltd., New Delhi, 1972, p.719. 14. V S P. Rao: Human Resource Management (Text and Cases), Excel Books, New Delhi, 2000, p. 532.

30 HUMAN RESOURCE ACCOUNTING (HRA) Learning Objectives After studying this chapter, you should be able to: 1. Explain the meaning of human resource accounting and list its objectives. 2. Discuss the advantages HRA offers. 3. Mention the limitations of HRA. 4. Discuss the various methods used to calculate the value of human resources. 5. Outline methods used to control the costs of human resources. You know that production is the result of combined contribution made by labour, i.e., human resources; material; machinery; Capital; technology; etc. Nonetheless, it is worth noticing that physical and monetary resources by themselves cannot contribute to production or output. In fact, it is human resources only that through its concerted efforts harnesses these resources to achieve production, or say, return on investment. In this way, human resources are the most important assets of an organisation. Yet another significant feature of human resources is that while other physical resources like machinery, building etc; depreciate over a period of time, human resources have appreciation through training and experience over the period. In accounting, while depreciation in physical assets is taken into consideration to prepare a true and fair Balance Sheet, appreciation in human resources is not considered while preparing the Balance Sheet. Thus, such an accounting practice is a blatant negation of the cardinal principle of ‘True and Fair Disclosure’ in published accounts. All the expenses incured on human resources in the form of recruitment, training and development are charged as expenses against the revenues of a particular accounting period. But, as opined by Rensis Likert, the expenses incurred on human resources are fixed in nature and they do not offer any immediate return. In fact, the returns accrue to the organisation over a long period as long as the employee stays with the organisation. Therefore, such expenses/costs should be capitalized and amortised over the entire period so that the Balance Sheet presents a true and fair position of the state of affairs of the business. Not capitalizing these costs implies concealing assets and net worth of the organisation to that extent. Now, the problem is how to capitalize human resource costs? Human resource accounting is the answer to this problem. In India, several companies such as BHEL, Engineers India, Associated Cement Corporation of India, Oil and Natural Gas Corporation Ltd. (ONGC), etc., have been following Human Resource Accounting to show their human resource capital in their annual reports i.e., Profit and Loss Account and Balance Sheet. Just what human resource accounting is, what are its objectives and limitations, what benefits does it offer, how human resource costs are ascertained and controlled are the subject matters discussed in this chapter.

30.1 MEANING AND OBJECTIVES Human resource accounting (HRA) is similar in principle to the financial accounting. That is, just as financial accounting reflects the costs of assets such as building and machinery, human resource accounting shows human resources as capital not as expenses. Thus, HRA shows the investment the organisation makes in its people and how their values change over a period of time. In simple words, HRA is a sophisticated way to measure the effectiveness of personnel management activities and the 377

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use of people in an organisation. Let us consider some important definitions of HRA. According to the American Association of Accountants (AAA)1, “HRA is a process of identifying and measuring data about human resources and communicating this information to interested parties”. Flamhoitz2 has defined HRA as “accounting for people as an organisational resource. It involves measuring the costs incurred by organisations to recruit, select, hire, train and develop human assets. It also involves measuring the economic value of people to the organisation”. Now, HRA can be defined as the measurement and reporting of the cost on human resources and their present values to the organisation. The main purpose of HRA is to facilitate the effective and efficient management of human resources of an organisation by making the information available on their acquisition, development, retention, evaluation, etc. According to Rensis Likert3, the objectives of HRA are to: 1.

Provide cost value information about acquisition, development, allocation and maintenance of human resources so as to achieve organisational goals in an effective manner.

2.

Enable management of the organisation to effectively monitor the use of human resources.

3.

Ascertain whether human assets are conserved, appreciated or depreciated during a given period of time.

4.

Assist in the development of effective management practices by classifying the financial consequences of various practices followed by the organisation.

30.2 ADVANTAGES HRA is useful to organisations in more than one respects. It is clear from the following advantages that it offers to organisations: 1.

HRA provides useful information about the human capital in the organisation. Such infor mation enables the manager to take right decision, e.g. choice between new recruitment and promotions, transfer and retention, and retrenchment and retention.

2.

It throws light on the strengths and weaknesses of the employees working in the organisation. It facilitates management in recruitment planning, i.e., whether to hire/recruit people or not.

3.

HRA also facilitates management to evaluate the effectiveness of HR policies and practices. For example, high costs in training may warrant to look at the returns over a period of time, expenses incurred in the additional recruitment in respect of a particular category of employees may indicate the need for a better compensation plan for them. Besides, HRA also provides feedback to a manager even on his/her own performance.

4.

It also provides valuable information for present as well as potential investors to judge a company better on the value/strengths of the human resources/assets utilized therein. If two companies are offering the same rate of return on capital employed, for example, HRA by providing information on their human resources can help the potential investors decide which one company be picked up to make investment. This is because HRA is considered as more accurate accounting method of ascertaining true and fair return on the total resources employed in a firm.

5.

Finally, the information provided by HRA enables management to control various types of human resource costs and, in turn, help improve profitability of the organisation.

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30.3 LIMITATIONS However, HRA is not an unmixed blessing. It also suffers from certain limitations as listed below: 1.

So far, there are no clear-cut guidelines how to differentiate the ‘cost’ and ‘value’ of human resources. Added to it is the uncertainty about human life itself. Like physical assets, human assets cannot be owned, retained and utilized at the sweet will and pleasure of an organisation. Not only that, the so-called ‘asset’ after getting enriched within an organisation may simply disappear attracted by green pastures and, thus, causing loss and inconvenience to the organisation almost suddenly. Given such conditions, it is not easy to value human assets in an organisation.

2.

HRA also suffers from measurement problems. There is no consensus as yet among the accountants and finance professionals regarding in what form and manner the human assets are to be valued and then shown in Balance Sheet. This problem gets compounded by the question of recovery /amortising rate. Whether the HR costs should be amortised at decreasing, constant or increasing rate? Whether the amortisation rate should remain same or different for different categories of human capital, i.e., employees?

3.

There is also a fear that the employees and trade unions may not accept the idea. The reasons are not difficult to seek. Valuing employees at different levels may lead to division among them on, the one hand, and may discourage those valued at lower revels,on the other. Trade unions may dislike the idea mainly because they will have to seek rewards/compensation for employees as per their levels of valuation in the organisation.

4.

However, there is no sufficient empirical evidence available so far to support the contention that HRA as a managerial tool facilitates managers in better and effective management of human resources in an organisation.

30.4 APPROACHES OR METHODS OFHUMAN RESOURCE VALUATION The accountants and finance professionals have suggested various methods for measuring the value of human resources utilized in an organisation. These, for the convenience of readers, may be broadly classified into two categories: Monetary Methods, and Non-Monetary Methods: We shall discuss these separately one by one.

Monetary Methods These methods are based on cost or economic value of human resources Under these methods, human resources of an organisation are translated into a common denominator, i.e., money on which organisational decisions are taken. Following are the important monetory methods used for measuring human values in an organisation. 1. Historical Cost Method:This method is developed by Rensis Likerst. Under this method, all actual costs incurred on recruitment, training, familiarisation, etc., are capitalized. Then, the capitalized cost is amortised, or say, written off over the period an employee serves in the organisation. In case the employee leaves the organisation before his expected service period, the remaining amount is written off completely in that particular year of his/ her leaving the organisation. The advantage of this method is that the value of human asset can be shown on conventional Balance Sheet and Profit and Loss Account. However, its drawback, if at all, is that human resource is equated resulting in undervaluation. 2. Replacement Cost Method:As the title itself indicates, under this method, replacement cost refers to the cost of replacing an existing employee. In other words, replacing cost is the cost that would cost to replace the existing human resources with human resources capable of rendering

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equivalent services. Here, the underlying costs included in replacement cost are the cost of recruitment, training and development, opportunity cost for the intervening period till the new recruit attains the efficiency level equal to that of the old (to be replaced) employee. In this way, this method helps the management in the process of human resource planning for the organisation by making the information available on costs to be involved in the acquisition of people in future. In a sense, this method is inconsistent with the ‘historical cost method’. That there may not be similar replacement cost for a certain asset and management may not be willing to replace the present human asset because of its greater value than that of scrap value are some of the drawbacks of this method. 3. Opportunity Cost Method:This method is used to value employees possessing certain skills and, thus, are rare in availability. Managers willing to acquire such scarce employees offer bid prices. One who finally acquires the scarce employees puts the bid price as his investment in such employees. The bid price is arrived at calculating actual or expected rate for capitalisation of the supposed earnings to be earned by such employees. Obviously, if an employee can be hired easily, there will be no opportunity cost for him/her. The main drawback of this method is the absence of a well justified criterion to decide the amount of the bid, or say, offer. 4. Asset Multiplier Method: This method is based on the assumption that there is no direct relationship between cost incurred on an employee and his value for the organisation. This is because the value of an employee depends on factors like motivation, working conditions and their attitude toward work and organisation. In this method, all employees working in an organisation are broadly classified into four categories; viz., top management, middle management, supervisory management and operative and clerical staff. The salary bill of each category is multiplied with appropriate multiplier to ascertain the total value of each category for the organisation at a given point of time. Here, multiplier is an instrument that relates the personal worth of employees with the total asset values of the organisation. As per principle, the value of human asset should match with the value of goodwill. Inconsistency in the value of human assets in comparison to goodwill is indicative of inaccuracy in multiplier that should be adjusted accordingly. 5. Economic Value Method: Under this method, human asset is valued on the basis of the contribution they are likely to make to the organisation till their retirement from the jobs. The payments made to them in the form of pay, allowances, benefits, etc., are estimated and then discounted appropriately to arrive at the present economic value of the individuals. This model can be experssed in the following formula: Vr 

T  E (t ) r  r (i  r )

Where, Vr

= the human capital value of an individual r years old.

E (t) = the individual’s annual earnings upto retirement, represented by the earnings profile. r

= discount rate i.e., cost of captial.

T

= retirement age.

The drawback of this method is that the under or over-fixation of salary may affect equating the total earnings to the human capital.

Non-Montary Methods Taking note of the changes in the effectiveness of individuals, groups and the organisation from time to time, the behavioural scientists have developed some non-monetary methods in HRA. The important ones are discussed here:

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1. Expected Realisable Value Method: Under this method, the elements of expected realisable value of employee are measured through behavioural measures. For example, the productivity of an employee can be measured by using objective indices and managerial assessment. Psychometric tests and subjective evaluations can be used to measure the promotability and transferability of employees. Similarly, attitude surveys can be used to measure employee satisfaction, motivation, etc. 2. Discounted Net Present Value of Future Earnings: This method is propounded by Rensis Likert. The method is based on three variables— casual, intermediate and output. According to Likert, the effectiveness of human capital/resources can be measured by using these three variables. Casual variables such as leadership style and behaviour affect intermediate variables such as morale, motivation, commitment to work, etc., which, in turn, affect output variables such as production, sales, profit, etc.

30.5 CONTROLLING COSTS OF HUMAN RESOURCES Human resource costs constitute a significant portion of the total operating costs in many industrial organisations. An overview of various types of human resource costs is given in the following Table 30.1. Table 30.1: Costs of Human Resour ces



Recruitment costs: Include advertising, travel expenses, consultant’s fee, incidental expenses.



Selection costs: Include costs of application forms, testing and interview expenses and other administrative costs.



Orientation costs: Costs incurred in offering orientation courses to new employees (about company policies, procedures, programmes, rules, regulations, etc.).



Training costs: Trainers’ salary, facilities cost, trainees’ time spent in the programme measured financially, low productivity during training.



Development costs: Costs incurred in enhancing employee skills and expertise.

Evidences indicate that organisation having low costs of human resources as a percentage to the total cost enjoy competitive advantage. That enables them to emerge as ‘winners’ in competitive market. Hence, the need for controlling the costs of human resources. Accordingly, some of the widely used methods to analyse and control the costs of human resources are discussed here. 1. Management by Objectives (MBO): According to Peter F. Drucker, measurement is very important aspect in management. However, human resource management has been weak in respect of measurement due to its qualitative variables such as feelings, attitudes, job satisfaction, etc. Experts have suggested the use of MBO to measure the qualitative variables of human resources. For example, K.N. Randeria4 has prescribed the following procedure for measuring the qualitative variables of employee: (a) Employee costs per unit of production/service shall be held at (Base year) and indexed to as a percentage of fixed and sem-variable costs. (b) At least two-third of increased cost of improvements in the long-term agreement with trade unions shall be met through employee productivity. (c) During the next ....years, there shall be reduction of ....per cent in down time of plant and machinery.... per cent in the avoidable waste of materials and .... per cent in absenteeism beyond authorised leave. (d) Ensure that one-third of savings arising out of (c) above will be distributed to ensure improvement in the induvidual employee’s earnings. (e) An individual employee must move up .... grades in his work span of .... years through careful manpower and succession planning.

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(f) At least one-fourth of vacancies in the managerial cadre shall be filled from amongst the lower job holders through appropriate training and development programme. 2. Ratio Analysis: In this approach, the important performance indicators that concern the personnel function are used. Cost of recruitment training, etc., are the examples of personnel function. These indicators are called personnel ratios and cover the following: (i) Cost of Recruitment: This is also called cost per hire. This ratio is used to measure the cost of recruitment and includes costs such as cost incurred in hiring process; cost of advertisement; fee paid to the recruitment agency; cost incurred in conducting tests; group discussion and personal interview; cost of medical examination; and administrative expenses such as stationery, postage, telephone, etc. The cost of recruitment, or say, cost per hire is expressed as follows: Cost of Recruitment Cost per hire (in Rs.) = No. of Recruiters hired/Retained The knowledge about the cost of hire helps managers rationalize and improve the efficiency of recruitment process. (ii) Recruitment Cycle Time: It means the time taken from commencement to compeletion of recruitment process. The main objective of analysing recruitment cycle time is to know the ideal time needed to initiate and complete the recruitment/hiring process. An analysis of time taken to complete each stage of hiring will suggest the need for steps to be taken to minimize the cycle time. Measures like clear job specification, computerisation of application blanks, standardizing the screening procedures, etc., help. reduce the cycle time in recruitment process. (iii) Cost of Turnover: Employee turnover is expensive as it involves both direct and indirect costs. Direct costs also called replacement costs include all costs of recruiting an employee, training, interruption cost, etc. Deterioration in the motivation and morale of employees are indirect costs. The cost of turnover can be calculated by using the following formula: Number of Separations ×100 Turnover Rate (%) = Average Number of Employees (iv) Cost of Training: Training is an ongoing activity in organisations to enhance the employee skills and competence. Though measuring the effectiveness of training in totality is difficult, yet there are ways to reduce costs involved in conducting training programmes. The cost of training is usually expressed in the following ways: Training Costs

A. Cost of Training Per Trainee

=

B. Cost of Training Per Employee

=

C. Training Ratio

=

Number of Employees Trained Training Cost Number of Employees No. of Training

Number of Employees 3. Personnel Productivity: Productivity is expressed as the ratio of organisation’s outputs i.e., goods and services to its inputs, i.e., physical, financial and human resources. One way to control the costs of human resource is increasing the productivity of employees working in the organisation. Organisations can raise the productivity of their employees through some techniques like O and M studies, work simplification, quality circles, productivity-linked rewards and proper utilization of manpower at various levels. Thus, when the percentage increase in personnel productivity is higher

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than percentage increase in personnel costs, per unit costs of personnel will be reduced. The same enables companies to continuously increase the remuneration of their employees with decreasing cost of personnel or keeping the perssonnel cost constant. 4. Personnel Reports and Budgets. Personnel reports provide useful information regarding manpower utlization. These can be used for controlling human resource costs. Personnel budget is a personnel programme expressed in monetary terms for key areas such as employee compensation, facilities, training, development etc. A comparison of actual costs with budgeted costs helps the manager take corrective measures to control the personnel costs.

30.6 SUMMARY This summary is organised by the learning objectives given on page...377 : 1. Human resource accounting implies measurement and reporting of information on the costs and values of human resources during a specified time period. The main objective of human resource accounting is to measure the costs and values of human resources so that these are used effectively in an organisation. 2. That HRA facilitates a manager to evaluate the effectiveness of human resource policies is a major advantage offered by HRA. 3. Absence of clear-cut guidelines to differentiate the cost and value of human resources, lack of consensus regarding the measurement of human values, the fear of refusal of idea by the employees and trade unions, etc., are some of the limitations HRA suffers from. 4. Historical cost, replacement cost, standard cost, opportunity cost, multiplier, economic value, expected realisable value, and discounted net present value are the main methods measuring the value of human resources. 5. Some of the widely used methods to analyse and control the costs of human resources include management by objective, ratio analysis, personnel productivity, and personnel reports and budgets.

KEY TERMS Human Resource Accounting

Productivity

Management by Objectives

Recruitment Cycle

REVIEW AND DISCUSSION QUESTIONS 1. What is human resource accounting? In what sense it differs from financial accounting? 2. Explain in what way HRA is useful for managing human resources. And also mention the limitations of HRA. 3. Describe the main methods of measuring the value of human resources. 4. As a human resource manager, how you will control the human resource costs in your organisation.

REFERENCES 1. 2. 3. 4.

American Association of Accountants: Terms and Concepts in Accounting, New York, 1980. E. G. Flamhoiltz: Human Resource Accounting, Dickenson Publishing, Calife, 1974. Rensis Likert: The Human Organisation, McGraw-Hill, New York, 1967. K. N. Randeria: Cost of Employee, National Institute of Personnel Management, Calcutta, 1982.

31 HUMAN RESOURCE INFORMATION SYSTEM (HRIS) Learning Objectives After studying this chapter, you should be able to: 1. Appreciate the need for HRIS. 2. List the advantages HRIS offers to an organisation. 3. Discuss the uses of HRIS. 4. Delineate the process involved in designing a modern HRIS. 5. Describe the various sub-systems consisted by HRIS. 6. List the information given in a personnel inventory. 7. Identify the limitations an HRIS suffers from. Being key to employee productivity, competitive strength, and corporate excellence, information is being recognized as the fifth organisational resource. In today’s era of information technology, information is power. It is the life-blood of an organisation. There has been an increasing realisation that success of an organisation in a complex and changing business environment hinges, to a large extent, on the effective management of its human resources .The effectiveness of human resource management, largely depends upon the quality of information held by it. For this, an information system is required to communicate effectively with the environment. The same gives genesis to the human resource information system (HRIS). This cahapter discusses the various aspects of HRIS in an organisation. Let us begin with justifying the need for HRIS.

31.1 NEED FOR HRIS Just discussed in the preceding chapters, in order to conduct personnel research and personnel audit, and human resource accounting, the personnel manager requires lots of data relating to employees working in the organisation. We have also seen earlier in Chapter 4 that human resource/ manpower planning activity too needs a considerable amount of data. However, the manual records system is found inadequate and insufficient to meet the information requirements of a modern business organisation. In other words, the difficulty in maintaining and the shortcomings of manual records system can be stated as the basic reasons as the need for HRIS. These are elaborated subsequently. The difficulty here refers to the voluminous data on the employees which is not feasible to track manually. Not only that, data needs to be updated from time to time and this makes the clerical job quite labour-intensive and costly. Alastair Evans1 states cost, accuracy, fragmentation, duplication and difficulty of analysis as some of the difficulties associated with the manual records system. The manual transfer of data from one record to another increases the chance of error which affects the accuracy and reliability of data held. Entries may be passed twice, data may be transferred to wrong documents leading to confusion. Since data/information is maintained in a fragmented manner, i.e., manual records are kept at separate locations handled by different persons in different departments, complete information of an employee is not readily available at a central place. This hampers decision making process of the organisation. Venkata Ratnam and Srivastava2 have stated three purposes as the need for HRIS: 384

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385

1. 2.

To store data and information for each individual employee for ready reference. To provide a basis for decision making in day-to-day personnel issues, (e.g. grant of leave) as also for planning, budgeting, implementing and monitoring a host of human resources functions. 3. To supply data/returns to government and other public. Hemendra Verma3, a software consultant, conducted a survey and highlighted the need for HRIS for the following purposes: 1. It was found that there is very little time allotted in handling information in respect of the HR function, may be because of time required to handle the abundant information. 2. There is a lack of information about human resources in the industry at all levels. 3. HRIS would help achieve “equality” in areas like promotion, transfer, nomination, etc. 4. HRIS helps settle employees’ dues in time, in respect of provident fund, retirement, gratuity, L.T.C. and earned leave compensation, etc. 5. Once the profile of a person is entered in the computer, retrieving the information becomes easier and also involves less costs and lessens chances of errors. Some people use two terms data and information interchangeably. But there is a distinction between the two concepts. Data are raw, unanalysed numbers and facts about events, whereas information is the analysed and organised form of data. For example, the amount of net profit is a data because no meaning can be assigned to the absolute figure of net profit. But, when the figure of net profit is expressed as a percentage of sales, it conveys certain meaning and is called information. N. Upadhya4 has very concisely distinguished data from information by stating: “Meaningful organised data can be defined as information”. Before we define HRIS,it seems in the fitness of the context to first define ‘Management Information System’ (IMS). MIS is a formal, usually computerised, structure for providing management with information, relating to internal operations and external factors to facilitate decision-making process. Now, applying this concept in the context of HRM, HRIS may be defined as follows: HRIS is a systematic way of storing data and information for each individual employee to aid planning, decision making and submitting of returns and reports to the external agencies.

31.2 ADVANTAGES OF HRIS A well developed HRIS offers the following advantages:  Reduction in the cost of stored data in human resource.  Higher speed of retrieval and processing of data.  Reduction in duplication of efforts leading to reduction in cost.  Availability of accurate and timely data about human resources.  Better analysis leading to more effective decision making.  More meaningful career planning and counselling at all levels.  Improved quality of reports.  Better ability to respond to environmental changes.  More transparency in the system. Alastair5 Evans has listed the following potential benefits that can following potential benefits that can be derived from HRIS:

Cost Effectiveness 1.

The computerization of personnel records offers an option to be considered when personnel functions are facing conflicting pressures to provide more information whilst at the same time cut back on administrative overhead costs. As the costs of computer hardware falls

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2. 3. 4. 5.

relative to the costs of employing clerical staff, so the adoption of computerized systems is becoming increasingly cost effective. A reduction of one-third in time taken to process new employees. Savings of between 55 and 90 per cent of the time taken to provide routine information by manual methods. Clerical savings of over 600 hours per year in providing data to patrol, over 800 hours per year in preparing weekly reports and almost 500 hours per year in preparing monthly, quarterly and annual reports. Improved accuracy of data which is updated at regular intervals, such as pay, personal records, etc.

31.3 USES OF HRIS As stated earlier, the main purpose of maintaining HRIS system is to gather, classify, process, record and disseminate the information required for efficient and effective management of human resources in the organisation. The various uses of HRIS in an organisation can be listed as follows: Personnel Administration: It encompasses personal information of an employee. These may include name, address, date of birth, marital status, and the date of joining the organisation. It also contains the name and address of next kin of the employee concern. These information describe the employee. Salary Administration: One of the functions of HRIS is to provide a report containing information like present salary, benefits, last pay increase and proposed increase in future of employees. Leave/Absence Increase: HRIS is also used to control leave/absence of employees. This is done by maintaining a leave history of each employee. Every employee can be issued an identity card writing every employee’s token number coded on it. Employee’s entry and exit from the organisation should be recorded on the identity card. This reduces chances for malpractice or oversight in calculating wages for each employee. Skill Inventory: Recording employee skills and monitoring a skill data base is yet another use of the HRIS. Such a skill record helps identify employees with the necessary skill for certain positions or jobs in an organisation. Medical History: The HRIS is also used to maintain occupational health data required for industrial safety purposes, accident monitoring, and so on. Performance Appraisal: In order to form a comprehensive overview about an employee, HRIS maintains performance appraisal data such as the due date of the appraisal, potential for promotion, scores of each performance criteria and alike. The textual information can be combined with the factual data obtained from the HRIS and the combination of information can be used for imparting training and affecting employee mobility in the form of transfer and promotion. Manpower Planning: HRIS is used for manpower planning also. It keeps information of organisational requirements in terms of positions. HRIS connects employees to the required positions in the organisation. It is also used to identify vacancies and establish employees thereon. HRIS can also help identify a logical progression path and the steps to be taken for employee progress/ advancement. Recruitment: Recruitment forms the most essential function of HRM. HRIS helps in the recruitment process in a big way by recording the details of activities involved in employee recruitment. These may include cost and method of recruitment and time taken to fill the positions levelwise, for example. Career Planning: By providing necessary information such as which employees have been earmarked for which positions, HRIS facilitates positional advancement of employees. In other words, HRIS helps in planning for succession.

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Collective Bargaining: HRIS through a computer terminal can provide up-to-date relevant and required information, facts and figures and, thus, can facilitate collective bargaining. It can help collective bargaining as “what if analysis” rather as feelings and fictions. In the same manner, HRIS can also help maintain better human relations in the organisation. Now, the various uses or applications of HRIS can be juxtaposed as follows: Table 31.1: Computerised Applications for HRIS

Least Complex Application

Most Complex Application

1.

Payroll preperation

1.

Automation of basic personnel data

1.

Salary analysis 1.

Skill inven- 1. tory

Collective bargaining

2.

Cheques preparation

2.

Preparation of reports e.g.,

2.

Performance planning

Human re- 2. source planning

Information sharing

3.

HR reports

3.

Seniority

3.

High-flier tracking

2.

3.

Teletraining

Adapted from the reading materials prepared by the School of Management Studies, Indira Gandhi National Open University, New Delhi. 1987 (MS. 7 Block 2, Unit 8: Computers in Human Resource Management, p. 38.

31.4 DESIGNING OF HRIS The realization that there cannot be good plan without good data and there cannot be good data without a good plan to collect it, underlines the need for designing a good HRIS in the organisation. The following steps are involved in designing a sound HRIS: 1. Determination of Information Needs: Data and information are basic inputs for decision making activity. Managers at different levels may need different types of information. Hence, identification of information needed by the managers becomes the first step in designing HRIS. This involves a perspicacious study of the activities carried out in the organisation. Work patterns, their relationship and constraints affecting the HRIS also need to be analysed. Yes, these factors may differ from organisation to organisation and from industry to industry and even from time to time in case of the same organisation and industry. 2. Designing the System: At this stage, the flow of information is structured in such a manner that it is economical and matches with the information needs of managers. It is important to mention that HRIS as a sub-system of Management Information System (MIS) does not require a separate design. However, designing HRIS may require developing preferred processing techniques for desired data set by managers at different levels. 3. Implementation: This is the stage when the HRIS is actually set up. In order to handle the system effectively, employees are imparted the necessary skill through orientation and training programmes. Besides, facilities are increased and upgraded, procedures are properly streamlined with an objective to integrate the HRIS with various organisational components in existence at the time. 4. Monitoring and Evaluation:It involves measuring the performance, or say, contribution of the system to the overall human resource management of the organisation. By doing so, gaps are identified and corrective steps are taken to ensure its smooth operation. The system is evaluated on a regular basis so that it is evaluated in the light of changes taking place from time to time within and outside the organisation.

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31.5 COMPUTERISED HRIS A computerized HRIS is designed to monitor, control and influence movement of people from the time they join the organisation till the time they decide to leave the organisation. A computerised HRIS, according to S. Chandrasekhar6, consists of the following eight sub-systems: 1. Recruitment Information: It includes information such as advertisement module, applicant’s profile, appointment and placement data. 2. Personnel Administration Information: It comprises personal needs of an employee concerning leave, transfer, promotion, increment, etc. 3. Manpower Planning Information:It offers data that could help human resource mobilisation, career planning, succession planning, and various inputs for skill development. 4. Training Information: It provides information for designing course material, arranging needbased training and appraising the training Programme. 5. Health Information: It consists of data relating to health, safety and welfare of employees. 6. Appraisal Information: It consists of performance appraisal information that serves as inputs for promotions, career and succession planning. 7. Payroll Information: It provides data regarding wages, salaries, incentives,, allowances, fringe benefits, deductions for provident fund, etc. 8. Personnel Research Information: It is a data bank about employee attitude, turnover, absenteeism, which may be used for different types of analysis to know and understand the employee better.

31.6 PERSONNEL INVENTORY Personnel inventory means a list of personnel and their background providing information on name, age, sex, qualifications, experience, address etc. HRIS helps develop a personnel inventory to be used for human resource planning, i.e., the first step in human resource management. The information on personnel inventory is obtained from job applications and questionnaires filled by employees from time to time. The types of information included in personnel inventory depends upon its uses in the organisation. A typical example of personnel inventory as suggested by Morrison7, is presented in table 31.2. Tables 31.2 : Data for Personnel Inventory System 

Descriptive data: name, address, date of birth, marital status and other data that describe a person.



Skills inventory: a specialized application of descriptive data, such as skills, abilities, job experience and interests. These data may refer to periods both before and after the employee is hired.



Organizational status: date of hire, organization location, job title and other job-related data indicating where a person is situated and what work he is doing in the organization.



Work history: a compilation of past organizational positions, performance and status changes, including raises and changes in location and budget centre. This information may be accumulated from the date of hire, but usually it includes only the most recent 15 to 20 lines of data, covering approximately two to five years of activity.



Performance appraisal: usually considered highly sensitive data; therefore, appraisal information and promotion potential are often coded.



Wage and salary: all information necessary for wage and salary and benefits administration, as well as that necessary for calculation of gross pay roll and gross-to-net pay.



Labour reporting data : timekeeping, absence, production and labour cost information: work location; supervisor to whom charged and so forth:

Human Resource Information System (HRIS)



  

389

Vacation scheduling and control, health and safety, education and training information, as well as grievances, company transportation, and other data needed to support special programmes. Recruitment: applications in process, applications on file, status of recruiting activity, data about schools, and follow-up information. Special data banks for research, such as attitude surveys, manpower development, organization planning and selection studies, and manpower market analyses. Some firms are also developing non-computerized data banks containing information about the external environment that relates to manpower acquisition and planning.

Personnel Inventory System in WIPRO The personnel inventory booklet giving the following information is given to each employee and updated regularly in WIPRO:  Basic Bio-Data, Joining Date, Department, Grade.  Qualifications  Memberships  Previous Employment  Transfers  Deputation  Charge Sheets  Hospitalization  Loss of Pay  LFC details  Relatives’ details  Training details  Publication details  Joining details  Promotion details  Punishment details  Unauthorised absence details  Leave encashment details Source: Company Documents of WIPRO Information Technology Ltd.

31.7 LIMITATIONS OF HRIS Computerized HRIS is not an unmixed blessing. While it offers some benefits, as described earlier, it also suffers from problems which need to be addressed to make the HRIS more effective. The major problems of HRIS are described below: 1. It can be expensive in terms of money and manpower requirements. 2. Its effective application needs large-scale computer literacy among the employees responsible for maintaining HRIS. 3. If the personnel designing HRIS are not competent enough in their works, there is, then, mismatch between data provided by the HRIS and data required by the managers. 4. Computers cannot replace human being because human interventions will always be there to improve the existing situation. The “Garbage-in Garbage Out (GIGO)” is the key expression in any computerized system and, hence, in HRIS also. 5. Absence of continuous up-dating of HRIS makes the information stale which is considered as good as no information.

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31.8 SUMMARY This summary is organised by the learning objectives given on page...384 1.

HRIS is needed for making required data and information available for making better decisions.

2.

Cost and time reduction in data collection through computerized HRIS is the major advantage offered by HRIS.

3.

HRIS is used to manage all aspects relating to an employee such as salary, leave , skill, performance appraisal, recruitment, career planning, collective bargaining, etc.

4.

The designing of sound HRIS involves four stages, namely, determination of information, the system designing, implementation, and monitoring and evaluation.

5.

A computerized HRIS consists of certain subsystems such as recruitment, personnel administration, training, health, appraisal, pay roll information, etc.

6.

Personnel inventory contains the necessary data about employee in the organisation.

7.

Absence of large-scale computer literacy to operate the system has been the major limitation of HRIS.

KEY TERMS Attitude

Incentives

Business Environment Career Planning

Management Information System Performance Appraisal

Fringe Benefit

Succession Planning

Human Resource Information System

Training

REVIEW AND DISCUSSION QUESTIONS 1. Explain the concept of HRIS. Justify the need for HRIS in modern organisations. 2. Discuss the various uses and advantages of HRIS. 3. How will you design an HRIS in an industrial organisation?

REFERENCES 1. Alastair Evans: Computerizing Personnel Systems: A Basic Guide , Institute of Personnel Management, London, 1986. 2. C.S.Venkata Ratnam and B.K Srivastava: Personnel Management and Human Resour ces, Tata McGraw-Hill, New Delhi, 1991. 3. Hemendra Verma: Seminar Presented on HRIS at Indian Institute of Management, Ahmedabad, 30th June, 19994. 4. N. Upadhya: Information Technology: A Tool for Decision Making, Personnel Today, Vol, 12, No.4, January –March 1992, p. 27. 5.

Alastair Evans: op. cit., 1986.

6. S. Chandrasekhar: Computerised HRIS in T.V. Rao and D.F. Pereira (Eds.): Recent Experiences in HRD, Oxford & IBH, New Delhi, p. 285. 7. E.J. Morrison: Developing Computer-Based Employee Information Systems, AMA Research Studies 99, American Management Association. Inc., 1969, pp. 28-29.

SECTION – 6

MISCELLANEOUS 32. Human Resource Management in a Changing Environment 33. International Human Resource Management (IHRM) 34. Managing Human Resources (HR) in Virtual Organisations (VO)

32 HUMAN RESOURCE MANAGEMENT (HRM) IN A CHANGING ENVIRONMENT Learning Objectives After studying this chapter, you should be able to: 1.

Delineate the changing environment of HRM.

2.

Present the new management practices in the changing environment.

Change has become euphemeral everywhere-be it economy, politics, business, environment and so on. For example, economy has changed from closed to open to web economy, business has expanded from regional to national to global, and business organisations have altered from brick and mortar to knowledge to virtual organisations. Along with these, changes are also occuring today in the environment of human resource management. These changes require HRM to play an ever more crucial role in organisations. As mentioned earlier in Chapter 3, business strategy is to be aligned with the environment and functional strategies like HR strategy with the business strategy. Then, this implies that the change in business strategy and for that matter HR strategy has become sine quo non with change in environment. Therefore, the knowledge of changing environment becomes a prerequisite to formulate an appropriate business and HR strategy. With this in view, an attempt has been made in this chapter to delineate the changing environment and the changing role of HRM in changing environment.

32.1 CHANGING ENVIRONMENT OF HRM Business environment is changing environment and so is HR environment. The changing environment of HRM includes work force diversity, economic and technological change, globalisation, organisational restructuring, changes in the nature of jobs and work and so on.

Work force Diversity Diversity has been defined as any attribute that humans are likely to use to tell themselves, that person is different from me and, thus, includes such factors as race, sex, age values, and cultural norms1. The Indian work force is characterized by such diversity that is deepening and spreading day by day. It is likely to be more diverse as women, minority- group members, and older workers flood the work force. With the increasing number of women entering the work force due to a combination of factors like women’s emancipation, economic needs, greater equality of sexes, education and so on, additional pressures of managing a different set of problems at the work place have arisen. As such, the number of women is on increase in all walks of life i.e., teachers, lawyers, doctors, engineers, accountants, pilots, parliamentarians and so on. However, increasing number of women in the work force has been necessitating the implementation of more flexible work scheduling, child care facilities, maternity and now paternity leave also and transfer to location of husband’s place of posting. Also, as the work force ages, employers will have to grapple with greater health care costs and higher pension contributions. On the whole, the increased diversity of work force will place tremendous demands on the HR management function. 393

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Further, creating unanimity from a diverse work force has also become a challenge for HR manager. This is because, as several experts2 put it, diversity is marked by two fundamental and inconsistent realities operating today with it. One is that organisations claim they seek to maximize diversity in the work place, and maximize the capabilities of such a diverse work force. The other is that traditional human resources system will not allow diversity, only similarity. These experts emphasize that employers traditionally hire, appraise, and promote people who fit a particular employer’s image of what employees should believe and act like. At the same time, there is corresponding tendency to screen out those who do not fit.

Economic and Technological Change Along with time, several economic and technological changes have occurred that have altered employment and occupational pattern. In India too, there is a perceptible shift in occupational structure from agriculture to industry to services. The New Economic Policy, 1991 has led to liberalization and globalization giving genesis to multinational organisations with their multicultural dimensions having certain implications for HRM. The implications of globalization for HRM are discussed subsequently. The Indian economy has already become an open economy but it will be more so from April 2003 with the complete lifting of quantitative restrictions (QRs) on imports in India. Technology has become the hallmark of the modern organisations. As such, modern organisations have become the technology-driven organisations. So to say, men are replaced by machinery. Manufacturing technology, for example, has changed to automation and robotisation. Manufacturing advances like these will eliminate many blue-collar jobs, replacing them with fewer but more highly skilled jobs. Similar changes are taking place in office automation, where personal computers, word processing, and management information system (MIS) continue to change the nature of office work. The explosive growth of information technology linked to the internet has ushered in many changes throughout the organisation. One of the major changes led by information technology is that it has hastened what experts call the “fall of hierarchy”, i.e., managers depend less and less on yesterday’s “stick-to-the –chain-of-command approach,” to their organising function. This is so because earlier it used to be, if one wanted information, one had to go up, over and down through the organisation. Now, one just taps in. That’s what broke down the hierarchy. Somuchso, now employees do not need to be present a definite work place. Instead, they can work from their own places/ residences through the net. This has given genesis to a new breed of organisations, called ‘virtual organisations.’ (Vo) Voirtual organisations and HRM are discussed separately in Chapter 34. In summary, these economic and technological changes has created an altogether different environment for HRM.

Globalization The New Economic Policy, 1991 has, among other things, globalised the Indian economy. There has been a growing tendency among business firms to extend their sales or manufacturing to new markets aboard. The rate of globalization in the past few years in India has been nothing short of phenomenal. Globalization increases competition in the international business. Firms that formerly competed only with local firms, now have to compete with foreign firms/competitors. Thus, the world has become a global market where competition is a two-way street. Globalization has given genesis to the multinational corporations (MNCs). The MNCs are characterised by their cultural diversities, intensified competition, variations in business practices and so on. As an international business expert puts it, “the bottom line is that the growing integration of the world economy into a single, huge marketplace is increasing the intensity of competition in a wide range of manufacturing and service industries” 3.

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Given these conditions, from tapping the global labour force to formulating selection, training and compensation policies for expatriate employees have posed major challenges for HRM in the next few years. This has underlined the need for studying and understanding HRM of multinational organisations or international organisations separately. We have also devoted the penultimate chapter of this book to deal with “International HRM”.

Organisational Restructuring Organisational restructuring is used to make the organisation competitive. From this point of view, mergers and acquisitions of firms have become common forms of restructuring to ensure organisational competitiveness. The mega-mergers in the banking, telecommunications and petroleum companies have been very visible in our country. Downsizing is yet another form of organisational restructuring. As a part of the organisational changes, many organisations have “rightsized” themselves by various ways like eliminating layers of managers, closing facilities, merging with other organisations, or outplacing workers. There has been a practice to flatten organisations by removing several layers of management and to improve productivity, quality, and service while also reducing costs. Whatever be the form of restructuring, jobs are redesigned and people affected. One of the challenges that HRM faces with organisational restructuring is dealing with the human consequences of change. For example, the human cost associated with downsizing has been much debated and discussed in the popular press. As such, HRM needs to focus on the changed scenario uniquely and that is not so simple. Thus, management of HR activities has become crucial for HR managers.

Changing Nature of Work Along with changes in technology and globalization, the nature of jobs and work has also changed. For example, technological changes like introduction of fax machines, information technology, and personal computers have allowed companies to relocate operations to locations with lower wages. There is also a trend toward increased use of temporary or part-time workers in organisations. One most significant change in the nature of work is that it has changed from manual to mental/ knowledge work. In this context, the management expert Peter Drucker’s views are worth citing. He said that the typical business will soon bear little resemblance to the typical manufacturing company of 30 years ago. The typical business will be knowledge-based, an organisation composed largely of specialists who direct and discipline their own performance through organized feedback from colleagues, customers and headquarter. For this reason, it will be what he calls an information-based organization4. As a result, the organizations giving and will give growing emphasis on their human capital i.e., the knowledge, education, training, skills, and expertise of employees, the expense of physical capital like equipment, machinery and physical plant5. This growing emphasis on education and human capital has, among other things, changed the nature of economy as service-oriented economy. In the changed economic scenario, jobs demand a certain level expertise that is far beyond that required of most workers 20 or 30 years ago. This means that companies are relying more on employee’s creativity and skills, i.e., employee’s brain power. As Fortune magzine has also said: “Brain power .... has never before been so important for business. Every company depends increasingly on knowledge–patents, processes, management skills, technologies, information about customers and suppliers, and old-fashioned experience. Added together, this knowledge is intellectual capital”6. As such, the HR environment has changed. The challenge posed by changed environment is fostering intellectuals or human capital needs managing these differently than those of previous generation. Here, Drucker7 puts that the centre of gravity in employment is moving fast from manual or clerical workers to knowledge workers, who resist the command and control model that business took from the military 100 years ago.

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Now that the changing environment of HRM is delineated, we are ready to present the new HR management practices in such changing environment.

32.2 CHANGING ROLE OF HRM The HR environment is changing and so is the role of HRM, to adapt the changing trends. The human resource managers of today may find themselves obsolete tomorrow in the changed business environment if they do not adapt HR practices suiting to the environment. As such, new role or practices have emerged to successfully respond to the changes. Some of the important HR practices are discussed here: 1. Flatter Organisations. Pyramidal organisation was the norm of yesterday. The pyramidal shape of organisations is converted into flat organisations reducing the ten-twelve levels to fiveseven levels. The increasing number of flat organisation abound in the country. One main feature of flat organisation, among other things, is that there are more people to report to the managers, they will be less able to meddle in the work of their subordinates. 2. Employee Empowerment: Gone are days when managers were exercising formal power over employees to get work done from them. The changes occured in attitude and awareness of employees over the period have rendered this mode of managing employees as obsolete. Under the changed conditions when employee has become, what is popularly termed as a ‘knowledge worker’, the employees need to be provided with greater autonomy through information sharing and provision of control over factors that affect performance. This is, experts say, turning the typical organisation upside down. Granting sanction to the employees to make decisions in their work matters is called ‘employee empowerment’. 3. Team work: The concept of division of labour i.e., specialized function introduced by Adam Smith remained in practice for a long period till the twentieth century. But, given the process-oriented work nature of modern organizations, single-function concept has ceased to its relevance. Modern organisations, or say, MNCs rely more on multi-function of workers so that workers do not remain confined to a single function but can do more than one function. This is particularly so in case of increasing concern for downsizing by the organizations. As such, a worker’s contribution to organization becomes more as a member of the team. The managerial implications are that these workers need to be managed accordingly as a team, not an individual in isolation. In other words, managers need to follow a holistic approach of management for managing such workers. 360-Degree Appraisal may be such an example. 4. Ethical Management: As the issues faced by the HR managers have increased in number and complexity, so have the pressures and challenges of working ethically. Ethical issues pose fundamental questions about fairness, justice, truthfulness, and social responsibility. Concerns have been raised about the ethical standards used by managers and employees, particularly those in business organisations. The most common unethical incidents exhibited by employees have been cheating on expense account, paying or accepting bribes and kickbacks, forging signature, lying to supervisors, employees alcohol or drug abuse, and falsification of records Ethics means doing just or right. In this sense, ethics deals with what “ought” to be done. For the HR manager, there are ethical ways in which the manager ought to act relative to a given human resource issue. However, determining specific (ethical) actions is not always easy. Ethical issues in HRM often have dimensions such as extended consequences, multiple alternatives, mixed outcomes, uncertain consequences, and personnel effects8. Then, the real problem of HR managers is how to deal with these ethical dimensions? Researchers9 have suggested some guidelines that can help HR managers respond to the ethical elements:

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

Does the behaviour or result achieved comply with all applicable laws, regulations, and government codes?



Does the behaviour or result achieved comply with all organisational standards of ethical behaviour?



Does the behaviour or result achieved comply with professional standards of ethical behaviour?

It is clear from the above three points that just complying with the laws and regulations cannot guarantee ethical beheviour. Instead, organisational members need to be guided by values and codes of behaviour. One way to induce ethical behaviour in organisations is to conduct training of employees and HR managers. Training of employees and HR managers in ethics compliance has been found to reduce the incidence of ethical problems. It is with this realisation that the ‘Ethics in Business’ as a paper is prescribed in the course curriculum of the management programmes by most of the Institutes and Management Departments in Universities in India and elsewhere as well.

32.3 SUMMARY This summary is organised by the learning objectives given on page….393 1.

Alongwith the changing business environment, the HR environment has also been changing and is marked by characteristics like work force diversity, economic and technological change, globalization, organisational restrucluring, changing nature of work, etc.

2.

The HR environment is changing and so is the role of HRM to adapt the changing trends. The new HRM practices comprise of flatter organisations, employee empowerment, team work, ethical issues and so on.

KEY TERMS Downsizing

Human Capital

Empowerment

Inormation Technology

Ethic

Internet

Globalization

Virtual Organisation

REVIEW AND DISCUSSION QUESTIONS 1. “The business environment is changing and so is HR environment”. Comment. 2. Identify the changing trends in HRM environment with special reference to India. 3. “The changing business environment requires changes in HRM practices”. How will you explain it? 4. Bring out the changing role of HRM in new HRM environment. 5. List the changes in HR practices in an organisation you know. Also, justify the need for such changes in HR practices.

REFERENCES 1. Gerald Ferris, Dwight Frink, and M. Carmen Galang: Diversity in the Workplace: The Human Resource Management Challenge, Human Resource planning, V ol. 16, No.1, pp. 41-51. 2. Gerald Ferris et. al.: Ibid, p. 43. 3. Charles W. Hill: International Business, Burr Ridge II, Irwin, 1994, p. 9. 4. Peter Drucker: The Coming of the New Organisation, Harvard Business Review, JanuaryFebruary 1988, p. 45.

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5. Richrd Crawford: In the Era of Human Capital, Harper, New York, 1991, p. 10. 6. Thomas Steward: Brain Power, Fortune, June 3, 1991, p.44. 7. Peter Drucker: op. cit. 1988, p. 45. 8. Larue T. Hosmer: The Ethics of Management, Richard D. Irwin, Homewood II, 1987, pp.12-14. 9. Robert D. Gatewood and Archie B. Carnell: Assessment of Ethical Performance of Organisation Members: A Conceptual Framework, Academy of Management Review, Vol. 16, 1991, pp. 667690.

33 INTERNATIONAL HUMAN RESOURCE MANAGEMENT (IHRM) Learning Objectives After Studying this chapter, you should be able to: 1.

Classify the types of international business.

2.

Delineate the perspective of international HRM.

3.

Discuss the major considerations in formulating H. R. practices like selection, training, compensation and retention of human resources in case of an international business organisation.

Along with time, business has undergone change in both size and scope. It has grown from sole proprietorship to large-scale joint stock companies and expanded from parochial local to international market. In simple words, international business means doing business in other nations as well. Starting with industrial revolution during the eighteenth century, international business has, by now, expanded phenomenally across the nations converting them into a global village. We do not have to look too far to see how important international business is to companies here and abroad if we look at their rate of export/import growth. Multinational Corporations (MNCs) are the modern avatar of international business. Today business has to face competition at the global level. Obviously, the survival and success of an international business depends on the competitive advantage it had acquired. The Japanese multinational companies give a clue how to acquire competitive advantage. The success of the Japanese enterprises has been attributed to “ingenuity of its workforce” and the importance placed on the strategic management of HR within the enterprise. Business expansion beyond national boundaries is much more than a step across a geographical line. However, when a company makes inroads into different markets, different cross-cultural societies and business environment, it has to contend with the most crucial aspect of staffing these operations. Here the opinion of Duerr1 seems worth quoting : “ virtually any type of international problem, is either created by people or must be solved by people. Hence, having the right people in the right place at the right time emerges as the key to company’s international growth.” That is why such issues as selection, compensation, training and development, retention etc., human resource practices in different countries and regions have focused attention on issues related to international HRM. All these aspects of HRM become the subject matter of this chapter.

33.1 TYPES OF INTERNATIONAL BUSINESS There are many alternatives available to companies to extend their operations abroad. To begin with, international operations usually start with either exporting, lincensing, or franchising2. A brief mention of these follows: Exporting: Exporting is often the first choice when manufactueres decide to expand abroad. Simply stating, exporting means selling abraod, either directly to target customers or indirectly by retaining foreign sales agents or/and distributors. Either case, going aborad through exporting has minimal impact on the firm’s human resource management because only a few, if at all, of its employees are expected to be posted aborad. 399

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Licensing: Licensing is another way to expand one’s operations internationally. In case of international licensing, there is an agreement whereby a firm, called licensor, grants a foreign firm the right to use intangible (intellectual) property for a specific period of time, usually in return for a royalty3. Licensing of intellectual property such as patents, copyrights, manufacturing processes, or trade names abound across the nations. The Indian basmati (rice) is one such example. Franchising: Closely related to licensing is franchising. Franchising is an option in which a parent company grants another company/firm the right to do business in a perscribed manner. Franchising differs from licensing in the sense that it usually requires the franchisee to follow much stricter guidelines in running the business than does licensing. Further, licensing tends to be confined to manufacturers, whereas franchising is more popular with service firms such as restaurants, hotels, and rental services. One does not have to look very far to see how important franchising business is to companies here and abroad. At present, the prominent examples of the franchise agreements in India are Pepsi Food Ltd., Coca-Cola, Wimpy’s Damino, McDonald, and Nirula4. In USA, one in 12 business establishments is a franchise5. However, exporting, licensing and franchising make companies get them only so far in international business. Companies aspiring to take full advantage of opportunities offered by foreign markets decide to make a substantial, direct investment of their own funds in another country. This is popularly known as Foreign Direct Investment (FDI). Here, by international business means foreign direct investment mainly. Let us discuss some more about foreign direct investment. Foreign Direct Investment (FDI): Foreign direct investment refers to operations in one country that are controlled by entities in a foreign country. In a sense, this FDI means building new facilities in other country. In India, a foreign direct investment means acquiring control by more than 74% of the operation. This limit was 50% till the financial year 2001-2002. There are two forms of direct foreign investment: joint ventures and wholly-owned subsidiaries. A joint venture is defined as “the participation of two or more companies jointly in an enterprise in which each party contributes assets, owns the entity to some degree, and shares risk”. In contrast, a wholly-owned subsidiary is owned 100% by the foreign firm. An international business is any firm that engages in international trade or investment. International trade refers to export or import of goods or services to customers/consumers in another country. On the other hand, international investment refers to the investment of resources in business activities outside a firm’s home country.

33.2 PERSPECTIVE OFINTERNATIONAL HRM Perspective influences practices. That the perspective of international HRM will differ from the indegineous one, the delineation of the former seems in the fitness of the context. The major factors that form perspective for international HRM and, in turn, influence HRM practices are scanned as cultural, economic, political, labour cost and to industrial relations. These are discussed in seriatim. Cultural Factors: Culture means shared beliefs, values, norms, and moral by the people. Organisational culture means a pervasive underlying set of beliefs, assumptions, values, shared feelings and perceptions, which influence the behaviour of people in the organisation. The same distinguishes one organisation from another. Similarly, at macro level too, wide ranging cultural differences exist across the nations/countries. For example, the eastern culture widely varies from the western one. Just to quote, the incentive plans in Asia (Japan) tend to focus on the work group, while in the west the more usual prescription is still to focus on individual worker incentives6. The research work of Geert Hofstede7 undertaken into IBM using the responses of managers from 66 different countries produced some interesting evidences on cultural differences. In his

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study, Hofstede found that societies differ on four primary dimensions which he called : power distance (PDI), uncertainty avoidance (UAI), individuality (INV) and masculinity (MASC). A brief discussion of these follows: Power Distance (PDI): By power distance Hofstede means the extent to which members of a society accept that power in institutions and organisations is and should be distributed equally. Accordingly, the distance between the government and the governed is narrower in democratic societies like India than in dictatorial ones like Philippines. This means, Hofstede concludes, the workers in India will have far more chances of influencing decisions of the government than would the workers in Philippines. According to him, the same applies to organisations also. Uncertainty Avoidance (UAI): In simple terms, uncertainty avoidance means the creation of set of rules and structures to eliminate ambiguity in organisations and support those beliefs that are promising for certainty and confirmity. Differnces abound among countries from this point of view also. For example, while at work place, the Indians, Germans and the French feel a much greater need for rules and regulations than do the Swedes and the British. The attitude of uncertainty avoidance is much frowned on in high PDI countries like Philippines and Germany. Individualism (INV): In simple terms, individualism means the degree of preference of individuals expected to look after themselves and their immediate families8. Just reverse is collectivist. From this stand point, USA and Britain score high on the individual index and Indonesia and Pakistan score low. What these mean is the preference for living and working in individual and collectivist ways respectively. Masculinity (MASC): By masculinity, Hofstede means the extent to which the society values assertiveness (masculinity) and caring (femininity). In simple terms, masculinity pertains to those societies in which social gender roles are clearly distinct, that is, men are supposed to be assertive, tough and focused on material success. Famininity pertains to societies in which women are supposed to be more modest, tender and caring for the quality of life. As per this index, Japan and Austria ranked high in masculinity, while Denmark and Sweden ranked low. It is also important to note that in Japan, the most masculine country, women seems to retain their feminine values. However, in Sweden, the least masculine country as per the index, feminine values apply also to men.

Economic Conditions Like cultural differences, there abound economic differences among nations/countries. Differences in economic conditions or systems cause inte-rcountry differences in HR practices. For example, in case of a country with free enterprise systems, the need for efficiency tends to favour HR practices and policies that encourage productivity, efficient workers, etc. On the other side, when one moves along the scale toward more socialist systems, HR practices tend to shift toward different direction like preventing unemployment. It may do so even at the expense of sacrificing efficiency.

Labour Cost Factors HR practices are also influenced by differences in labour costs existed in different countries. If the labour cost is high, it can require more focus on labour efficiency which, in turn, can influence HR practice to shift toward improving labour performance. Labour may get remuneration as per performance i.e., pay-for-performance. Evidences are available to mention the inter-country differences in labour costs. Labour cost is quite more in U.K. than in India, for example. Wide gaps in hours worked also exist among the countries which also needs to be considered while studying HR practices in a particular country. Somuchso, intra-country differences in hours worked exist across organisations. For example, in India, there is 5 days week (work) in the central government departments, while it’s 6 days week in the state government departments. This affects HR practices such as vacations between the two types of organisations in the same country.

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Labour Relations Factors Labour relations or industrial relations i.e., relationship between employees, employers and the government that vary from country to country and have an enormous bearing on affecting HR practices. For instance, in Germany, codetermination is the rule. Here, the employees enjoy legal right to have their voice in the matters of their company. On the other hand, in India and many countries, the State has its role to play in the relations between employees and employers. In India, for instance, HR policies on most matters such as compensation (wages/salary) and retirement benefits are set by the government. The government does so by enactment of the various Acts such as the Minimum Wages Act, 1948. The Payment of Gratuity Act, 1972, the payment of Bonus Act, 1965, etc. The HR policies are determined accordingly. As seen above, wide inter-country differences in culture, economic systems, labour costs, and industrial relations systems affect HR practices. Hecce, HR managers need to consider these impacts and evolve HR practices for business operations conducted globally. The subsequent section deals with the same.

33.3 PRACTICES IN INTERNATIONAL HUMAN RESOURCE MANAGEMENT The HR practices that are involved in managing HR in national context, as discussed so far in this book, also apply to international context, of course, with changes in approaches and philosophies. A researcher Dowling9 having reviewed the literature available on international HRM concluded that it included more “functions and activities, broader perspectives, more involvement in employee’s personal life, changes in emphasis as the work force mix Parent Company Nationals (PCNs) varies, Host Country National (HCNs) varies, risk exposure, more external influences. Depending on the distinct international context, there cannot be a single approach as perfect and foolproof for managing human resources at international level. However, the various dimensions involved in the context have to be considered before implementing a particular approach or mix of approaches for managing HR at the local level or corporate headquarters. With this in view, we now discuss the major considerations or dimensions involved in formulating HR practices in an international context.

Planning There are usually three approaches to HR planning in multinations. These are: ethnocentric, polycentric, and geocentric10. In ethnocentric policy, all key management positions are filled by parent company nationals and foreign subsidiaries are being locally staffed or what is termed as HCNs (Home Country Nationals). The reasons given for following ethnocentric planning policy include lack of managerial talent in the host country, desire to maintain a unified corporate culture and tighter control and desire to disseminate the parent firm’s core competencies across foreign subsidiaries. This policy is usually followed at an early stage of “internationalisation”. Researchers11 have, however, identified some major problems with this approach. They feel it limits promotional opportunities of HCNs which may lead to reduced productivity. PCNs unfamiliarty with local conditions, on the other hand, could be the negative factor. In polycentric approach, the foreign subsidiaries are managed by host country nationals and home-office headquarters by parent-country nationals. This approach may reduce the local cultural misunderstandings that expatriate managers may exhibit. The advantage of this approach is that adjustment and language learning problems are eliminated. American Express and Nestle follow this approach for staffing their foreign subsidiaries. In contrast to the former approaches, the geocentric approach has accent on ability rather than on nationality. This approach seeks the best people for key jobs throughout the organisation,

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regardless of nationality. This approach seems to identify with the spirit of the times and enable a firm to develop an international executive cadre and reduce the tendency of national identification of managers with units. The drawbacks of this approach, if any, are it faces conflict with policies of local governments who desire foreign subsidiaries to employ their citizens, cumbersome paper work, and increased relocation and training costs. Morgan11 has presented these three planning policies as shown in Figure 33.1. Human Resource Functions

Procure

Allocate

Utilize

Other

Home Local Nationals

Host

Expatriate Managers/Professionals/Technicians Third Country Nationals Types of Employees Fig. 33.1: Human Resource Planning Processes Source: P.V.Morgan: International Human Resource Management: Fact or Fiction, Personnel Administrator, Vol. 31, No. 9, 1986, p. 44.

Recruitment and Selection Recruitment and selection functions of HRM are performed to ensure right man on right job at right time and right place. However, this is not so easy, more especially in case of MNCs. According to Solomon12, 20% to 25% of all overseas assignments fail mainly due to recruitment reason. Hence, recruitment and selection matter in human resource management. Selectors usually play safe by placing a heavy emphasis on technical qualifications and little on the individual ability to adapt to a foreign environment that is, drastically and culturally different, as discussed earlier in this chapter, Foreign placements make demand on expatriate employee that are different from what the employee would face if posted in his or her home country. For example, the expatriate employee will have to cope with new work force, with colleagues with drastically different cultural inclinations, coupled with, if the spouse and children also accompany, the problems of adjustments with new place and people, making new friends, shoping in strange surroundings, learning language and attending new schools13. The research14 has shown beyond doubt that though technical competence is important for success, relational abilities increase the probability of successful performance. In his study, Tung15

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found that lack or relational skills was a principal cause for failure of individuals to cope in a multinational environment. He reported that when a US food manufacturer sent its marketing manager to Japan for 18 months, the process of his adjustment lost the company 98% of its market share to a major European competitor. Thus, selecting employees for foreign assignments means screening them for those traits that predict success in adapting to what may be dramatically new environments. A recent research study16 has identified five factors perceived by international employees to contribute to success in a foreign assignment. They were: job knowledge and motivation, relational skills, flexibility/ adaptability, extracultural openness, and family situation. Monappa17 views that in a multicultural work force, human resource practices have to be reactive rather than proactive.

Training Training is essentially imparted to improve job skills of the employees. It should also coincide with staffing needs. Accordingly, employees in an MNC need induction, orientation and training to be imparted in the social, cultural, business and technical aspects to make them fit for business requirements of today and tomorrow. An expert18 suggests that overseas employees need four-level training to be imparted. These are: Level I. training focuses on the impact of cultural differences, and on raising trainees’ awareness of such differences and their impact on business outcomes. Level II. focuses on attitudes and aims at getting participants to understand how attitudes (both positive and negative) are formed and how they influence behavior. Level III. training provides factual knowledge about the target country. Finally, Level IV provides skill building in areas like language, adjustment and adaptation skills. Beyond these special training practices, the need for traditional training is also felt for development of overseas employees. As in IBM, such training is imparted by rotating employees’ assignments. This helps employees grow professionally. Besides, IBM and other major MNC firms have established their Management Development Centres (MDCs) around the world where executives can come to hone their skills. The success of the Japanese MNCs is attributed, to a large extent, to their strong training practices. Japanese companies impart different kinds of training to their employees. Some send them for graduate programmes, some send them abroad to train in business law and engineering and familiarize themselves with foreign principles of management. There is also the Institute of International Studies and Training in Japan, established as a joint venture among business, government and academic circles, to promote training activity in the country.

Compensation The issue of compensation/remuneration in case of international employees is a tricky one for two reasons. First, paying all the employees of one rank the same compensation satisfies the norm of equitable remuneration. However, it raises more problems than it solves. The fact remains that as a second reason, the cost of living can be significantly varying among the countries. For example, it can be enormously more expensive to live in America than in India. If these cost-of-living differences are not duly considered while determining compensation for overseas employees, it may be almost impossible to get employees to take these high-cost assignments. Therefore, paying compensation that not just satisfies employees but also seems fair and equitable is no simple matter. The most common approach for formulating multinational employees’ compensation is to equalize purchasing power across countries, a technique known as the Balance Sheet Approach19. The basic idea behind this approach is that each foreign employee should enjoy the same standard of living

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he/she would have enjoyed at home. For this, multinational pay equal base pay to employees plus some allowances in the form of mobility allowance, housing allowance, children’s education allowance, etc., to regain lost purchasing power due to relocation. In India with the process of liberalization and globalization, the government has allowed companies to pay their managers salary packages which are more in keeping with those of their counterparts abroad. Unless salary and benefits are more or less equitabily distributed through the different units of a multinational, it can cause problems of demotivation and lackluster performance. This would cause more damage to the bottom line than the increase in benefits paid to individual employees. Performance Appraisal. Like compensation, several things complicate the task of appraising a foreign employee’s performance. Two are the most crucial ones. One, who will appraise? Two, what will be the criterion of appraising? Local managers having some inputs can appraise the expatriate employee. But, such appraisal is likely to be distorted by cultural differences . For example, a US expartriate employee in India may be appraised somewhat negatively by his host-country bosses who find his use of participative decision making inappropriate in their culture. If the expatriate is appraised by objective criteria such as profits and market share, it may also not be quite appropriate because local events such as political instability, for example, will have their bearing on the expatriate’s performance. In order to resolve the above appraisal issues, experts20 have suggested a five-point procedure for improving the expatriate employee’s appraisal. They are: 1. Stipulate the difficulty involved in assignments at the work place of expatriate. For example, working as expatriate in China is generally considered more difficult than working in India. 2. Give more weight in evaluation towards the on-site manager’s appraisal than towards the home-site managers appraisal which will be mainly based on distant perceptions of the employees performance. 3. In case the home-site manager appraises the expatriate employee, the manager should take atleast background advice from a former expatriate from the same overseas location. 4. Modify, if required, the performance criteria used for a particular job to fit the overseas position and characteristics of that particular locale. For example, ,maintaining and improving labour relations might be more important in India which is characterized by labour instability, than it would be in another country like United States. 5. Use both quantitative and qualitative criteria to evaluate the performance of overseas employee. So to say, don’t appraise the expatriate, in terms of quantifiable criteria like profits or market share only, but also give due credit for his or her very relevant insights into the functioning of overseas operations.

33.4 SUMMARY This summary is organised by the learning objectives given on page...399: 1.

2. 3.

International business means doing business in other nations as well. Among the alternatives for extending business operations overseas are exporting, licensing, franchising, and foreign direct investment. Joint ventures and wholly-owned subsidiaries are the two common forms of foreign direct investment. Factors like cultural, economic, political, labour cost, industrial relations, etc. from distinct perspective for international HRM. Like national HRM, the common HRM practices applicable to the international HRM include planning, recruitment, training, compensation, and performance appraisal. However, these practices are applied in consonance with the distinct HRM environment/perspective existed overseas.

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KEY TERMS Compensation

Joint Venture

Competitive Advantage

Multinational Corporation (MNC)

Foreign Direct Investment (FDI).

Organisational Culture

Franchising

Performance Appraisal

Industrial Relations

Training

International Business

REVIEW AND DISCUSSION QUESTIONS 1. Define international business. Suppose, you are the owner of a small business, what ways will you consider to extend your business operations overseas? In your opinion, which one will be the most meaningful for you, and how? 2. “ Inter-country differences affect HRM” Explain. 3. Discuss the nature of operations of any two multinational corporations you know. 4. You are the HRM manager of a firm that is about to send its first lot of employees overseas to staff a new subsidiary. What special training you will recommend to impart these employees. Also give your justification for the same. 5. How is the performance of an expatriate appraised? How does it differ from appraising that of a home-employee? 6. Delineate the persepective of international human resources management.

REFERENCES 1. M.G. Duerr: International Business Management – Its Four Tasks, Conference Board Record, in Peter J. Dowling and Randall S. Schuler: International Dimensions of Human Resources Management, PWS Kent Publishing company, Boston, Mass, October 1086, p. 43. 2. Gary Dessler: Managing Organisations in an Era of Change, Ft. Worth, TX, Dryden, Chapter 2, 1995. 3. John Daniels and Lee Radebaugh: International Business, Addison- Wislwy, Reading, 1994, p. 544. 4. Deepak Agarwal and Rajiv Lal: Contractual Arrangements in Franchising: An Impirical Investigation, Journal of Marketimg Research, Vol. 32, May 1995, pp. 213-221. 5. S. Shiva Ramu : Franchising, Wheelers Publishing, New Delhi, 1997, pp. 11-12. 6. Gary Dessler: Human Resources Management, Printice-Hall of India Private Limited, New Delhi, 2002 (Seventh Edition, pp. 673-674. 7. Geert Hofstede: Cutture’s Consequences: International Differences in Work Related Values, Sage Publications, Beverly Hills, Calif, 1980. 8. Geert Hofstede: Cultural Dimensions in People Management, In: Valadimir Pucik et.al (Eds): Globalising Management, John Widely & Sons, New York, 1990, p. 143. 9. Peter J. Dawling : Hot Isues Overseas, Personnel Administrator, Vol. 34, No.1, 1989, pp. 66 -72. 10. P.V. Morgan: International Human Resource Management: Fact or Fiction, Personnel Administrator, Vol. 31, No.9, 1986, pp. 44-46. 11. P.V. Morgan: Ibid, 1986, p. 44.

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12. Charlence Marmer Solomon: Success Abraod Depends on More than Job Skills, Personnel Journal, April, 1994, P. 51. 13. Anne Harzing: The Persistent Myth of High Expatriate Failure Rates, International Journal of Human Resource Management, Vol. 6, No.2, May 1995, pp. 457-474. 14. R.D. Hays, C.G. Haward and Rosalie L. Tung: Satrategic Management of Human Resources in the Multinational Enterprise, Human Resource Management, Summer 1984, pp. 129-143. 15. Rosalie L. Tung: Selection and Training Procedures of U.S, European, and Japanese Multinationals, California Management Review, Vol. 25, 1982, pp. 51-71. 16. Arthur Winfred Jr. and Winston Bennett Jt: The International Assignee: The Relative Importance of Factors Perceived to Contribute to Success, Personnel Psychology, Vol. 48, 1995, pp. 106-107. 17. Arun Maonappa: Managing Human Resources, Macmillan India Limited, New Delhi, 1998, p. 36. 18. Daniel Fieldman : Repatriate Moves as Career Transition, Human Resource Management Review, Vol. 1, No. 3, 1991,pp. 163-178. 19. Gary Dessler: Human Resource Management, Printice-Hall of India Private Limited, New Delhi, 1997, p. 684. 20. Gary Addou and Mark Mendenhall: Expatriate Performance Appraisal: Problems and Solutions, In : Mark Mendenhall and Gary Addau (Eds): International Human Resources Management, PWS-Kent Publishing Company, Boston, 1991, pp. 364-374.

34 MANAGING HUMAN RESOURCES (HR) IN VIRTUAL ORGANISATION (VO)* Learning Objectives After studying this chapter, you should be able to : 1.

Define virtual organisation and list its salient characters.

2.

Classify virtual organisations into broad types

3.

Distinguish between traditional/face-to-face and virtual organisation.

4.

List the various advantages the virtual organisations offer and the disadvantages these suffer from.

5.

State the salient features a virtual organisation has.

6.

Explain how human resource is managed in virtual organisations.

Of late, the ongoing LPG (Liberalization, Privatisation and Golbalization) move have led to intense competition, turbulent market and changing consumer requirements. In order to service in such business environment, every organisation has to respond to these changes. For this, business organisations need to be more flexible, adaptive, efficient, highly responsive and agile to survive and thrive in this fast changing and highly uncertain business environment. Flexible, also called dynamic organisations, are said to have internal structures and capabilities to facilitate responsiveness and adaptability to changes in economic and market conditions, changes in the government policy and employment legistation, unemployment, developments in technology and methods of production, competitiveness and removal of skill boundaries1. One of the options available for embedding flexibility in organisations is to have virtual organisation (VO). That the prevalence of virtual organisations is increasing, on the one hand, and managing human resources in virtual organisations differes from the traditional/face-to-face/physical ones, on the other, justifies the need for understanding virtual organisations in an orderly manner. Hence the present chapter. Just what a virtual organisation is, how it differs from traditional/face-to-face organisation and what are the emerging HR issues and trends in virtual organisation are addressed in this chapter?

34.1 WHAT IS VIRTUAL ORGANISATION (VO)? This new form of organisation, i. e., ‘virtual organisation’ emerged in 1990 and is also known as digital organisation, network organisation or modular organisation. Simply speaking, a virtual organisation is a network of cooperation made possible by, what is called ICT, i. e., Information and Communication Technology, which is flexible and comes to meet the dynamics of the market. Alternatively speaking, the virtual organisation is a social network in which all the horizontal and vertical boundaries are removed. In this sense, it is a boundaryless organisation. It consists of individuals working out of physically dispersed work places, or even individuals working from mobile devices *

This chapter draws heavily from S. S. Khanka : Managing HR in Virtual Organisations, Yojana, Volume 46, February 2002, pp. 37-38.

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and not tied to any particular workspace. The ICT is the backbone of virtual organisation. It is the ICT that coordinates the activities, combines the workers’ skills and resources with an objective to achieve the common goal set by a virtual organisation. Managers in these organisations coordinate and control external relations with the help of computer network links. The virtual form of organisation is increasing in India also. Nike, Reebok, Puma, Dell Computers, HLL, etc., are the prominent companies working virtually. While considering the issue of flexibility, organisations may have several options like flexi-time, part-time work, job-sharing, and home-based working. Here, one of the most important issues involved is attaining flexibility to respond to changes – both internal and external – is determining the extent of control or the amount of autonomy the virtual organisations will impose on their members. This is because of the paradox2 of flexibility itself. That is : while an organisation must possess some procedures that enhance its flexibility to avoid the state of rigidity, on the one hand, and simultaneously also have some stability to avoid chaos, on the other.

Characteristics A virtual organisation has the following characteristics : 

Flat organisation



Dynamic



Informal communication



Power flexibility



Multi-disciplinary (virtual) teams



Vague organisational boundaries



Goal orientation



Customer orientation



Home-work



Absence of apparent structure



Sharing of information



Staffed by knowledge workers.

In fact, this list of the characteristics of virtual organisation is not an exhaustive one but illustrative only. One can add more characteristics to this list.

34.2 TYPES OF VIRTUAL ORGANISATIONS Depending on the degree or spectrum of virtuality, virtual organisations can be classified into three broad types as follows : 1.

Telecommuters

2.

Outsourcing employees/competencies

3.

Completely virtual

A brief description of these follows in turn.

Telecommuters These companies have employees who work from their homes. They interact with the workplace via personal computers connected with a modem to the phone lines. Examples of companies using some form of telecommuting are Dow Chemicals, Xerox, Coherent Technologies Inc., etc..

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Outsourcing Employees/Competencies These companies are characterised by the outsourcing of all/most core competencies. Areas for outsourcing include marketing and sales, human resources, finance, research and development, engineering, manufacturing, information system, etc. In such case,virtual organisation does its own on one or two core areas of competence but with excellence. For example, Nike performs in product design and marketing very well and relies on outsources for information technology as a means for maintaining inter-organisational coordination.

Completely Virtual These companies metaphorically described as companies without walls that are tightly linked to a large network of suppliers, distributors, retailers and customers as well as to strategic and joint venture partners. Atlanta Committee for the Olympic Games (ACOG) in 1996 and the developement efforts of the PC by the IBM are the examples of completely virtual organisations. Now, these above types of virtual organisations are summarized in the following Table 34.1. Table 34.1: Spectrum of Virtuality

Types Telecommuters Employees Completely virtual

Least virtual Core Corp. with virtual outsourcing Combination of employees Virtual employees, outsourcing, (Virtual offce, virtual production)

Most virtual Completely Virtual Virtual employees and/or Participants in a completely virtual organization

Source : Biswajit Pattanayak : Human Resource Management, Printice-Hall of India Private Limited, New Delhi, 2001, p. 301.

34.3 DIFFERENCE BETWEENTRADITIONAL/FACE-TO-FACE AND VIRTUAL ORGANISATION The driving force in a virtual organisation basically is the virtual teams. In a virtual team, member’s primary interaction is through some combination of electronic communication system to tie up with dispersed members who never or rarely come face-to-face. Members communicate online using links like WAN (Wide Area Network), video conferencing and e-mail. Following are the three primary factors that differentiate virtual organisations from traditional/ face-to-face organisations: 1. Absense of para-verbal and non-verbal cues (such as voice, eye movement, facial expressions, body language, etc.). 2. Limited social contacts. 3. Ability to overcome time and space constraints. Today, virtual team working has become the need of the time for global organisations. But, the very foundation of virtual teams and for that matter virtual organisations is based on trust relationship. Then, how to develop trust relationship? Research findings3 report that personalized interaction help develop trust relationship which is essential for continuous working of virtual teams/organisations. Here, the ICT that is considered the backbone of virtual organisations, appears to be inadequate for establishing trust relationship between the members owing to its inability to provide access to the basic stage of participants activities.

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34.4 ADVANTAGES AND DISADVANTAGES Virtual organisations offer the following advantages : 1.

It saves time, travel expenses and eliminates lack of access to experts.

2.

Virtual teams can be organised whether or not members are in reasonable proximity to each other.

3.

Use of outside experts without incurring expenses for travel, logging and downtime.

4.

Dynamic team membership allows people to move from one project to another.

5.

Employee can be assigned to multiple, concurrent teams.

6.

Teams’ communication and work reports are available online to facilitate swift responses to the demands of the (global) market.

7.

Employees can accommodate both personal and professional lives.

8.

Virtual teams allow firms to expand their potential labour markets enabling them to hire and retain the best people regardless of their physical locations.

In spite of these advantages, virtual organisations suffer from the following disadvantages also: 1.

The lack of physical interactions with its assoicated verbal and non-verbal cues and also the synergies that often accompany face-to-face interaction.

2.

Non-availability of paraverbal and non-verbal cues such as voice, eye movement, facial expression, and body language which help in better communication.

3.

Ability to work even if the virtual teams are miles apart and the members have never or rarely met each other face-to-face.

But the fact remains that despite these drawbacks, virtual organisations have become a reality and are growing in popularity. By now, several successful cases of virtual organisations abound in our country. It is the explicitly designed ‘Group Ware’, computer based system to support virtual groups, enables the virtual organisations to work in order to achieve a common goal.

34.5 FEATURES OF VIRTUAL ORGANISATION Information is power. The absence of information and knowledge renders virtual teams to emasculate and ineffective. Information technology, i. e., seamless web electronic communication media does not allow to happen this and keeps the organisation going. According to Pattanayak4,following are the salient features of virtual organisations: Technology: New technology has transformed the traditional ways of working. In particular, the worlds of computing and telephony are coming together to open up a whole new range of responsibilities. Computer Telephony Intergration (CTI) will usher in a new revolution to the desktop. The CTI has traditionally been used in all call centre applications. E-mail Integration: Integrating Short Message Service (SMS) into the existing e-mail infrastructure allows the whole organisation to take advanatage of SMS products such as ‘Express Way’. Office System Integration: SMS technology can greatly enhance the existing or new office systems, e. g., phone messages can be sent via SMS rather than returning it in a message book. Voice Mail Alert: SMS technology added to the existing voice mail system builds an effective method of receiving voice mail alerts. Mobile Data: This enables a laptop to retrieve informantion anywhere through the mobile phone network. Mobile data communications revolutionize where and how work is done. In the past corporate information has been inaccessible from many places where it is needed. One’s ability to link laptop to mobile phone keeps one connected to his/her virtual organisation from anywhere.

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34.6 HUMAN RESOURCE MANAGMENT IN VIRTUAL ORGANISATION Planning, recruitment, development, maintenance, retention and socialisation are the common HR issues that ensure right HR for right job. These also control and regulate the antecedent conditions of performance. Virtual organisations are staffed by highly proficient workers who are left to do their own things and produce highly competitive products or services. Jobs in virtual organisations being knowledge-based are assumed to require greater skills, have greater variety and offer better quality of working life (QWL). From HR point of view, virtual organisation has both sides of the coin. The one (positive) side is greater job autonomy and more financial stability, which are the most sought after things by the workers in any organisation. This is so because of the reduced commuting, lunches and the clothing costs. Added to these are increased working hours, a perceived increase in performance, reduced job-stress and better social relationships as barriers between the home and work interface are dissolved. However, the other (negative) side includes aspects like longer work hours, increased work demands, poor working (physical) conditions and fewer career opportunities. In virtual organisations, jobs are variable and of short term. People with multi-skill are valuable to the organisation. The major HR issues involved in a virtual organisation are : 1. Recruitment is conducted under time pressure and requires high performance expectations. 2. Both human capital i. e., knowing one’s job and social capital i.e., knowing each other become extricably linked. 3. Stability in social relationship is not very much required. 4. Master-apprentice relationship are craft-based learning techniques matter. 5. Work pace is variable because the need for readiness to be mobilized at any moment, like defence service, is high. 6. Job is of short term. This requires virtual organisations a heavy investment to create systems and staffing structures. The employee selection is a very crucial area in virtual organisation. The reason being people have to work in a virtual set up. Hence, there are certain requirements need to be met to work in virtual organisations. The important ones are : 1. Self-guided and motivated because employees are left to ‘do their own thing’ 2. Knowledgeable about the organisational procedures 3. An effective communicator 4. Adaptable 5. Familiarity with the job 6. Result-oriented It is, therefore, essential to consider the above qualities while recruiting people to work in virtual organisations. There is a need to select those employees whose values are in consonance with the organisational requirements/culture. For example, introverts might be more suitable for home-based tele-work involving low intra and extra organisational communication. On the contrary, extroverts might be more suitable for mobile tele-works involving high degree of extraorganisational communication. On the whole, the shift from traditional/face-to-face organisation to virtual organisation triggers two ongoing debates within the HRM field : 1. The relevance of traditional forms of HRM to future organisational forms.

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2.

The shift from person-job-fit to person-role as the guiding paradigm for resourcing decisions. There can be endless debate on pros and cons of virtual organisations. Nonetheless, it can be said with confidence that in a world of ever increasing competition and differention, it is impossible for any company to have all skills that are needed to do the job. It is virtual organisation that imbibes these ideas and makes the final leap. In fact, that is where the reality of virtual organisations lies to-day and possibly will remain tomorrow as well.

34.7 SUMMARY This summary is organised by the learning objectives given on page 404: 1.

A virtual organisation is a network of cooperation made possible by Information and Communication Technology, which is flexible and comes to meet the dynamics of the market. It is a boundaryless organisation.

2.

Depending on the spectrum of virtuality, virtual organisations are of three types, namely, telecommuters, outsourcing competencies, and completely virtual.

3.

Absence of para-verbal and no-verbal cues, limited social contacts and ability to overcome time and, space constraints are the main factors that distinguish virtual organisation from the traidtional/face-to-face organisation.

4.

The main advantages offered by virtual organisation include it saves time and expenses, makes use of outside experts economical, assigns concurrent jobs to the employees and enables employees to accommodate their personal and professional lives. Its major disadvantages are lack of physical interactions, absence of para-verbal and non-verbal cues and lack of face-to-face interaction among the employees working therein.

5.

Technology, e-mail integration, office system integration, voice mail alert, mobile data etc., are the salient features of a virtual organisation.

6.

Given the virtual nature of organisation, the human resource to be recruited in virtual organisations need to be self-guided and motivated, knowledgeable, effective communicator; result-oriented, adaptable, familiar with the job, etc.

KEY TERMS Culture

Joint Venture

Information Technology

Quality of Work Life

Job Stress

Virtual Organisation

REVIEW AND DISCUSSION QUESTIONS 1. Define virtual organisation and distinguish it from traditional/face-to-face organisation. 2. What are the various types of virtual organisations? What does justify the need for virtual organisation? 3. “Virtual organisations have both sides of the coin”. How will you explain? 4. What are the emerging HR issues in virtual organisations? 5. Write a note on human resource management in virtual organisations.

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REFERENCES 1. L. N. Adami : Autonomy, Control and The Virtual Worker in Virtual Working, In : Paul Jackson (Ed.) : Virtual Working, Routledge, New York, 1999. 2. W. F. Cascio : Virtual Work Places : Implications for Organisation Behaviour, Journal of Organisation Behaviour, Vol. 6, 1999, pp. 1-14. 3. Cited by Biswajeet Pattanayak : Human Resource Management, Printice-Hall of India Private Limited, New Delhi, 2001, p. 299. 4. Biswajeet Pattanayak : Ibid, 2001, p. 300.

SECTION – 7

CASES FROM INDIAN ORGANISATIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Biggest Buy-Out Deal Recruitment and Promotion Policies Engineering Industry Hindustan Chemicals Ltd. Workmen’s Compensation Major Mohanty of Sunrise Limited Empowering People in the HLL XYZ Corporation Pioneer Industries Limited Grievance Procedure Vs Collective Bargaining The Bulb Manufacturing Company High Salary Vs High Turnover Dilemma of an HR Manager Amgen’s Global Workforce

CASES FROM INDIAN ORGANISATIONS Case 1: Biggest Buy-out Deal* Famous for its red Eveready batteries and its ‘Gimme Red’ advertising campaign, Union Carbide India (UCI) came up for sale in February, 1994. It’s American parent, Union Carbide Corporation (UCC) had been trying to get rid of its unwanted child ever since the December 2, 1984 Bhopal tragedy in which 4,000 died and half a million were affected. But the Indian government frozened ownership changes until a compensation package had been hammered out. A compromise was reached a decade later, in January 1994, in which it was agreed that UCC could sell its 50.90 per cent holding in UCI if it used Rs 650 m of the proceeds to build a hospital. Anything UCC could manage to get on top of that, it could keep. When merchant bankers from the Credit Capital Finance Corporation and the State Bank of India approached him, Khaitan’s reaction was lukewarm. Shanti, on the other hand, was as keen as mustard. The boys needed more work, she felt. Aditya was doing well, looking after the tea business, and Sandeep, their son-in-law, was well-settled in Kilburn Reprographic. Deepak, however, needed to buckle down a bit more. In 1994, Business Standard had a report on the front page on an imminent split in the group, hinting at a competitive rivalry between the siblings. The report was inaccurate about several facts and B. M. Khaitan (BM) maintained his usual frosty silence when it was published. However, it goaded Shanti into some introspection. Mad about racing, Deepak was more absorbed in his stable of 300 horses and his stud farm than in his garage of engineering companies. Instead of trying to improve the lacklustre performance of the divisions under ‘his’ charge, Deepak was always flying off for a day to racing centres like Bangalore, Bombay, or Pune whenever the racecourse at home was closed. “The ecstacy that one experiences while watching one’s horse win on home turf is unsurpassable”, Deepak was quoted as having said. What about when a company made profits, asked his sensible mother. A big Rs 3 b company like UCI would help pin down Deepak, make him more interested in business, she thought. To convince her husband, she secretly phoned a man whom she knew BM would have to listen to: Rama Babu. R.P. Goenka’s (RP) opinions carry much weight in the Khaitan household. After the Harrods bomb blast, he was one of the first to reach BM’s beside. When he wanted help for his last-ditch Haldia petrochemicals salvage operation, BM pitched in unblinkingly. Goenka’s niece, Yashodra, is Deepak’s wife. And Khaitan credits his rehabilitation into Marwari society to Goenka. Their friendship is so well-known that when income tax officials came to visit Goenka in March 1988, news flashed around Calcutta’s business community that Khaitan was being interrogated as well. RP caught the first available flight the next morning after Shanti’s call came through. All through the day and deep into the night, Shanti, RP and the boys reasoned with BM, pointing out the pros of acquiring UCI. Over the past five years, whereas the near-stagnant dry cells market grew by just 1.6 per cent per annum in volume terms, UCI sales had surged by an average of 10 per cent per annum. Its pre-tax profits had grown to Rs 320 m in 1993-94 against Rs 60 m four years earlier. Debt, at Rs 110 m, was a comfortable 13 per cent of its net worth of Rs 840 m, which meant that it had a tremendous borrowing capacity and could easily raise up to Rs 2 b, if necessary. Its fixed assets were substantially undervalued. Most important of all, its strong brand had been carefully shielded from besmirchment by the *

Geeta Piramal: Business Mahajan, Viking, 1996, pp. 301-304.

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Bhopal stigma. Lastly, the Khaitans were already in the battery business (Standard Batteries) and this would be a good expansion opportunity. Persuaded by the combined strength of the forces working on him, Khaitan caved in. At first, it was believed that a controlling interest in UCI would cost Rs 800 m. This was based on a share price of Rs 60. With the criminal liability of the Bhopal tragedy hanging like a sword of Damocles over it, the corporate pariah’s share price had languished around Rs 55 through most of 1993-94 on Calcutta’s Lyons Range. At Rs 800 m, there were plently of buyers. In mid-1994, Credit Capital and SBI Caps announced a shortlist of seven: R.P. Goenka, B. M. Khaitan, Nusli Wadia of Bombay Dyeing, T.P.G. Nambiar of the BPL Group, A.C. Muthiah of Spic, K.K. Jajodia of Assam Tea and Arun Bajoria, the jute baron. The scrip began its inevitable climb upwards as speculators started kicking it around. Eventually, Khaitan paid Rs 2.9 b or Rs 175 per share. Though Goenka’s name was first on the list, he was an even less serious contender than Nambiar or Bajoria. K.K. Jajodia, on the other hand, was keen to buy but ‘could not put money on the table’, says one of the bidders. The race quickly narrowed down to Muthiah, Wadia and Khaitan. Muthiah, often called the Ambani of the south, made a joint bid with Henkel, a German chemical company. They had a vested interest in that UCI was in existing distributor of SPIC’s detergent powders and bars. But as the price moved up, the combine withdrew, leaving Khaitan and Wadia to slug it out. Wadia, a canny battle-scarred samurai, at this point of time was rolling on a high. Bombay Dyeing’s March 1994 results were excellent and he had recently swiped Britannia Industries, India’s biggest bread and biscuit company, into his group from under the nose of Rajan Pillai, an old frind-turned-foe. In an expansive mood, Wadia wanted to beef up his group, and UCI’s strong brands fitted in perfectly with his strategy for the future.To Strengthen his bid, Wadia tied up with Ralston Purnia, the American transactional which in 1986 had acquired UCC’s battery business globally except in India. Through the spring of 1994, the UCI scrip climed streadily from Rs 55 to Rs 95 on news of serious bidding, but UCC wanted at least $70 m (Rs 2.1 b at the then rates) or Rs 125 per share. According to a former UCI executive, this was a more than fair price. Ralston Purina’s internal calculations, based on a meticulous due diligence assessment, pegged UCI’s market value at Rs 2.5 b. By August 1994, the press was trumpeting that Wadia looked to be the winner, but on September, 9, the State Bank of India announced to several red faces the sale of UCC’s Indian battery company to Khaitan. “Price was the sole determining factor”, the UCI executive continued. “The logic behind BM’s thinking was quite simple. By any valuation, the price should not have been more than Rs 150. He knew that Wadia was a keen buyer. So he was willing to pay 10-12 per cent more or an extra Rs 25 to make sure of the result.” In the event, B.M. Khaitan offered Rs. 2.9 b or Rs 400 m more than Wadia. At $ 96.5 m, the sale was the biggest buy-out deal in Indian corporate history. Before this, H.J. Heinz had paid $ 67.5 m (Rs 2 b) through its local subsidiary for the purchase of Glaxo India’s family products division, and Atlant’s Coca-Cola Inc. had reportedly paid $ 60 m (Rs 1.8 b) for Ramesh Chauhan’s soft drink brand, Thums Up.

Questions 1.

Is buy-out rational? If you were a strategic manager what would you have done?

2.

If you were the HR manager, what would have been your role?

Case 2: Recruitment and Promotion Policies* XYZ Limited is a public sector undertaking with a staff strength of around 1,200 including 300 officers. As per the recruitment policy of the company, most employees join as trainees and after *

IGNOU, MBA, June 1996.

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successful completion of training, are absorbed at the lowest intake level. Thus, in the case of workers, most start as Technician/Operator Trainees, and officers, as Management Trainees. The company expects the higher posts to be filled by promotions and therefore, as far as possible, direct recruitment to higher positions is avoided. Only when there is an urgent requirement of a person to fill a higher post and no candidates from within the organisation are eligible,is an open advertisement released. In 1982, the company urgently needed one Junior Engineer (Instrumentation) to take charge of one of its plants. At that time, the company had four Junior Engineers (JEs) in position who had joined as Management Trainees in 1980 and had been regularised in 1981. Immediately above them was an Assistant Engineer, who in turn reported to the Project Manager. The company released an advertisement for the post of JE, seeking applications from those with at least two years’ experience in the field. One Mr. Ramesh Chaudhari, who had four years’ experience in a private concern applied and was selected. He found the terms of appointment lucrative and joined the company in May 1982. As four JEs were already working in the company, Chaudhari became the Junior-most JE as per the promotion policy of the company; the four JEs would become eligible for promotion to the post of ‘Assistant Engineer’ in 1985 (on completion of four years’ service) and Chaudhari in 1986. In July 1983, the Assistant Engineer left his job and hence, the company decided to fill the vacancy by direct recruitment. In the advertisement it was stipulated that the applicants should have a minimum of five years’ experience. Chaudhari met the specification since he had four years previous experience plus one year in XYZ Ltd. Therefore, he applied for the post through proper channel. The company decided to call the eligible candidates for interview. Accordingly, Chaudhari was also called along with the external candidates. He performed exceedingly well in the interview and was found suitable for the post. The General Manager (GM), who was chairman of the selection committee, congratulated Chaudhari and told him that he had been selected. However, the GM changed his mind subsequently and asked the Personnel Officer not to issue the appointment letter to Chaudhari. He gave the following reasons for reverting his decision: 1.

Mr. Chaudhari would get a higher post after completion of just over one year’s service in the organisation as against the normal requirement of four years.

2.

When Mr. Chaudhari joined, he was junior to the four JEs by about one year. If he was offered the higher post, he would suddenly become their boss. This would demoralise the JEs—in fact they had already decided to seek jobs elsewhere if Chaudhari became Assistant Engineer.

The GM was convinced that he could not afford to lose four JEs and therefore, he chose to disappoint Chaudhari.

Questions 1.

If Chaudhari had been an external candidate, would he have got the job? As an internal candidate, did he deserve to be treated in a different fashion?

2.

Did the management make a mistake in calling Chaudhari for an interview and selecting him, when he was “too junior” in the organisation?

3.

Are there any drawbacks in the recruitment/promotion policies of the company? If yes, eleborate them.

Case 3: Engineering Industry* During the mid 70s a pilot project on job redesign was started at the BHEL plant located at Haridwar. Following intensive interaction with the management, the trade unions and the supervisory staff, Block V where 25 workmen were engaged in fabrication of the upper part of the condenser unit, *

De, N.R, 1979. India: New Forms of W ork Organisation, vol. 2, International Labour Organization: Geneva.

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was selected for the pilot experiment. Some of the criteria for selection of this work unit were its compact character, reasonable layout and the favourable atttitude of the manager and the shop floor trade union leaders. Moreover the productivity in the shop was low (appx. 30% in May 1975). The break up of the 25 workers in terms of their assigned jobs was 9 fitters, 3 fettlers, 3 welders, 2 gas cutters, 1 crane operator, 2 riggers, 2 helpers, and 3 workmen involved in material supplies. The workers participated in a series of meetings with both internal and external consultants and agreed that there was a need to redesign the work. Diagnosis of the existing work system with their help revealed the following bottlenecks that came in the way of improving efficiency: 1.

Each worker was concerned exclusively with his own trade. None of them identified himself with the product.

2.

There was invariably forced idle time because when a particular worker was engaged at a given location, another who was required to work in close proximity had to wait until the first worker had finished his job.

3.

There was uneven demand of the services of the materials supplies group, the crane operator and the riggers.

To initiate action on job redesign, the workers decided to set up a task force consisting of representatives of each category of workers together with the supervisor. Membership of the task force was to be on rotational basis except in the case of two workers with leadership skills and the supervisor. The task force consisted of eight members. An Industrial Engineer was associated with the task force as a Consultant. The Manager in charge of the shop could also participate in the task force deliberations if he wished. The task before this group was to evolve an alternative system of work which would improve the workers’ motivation as well as productivity. The task force in association with the rest of the workers came up with the following decisions: 1.

Formation of Direct Production Group consisting of 1 welder, 3 fitters and 1 fettler with responsibility for the complete task.

2.

Doing one another’s job by undergoing on-the-job training.

3.

Crane operators and riggers to learn each other’s skills.

4.

Gas cutters, helpers, and material supplies group to be integrated into the new work system at later stage.

The above recoganization led to several benefits; a welder now started working as a fitter and training in other trades was given to fitters, fettlers, gas cutters and others. In September 1975, the workers, based on the confidence generated in them through the new work system, attempted further redesign of their job and decided that the work force should be distributed in two shifts: Shift one consisting of five fitters, five welders, one gas cutter and one fettler and shift two comprising four fitters, four welders, one gas cutter and one fettler. In addition, there would be crane operators in both the shifts. Each shift group became integrated and self-contained. It was decided that one shift would fabricate the right side of the upper part of the condenser unit, the other shift would do the same with the left side. The above reorganization led to the following advantages: 1.

Productivity rose from 30% in May 1975 to over 75% in February 1976.

2.

One-man-one-job concept was replaced by multiple skill acquisition.

3.

Individual system of working gave way to team work.

4.

Groups were self-managed, the traditional supervisory functions of work allocations, coordination, monitoring and control being performed by the groups.

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5.

Identification with the total product and concern for quality became a reality.

6.

Personal idle time (wasted in gossiping, loitering, and in unauthorized absence from workplace) was dropped considerably.

7.

Workers’ supervisor and the manager showed a high degree of work commitment.

Questions Analyse the Job Redesign in the BHEL.

Case 4: Hindustan Chemicals Ltd The Hindustan Chemicals Ltd (HCL) is a public sector firm engaged in petrochemical business. It employs about 1,600 most of whom are well-qualified, fairly young (average age 32) and typically have an urban background. HCL has retained one reputed consulting and training organization each to impart training in supervisory skills for their junior managers, human resource management programme with emphasis on organization analysis and behaviour modification skills for middle managers and advanced management programes for senior managers. HCL wanted to train all managerial employees over a period of 12 to 15 months in batches of 20 per month at junior and middle levels and 20 senior managers in once every two months. IAM, a renowned management institute was assigned the responsibility to cover middle managers. A couple of months after the start of the training intervention, the top management learnt of a growing tendency on the part of some of the employees on night shift to sleep while on duty. Since it was a tightly manned petro-chemical complex, any negligence or dereliction of duty in certain critical areas could be potentially hazardous and extremely risky. Therefore, the Director (Personnel) and a couple of members of the top management team went around the plant one night, without any prior information to the plant people about their visit. They caught red handed, four persons sleeping on duty, recorded evidence and proceeded with taking steps to initiate disciplinary action the following day. When the charge sheets were being prepared, trade union leaders descended on the scene, persuaded the top management to be lenient, as an exception in this case, to the concerned persons. The union leaders also assured that they would advise their members not to sleep while on duty. In the interest of maintaining good industrial relations, the top management did not pursue the cases. This gesture on the part of the top management was perceived as a sign of their weakness by the officers’ association and its members. They protested to top management whether they (the latter) would be equally considerate in cases involving them (the managers). The workers felt that so long as there is no problem in the plant, management would be considerate enough. With the result, the incidence of sleeping on night duty began to grow. Top management became alarmed. The Personnel Department was asked to advise all line managers, particularly shift in-charges in night duty to keep a vigil on those who have a tendency to sleep and report cases of persons who are found guilty of sleeping on duty. The circular did not register any impact on the middle and junior managers. Instead, they derisively laughed and ignored the circulars. They also felt that “the top management’s perception of industrial relations dynamics at the plant is very different from that of junior and middle level managers.” Seeing no improvement in the situation, the top management asked IAM to include a module on Handling Indiscipline with role play sessions on ‘How to conduct Domestic Enquiry’. The Programme Coordinator readily agreed to the suggestion because he felt that in doing so he was making it tailormade to the needs of the organization. When the module was first offered to the fifth batch of middle managers, the participants wondered why this subject was additionally introduced. They wanted to know why it did not form an

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integral part of the programme from the beginning itself and whether the need for including the topic was felt by their colleagues who attended the programme in the previous batches or by the top management. When they learnt that it was at the latter’s instance, they stoutly protested in chorus and said, “We know the importance of Discipline. In fact, with growing violence our physical security is often threatened due to sabotage, violence and vandalism by a handful of unruly elements. Discipline, therefore, is not merely an organization need, but also a personal need for us, whereas for the top management it is a bargainable aspect of shop-floor industrial relations. What we need is not training but proof that top management means what it says. We demand that the top management supports and sustains the actions we initiate in maintaining discipline. We will be able to have confidence in top management if it shows us the way by first initiating actions on the cases they themselves have booked.” Such restiveness affected the receptivity in what was on the agenda in the training schedule for that afternoon. But the trainees became intensely involved the following day when they were doing the organization analysis in small groups. Most participants wondered what happened to the suggestion their predecessors made while presenting the finding of their group discussions on organization analysis before some members of the top management team on the last day of every programme held so far. One participant asked: our colleagues gave their feedback to the top management. We understand the latter agreed on most points. But we see no evidence of follow-up of any kind.” A second one argued with the programme coordinator, “Why are you asking us to give vent to our feelings? Do you realize that our top management is merely using you and the other faculty as a buffer?” A third one queried, “You quoted Kurt Lewin on the first day and observed that behaviour is a function of personality and situation. Now tell us whether top management is merely wanting to change our personality but does not want to change the situation. We do not know whether discussion on aspects concerning their personality should remain a taboo since projection will not help us.”

Questions 1.

Discuss the key issues involved in the case.

2.

Identify the lessons for developing training strategies.

3.

What remedial measures would you suggest in this case?

Case 5: Workmen’s Compensation* Mr Nandkishore is a workman employed in the despatch department of a cement factory. The factory is located in one of the towns of a politically sensitive state. It employs about 1,500 employees besides the managerial staff. The annual turnover of the company is around Rs 150 crores and its capacity utilisation is 75 per cent. The factory has three unions besides a security staff association and a management association. For eight years, only one union has been recognized, on the basis of its “claim” that it has the largest following of workmen. Continued recognition of a single union led to strained relations between the two unrecognized unions and the management and also among the unions themselves. Mr Nandkishore is an office bearer of one of the unrecognized unions. The industrial relations situation in the factory has been fluctuating from periods of hamony to periods of disturbances. On December 10, 1998, Mr Nandkishore fell down from the ladder,while working during the second shift. The accident resulted in serious injury to his right arm. He was admitted in a government hospital for treatment. An accident report was sent to the commissioner under Workmen’s Compensation Act, to determine the amount of compensation, if any, to be paid to Mr Nandkishore for the loss *

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of any advance to the injured workman for covering medical expenses. It also stated that the above amount may be deducted from the compensation which Mr Nandkishore may get, according to the commissioner’s decision. The management paid Rs 3,000 as advance, after obtaining a written undertaking from the union that this amount will be deducted from the compensation payable. The union also agreed to this condition. It also arranged for the release of Rs 2,000 from the Labour Welfare Fund. The medical officer treating the workman submitted a report in February, 1989. The medical report did not mention any kind of disablement (Full/partial, temporary/permanent) to the workman. The commissioner, after processing the case and studying the report, ruled that the workman, Mr Nandkishhore shall be paid only half-monthly wages for these two months against his request for compensation as there was no permanent or partial disablement. On receipt of this report from the commissioner, the management asked the workman to repay Rs 3,000 given as an advance and requested the union to do the needful in this regard. The union, however,contended that since the accident occurred during and in the course of employment, the management must treat it as ex-gratia payment and that it should not demand its repayment as the money was used for treatment. The management, however, pointed out that at the time of taking advance, both the union and workman had agreed that this amount will be recovered from the compensation payable and since no compensation is payable, the workman should pay back the advance. The management further pointed out that it cannot waive the recovery of the above advance as it is bound by the rules. The union, however, insisted that management should not proceed on the recovery of advance from the workman. The management also heard rumours that the said union may stage a “show down” over this issue.

Questions 1.

What is the problem in the case?

2.

Analyse the causes which led to the problem.

3.

How should one deal with such a situation?

Case 6: Major Mohanty of Sunrise Limited* Major Mohanty, a retired man from army, joined as MD in Sunrise Limited, when the company was passing through a very bad period with declining production and productivity, heavy losses and low morale of the employees. Major Mohanty, after having made indepth, logical and strategic studies of the situation, immediately flagged on what he called ‘operation rejuvenation’, with exclusive thrust on productivity and production related issues. People related matters are of no consequence for him, for he believed that people, by and large, are dull, lazy, shirkers and non-starters, and as such, work should be extracted from them only through constant watch, close supervision, complete and rigorous command and control. His style of functioning did yield some results, but before any impact could be seen, he abruptly left the organisation, having got a better assignment in United States of America. Major Mohanty was immediately succeeded by Mr. Soni, a man who made a name for his balanced approach to people and production through participative style of management in his immediate position as the Deputy MD of a large organisation in a similar product line. He was, in fact, commended for his maximum concern for both people and production, and for bringing about an ideal intergration and harmony between the needs of the employees and those of production. In the present company also, Mr. Soni continued his policies of participative management with equal concern for both production and people. With a view to reviving the company back to health, he *

C.A. Intermediate, May 2002.

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affected some major changes. First of all, he decentralised the organisation so that the subordinates could exercise their discretion and initiative in decision-making, as also their imagination and creativity in performing other managerial functions. Further, he empowered the junior managers to incur expenditure up to an approved limit without seeking prior approval of the higher management. Communication system was also improved to facilitate free flow of upward and downward communication. Mr. Soni also adopted several measures to reduce costs and wasteful expenditure. He banned donations to charitable institutions, but increased the amount being spent on the welfare activities of the employees. Will Mr. Soni’s managerial style prove effective in ensuring bright future of the company? Some employees are of the view that a lot of things are being done, but they might not be effective in the long run. Others disagreed with them, and said, ‘Okay, we will give it a fair trial’.

Questions (a) Was Major Mohanty a theory ‘X’ or a theory ‘Y’ Manager? Explain with reasons. How do you fit his style of functioning in the ‘Managerial Grid’ of Blake and Mounton? (b) Is Mr. Soni a theory ‘X’ or a theory ‘Y’ Manager? Discuss. Will you advise Mr. Soni to change his presumptions about the nature of people at work? Give reasons insupport of your advice. (c) How do you describe Mr. Soni’s managerial style in the light of ‘Managerial Grid’ of Blake and Mouton? Can it be regarded as the best style of management? Give your response.

Case 7: Empowering People in the HLL Keki Bomi Dadiseth leads Hindustan Lever Ltd., the second ranked fastmoving consumer goods company in the country, using empowerment. The application of empowerment in this organization is a response to varied external and internal problems. HLL’s traditional rival, Proctor & Gamble, was turning more aggressive. The economic downturn had hurt the sales of all consumer goods. Its homegrown talent pool continued to be the favourite hunting ground for other organizations. The conformity-and orthodoxy-breeding culture which was once its strength was proving to be a weakness as many managers rebelled against the idea of being bound by systems and looked for freer pastures. To overcome these problems, he used empowerment based on his four HRD principles: people like power and responsibility; people have to be inspired, not instructed; people can be induced to solve all problems; outsiders are as important as insiders. Dadiseth is leading the mega corporation consisting of 10 large businesses (i.e., detergents, personal products, beverages, oil and dairy facts, processed foods, frozen desserts, popular foods, chemicals,fertilizers and animal feed, and exports) by empowerment. Like his principles, the philosophy and skills that he brings to bear on his empowering role are unique. He believes that people operate best as themselves. They cannot operate as people they are not. They must be their own selves as that is their true strength. He himself is strongly driven by his own desire to be himself. With this trait, he provides near complete autonomy to people. Once he has informed people of their goals, he gives them full freedom to use any strategy to accomplish these goals. He equips people with the wherewithal to form a winning team and energizes them to ensure full acceptance of their responsibilities. Although he is very demanding, he believes firmly in making allowances. Anyone is welcome to come through his permanently open door. As he points out: ‘Informality changes the way people feel’. His informality changes people’s mindsets. He gives people the confidence and freedom to express themselves freely. He interacts a lot and knows the finer art of interpersonal relationships. He keeps communication channels with people constantly and productively open. He believes there is a great deal to be learnt from people at all levels in the organization. This helps him release their energy

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for a common goal. In this way, he ensures that each of the HLL’s 35,000 employees works towards the same goals in unison. The system of empowerment is yielding rich dividends in eight of the company’s factories in terms of higher productivity, substantial cost savings and a congenial work climate. As a trade union leader points out: ‘There is no supervisor in the factory and the workers themselves are responsible for the quality control on a day-to-day basis.’ Marxists love the idea of empowerment. The workers’ skill is respected and the increment is based on acquisition of new knowledge. Out of the 37 factories of the company in the country, eight have already adopted empowerment. Efforts are being made to introduce the system in the remaining 29. It is considered easier to use empowerment in greenfield factories. Empowerment is working successfully in two of the HLL’s units in Maharashtra and another two in Gujarat. In West Bengal, another established unit, apart from Dabgram, is soon going to adopt it. Under the existing operation of empowerment, workers decide the manning pattern in the factory on a day-to-day basis and are themselves responsible for the maintenance of the machines. As a senior executive from the head office observes: ‘Given the responsibility, workers deliver extrmely well. There is no quality control system in these model factories. The workers are periodically taken to depots where they see how poor quality affects the product in the form of rejections from shops. So at the shop-floor they become extra careful with quality’. Of course, some of the factory managers themselves are against the implementation of such a revolutionary concept. They believe that it curtails their responsibilities. Keki is atempting to overcome the managers’ resistance through a process of continuous discussion. It is surprising that the unions are not opposed to this innovative concept. While multi-skilled workers are a potential threat to future employment generation, the mesage of ‘self-preservation’ has been built into them. They are delighted. They are their own bosses. Indeed, the workers have realized that in these days of intense competitions cost-cutting is of paramount importance. In West Bengal, the CITU-affiliated union has ensured that the concept of empowerment operates well in Dabgram. As a senior executive from the head office observes: ‘The ultimate aim is to implement empowerment in all the units of the company to cut costs and boost productivity.’

Question 1.

Go through the case and bring out the salient features of empowering people in the HLL.

Case 8: XYZ Corporation* XYZ Corporation is the pseudonym for a plant in eastern India in the core sector in public sector which was formally commissioned in 1959. For over a decade the organization did not consider any measure to formally involve employees to participate in management. It experienced serious industrial relations problems during 1960s and early 1970s. In early 1970s, a bold experiment was made in the organization by appointing a trade union leader as General Manager of the plant which at that time became notorious for inter-union rivalry, chronic industrial unrest and persistent sickness. Due to the well-meaning efforts of the union leader-turned-General Manager, the concerned Union Minister and the State Labour Minister a tripartite agreement was signed in 1972 to set up a three tier consultative machinery to deal with the labour management problems in the plant. Unions affiliated to the three central trade union federations, i.e. Indian National Trade Union Congress (INTUC), Centre for Indian Trade Unions (CITU), and All India Trade Union Congress (AITUC), were signatories to this agreement. The major features of the agreement were: *

C.S. Venkata Ratnam and B. K. Srivastava: Perssonnel Management and Human Resour ces, Tata McGraw-Hill Publishing Company, New Delhi, 1996, pp. 315-317.

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1.

To set up a state-level council (SLC) consisting of equal representatives of the management and of the three participating unions. The state government was also represented on this council with the labour minister as the Chairman. This council was entrusted with the task of supervis ing and regulating industrial relations in the plant and to discuss major issues and problems.

2.

To set up a bipartite plant level committee (PLC) consisting of equal number of representatives of the three unions on the one hand and of the management on the other for resolving specific problems and disputes arising in the plant.

3.

Bipartite floor level committees (FLC) in agreed units or departments to deal with day-to-day matters arising at the floor level.

4.

Work stoppages should not be resorted to or encouraged by the unions without first seeking redress through the three-tier machinery.

5.

It was recommended that the parties should take recourse to voluntary arbitration if other efforts to resolve a dispute did not succeed.

The three-tier machinery was launched with fanfare and was expected to usher in an era of qualitative change in union management relationship, with the climate of distrust and hostility being replaced gradually by a sense of trust and participation. The state-level consultative council had a few meetings and later became virtually defunct because the State Labour Minister could not devote much time as the Chairman of the Committee. After initial hesitation the Bipartite Plant Level Committee started functioning. While this committee made some favorable impact upon labour-management relations its most important contribution, perhaps, was that it brought the three feuding unions to a single bargaining table. The FLCs, however, could not be formed as the unions could not agree on the mode of election of the workers’ representatives in the committees. While the inactivity of the SLC did not affect the working of the three-tier machinery too seriously, the non-formation of FLCs did. A large volume of small problems affecting various groups of workers, large and small had no forum to come up to except the PLC. The PLC, as a result, got burdened with a vast number as well as variety of problems which it could not possibly resolve in a reasonable period. The agreement had run for about 18 months when INTUC union terminated it in 1973 by a formal notice according to law because it wanted a single bargaining union to be recognized for the organization by verification of membership under the code of discipline in industry. Its real intention was to wrest that status from the CITU union. The state government took no action on this demand. CITU was affiliated to the ruling party in the state at that time. Though the formal machinery lapsed, the negotiating framework continued without the label of FLC. The INTUC did not come in the way because having failed in persuading the state government to agree to membership verification and wresting sole representative status, it thought it good enough to retain some status to involve, interact and influence in aspects concerning union-management relations. Through perseverance and lobbying throughout 1974, an Apex Committee could be formed in January 1975 with the representatives of the three unions and management to design and implement a simplified incentive scheme for the plant. The Apex Committee on Incentives was followed by the adoption of a four-stage grievance procedure and constitution of a Central Grievance Committee in August 1975. A number of committees have also been created to discuss the production and productivity of each major shop with an Apex body at the plant level headed by the Managing Director. Plant Joint Consultative Committees were also formed for canteen, hospital, safety, etc. In all, 78 committees with the involvement of 467

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representatives from the three forum unions were constituted. Not even a day passes without one or the other committee holding its meeting. The committees are constituted on the basis of equal representation from management and the three major unions, affiliated to CITU, INTUC and AITUC. The scope of functioning of the different committees seems to have been expanded taking into consideration the scheme for employees’ participation in management as outlined in the government’s order dated 30 December 1983. There are three standing committees in the organization to deal with the existing aspects of human problems connected with commissioning of new assets and incentives schemes. There is also a standing committee for sharing information with the remaining four other unions which have not been represented on any of the remaining 77 joint committees. One of these was affiliated to Hind Mazdoor Sabha (HMS) and the rest to lesser known political parties. To oversee the working of the consultative machinery, a monitoring cell has been created with one of the Deputy General Managers as Chairman and Chief General manager (personnel), Chief of Training, Chief Industrial Engineer and a representative from Finance Department. All the committees are supposed to meet on fixed dates and time as per a calendar prepared much in advance and recommendations of various committees are to be implemented on a time-bound basis. Occasionally, training for participation is imparted to members of these committees. Thus the institutional arrangements for participation through joint consultation are quite elaborate. But a discerning analysis of the working of the system makes one suspect whether there is much ado about nothing. In a multi-union situation there is continuous pressure from all unions to include them in the participative processes. Of the seven registered unions, only three affiliated to CITU, INTUC and AITUC have been accorded representation in 77 out of 78 committees. The rationale was to maintain status quo and not disturb the arrangement first made while registering the tripartite agreement in 1972. But during the last decade the trade union dynamics in the organization changed considerably. CITU, being the only union with formal recognition, appears to feel a loss of status in participative forums as equal partners. Together these three unions are regarded as forum unions. Among them, the union affiliated to AITUC has much smaller following than the union affilated to HMS. Through this fact is widely known throughout the organization, the management is reluctant to open the issue of the composition of forum unions. The HMS, thus, feels let down by the arbitrary approach of management. The remaining three non-forum unions did not have any following worth reckoning. The three forum unions enjoy security. The management seems to pursue a policy of status-quo unmindful of the trade union dynamics in the plant. The unrecognised non-forum unions have been blocking implementation of decisions at participative forums in departments/sections, where they enjoy sizeable following. The union representatives on the committees do not necessarily enjoy popular support of the employees in the respective departments.

Questions 1.

Critically evaluate the approach of XYZ Corporation towards implementing the scheme of workers’ participation and identify the major issues.

2.

Outline what needs to be done to make participation work in XYZ Corporation?

Case 9: Pioneer Industries Ltd* Pioneer Industries Ltd (PIL) is a custom-built assembly type industry. Established in 1941 as a private enterprise, the organization ran into trouble due to financial vicissitudes and conditions peculiar to this industry the world over. When the Government of India was approached for help by way of subsidy, they initially placed orders on a cost-plus formula and subsequently, in 1952, acquired *

C S Venkata Ratnam, 1988. “IR and Productivity”, Indian Management, May, pp 47-49.

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two-thirds controlling interest. The Government acquired full control and ownership over the enterprise in 1961. Since then the Government has been extending generous financial help and seeking overseas technical help from a host of countries to strengthen the organization. In 1965, a visiting team from Japan studied the organization and observed that it can hope to double the output merely through re-organization of work which required no additional inputs by way of capital or technology. But the organization did everything except change work methods. A sum of over Rs 100 crore was invested, new equipment and facilities acquired, technical collaboration entered into with internationally renowned firms and manpower increased from 5,000 to 7,500. The quality of workmanship of the firm was lauded when the product stood up to severe tests, and the engineers and offficers of the organization achieved a major breakthrough in product design capability. Yet, the level of production stagnated and the length of the production cycle more than doubled between 1973-82. The government had been giving substantial help to the organization by protecting the market and liberally increasing the prices to cover costs. In the early 1970s the administered price was virtually doubled on a cost-plus-profit basis to help the organization tide over its losses. As a result, in 1979-80 the firm could show a surplus of about Rs 1.8 crore even through the output was merely one-third of rated capacity. The cushion of liberal price policy soon evaporated, and in 1984-85 alone the company incurred a loss of over Rs 15 crore. There is a general feeling among the employees and the junior and middle managers of the organization that its personnel and industrial relation practices and policies have been principally responsible for the poor performance. In the early years, soon after the organization began operation, the management sent one of its officers to register a trade union for the workers in order to forestal the emergence of a communist union. The communist union which nevertheless came into existence had eventually to wind up because of the tactics of the management. However,the communists ensured that their loyal supporters infiltrated into the management-sponsored union. As a result, although the firm has all along had only one union for workers and an association for the staff, there have been persistent factions in both bodies based on political cleavages. Among the several groups, the marxist communists and right wing BJP command sizeable support. Although both the union and association have been independent of outside affiliations and leadership, the employee leaders have often been identified with specific groups in the wider environment. The leadership kept changing during the two decades from 1947 to 1967 because there has been no wage revision during this entire period. It is significant to note that two other organizations in the public sector which manufacture a similar product had revised wages during this period. The wage increase given way back in 1947-48 was made by a cut in the DA in 1948-49 because of financial stringency. The cut was restored only in 1963 but in the same year DA was delinked from the cost of living, once again off-setting whatever benefits had accrued. While the workers’ union kept a low profile through these turbulations, the association picked up a draftsman by name AK who they believed could take on the management, and made him general secretary. AK studied the various issues in depth and submitted a list of seven collective and 116 individual demands. After much reluctance the management constituted a bipartite committee, but limited its brief to an examination of anomalies in pay scales. Although the committee submitted a unanimous report, the management dragged feet because the finance ministry did not concur with the recommendations. The bureaucrats eventually opted for an adhoc settlement by elongating pay scales, and that too only with regard to 7 out of the 47 categories. The outcome did not satisfy the association but nevertheless raised hopes of securing a more favourable outcome through a confrontation. The association gave a strike call and over 95% of the members participated in the longest ever strike lasting 58 days. This was in 1967. The strike was withdrawn on the assurance of the government that a sub-committee of the Engineering Wage Board would be constituted to examine the special features of this industry. Encouraged by this

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favourable outcome, the workmen joined hands hands with the staff and a Joint Action Committee (JAC) was formed with AK as the convenor. Worried by this unity of workers and staff, the management influenced the government to back out of the promise to appoint a special sub-committee. The management’s strategy was to create the impression that AK had failed to force the government into a special consideration of their claims and thereby sow discord. The government eventually backed out of its commitment and handed over the matter not to a special subcommittee but to the Engineering Wage Board. The employees protested vehemently that the special circumstances obtained in their industry needed separate consideration. The more the management tried to forge disunity, the harder the attitude of the leadership became. They began systematic efforts to prepare workers for conflict. AK conducted a survey of 4000 employees and came out with disturbing conclusions. One out of every four workers had no pay to take home after the statutory deductions and various other cuts. Many had to absent themselves on pay day to escape from their creditors. The indebtedness among majority of the workers ranged between five to ten times their gross annual earnings. There was widespread resentment against the management among both workers and staff. Marshalling these facts and sentiments, the leaders insisted that they had been denied a wage increase although similar other enterprises were benefited. Analyzing that AK was the backbone of union militancy, they decided to suspend him for irregular attendance. Construing this as an act of victimization, the staff walked out of work. The management cut the wage of those who walked out, which sparked yet another walkout with the workers also joining. The JAC ultimately submitted a strike notice over a charter of demands, the first being the reinstatement of AK. The strike lasted 27 days. The strike ended at the instance of the local Congress MP who got the concerned minister to assure satisfactory solution. A one-man commission was apointed. AK pulled political strings and a commission was appointed which awarded better benefits than the workers themselves had asked for. The employees virtually deified AK for getting them such impressive benefits and his influence rose to dizzying heights. Soon after the settlement, a new CMD was appointed. Concerned at the growing popularity of AK, he lured the leader to accept promotion from the staff category to junior manager. As a manager AK was miserable and frustrated. He had to sever his connections with the association and the union. His disciples, mostly with strong Marxist leanings, asumed the mantle of leadership, gained prominence and gradually sidelined him. Two years went by and his frustration mounted. Apart from the loss of influence he had enjoyed as a union leader, the management had not lived up to the promise of creating a separate department for him to preside over. Soon, AK asked the CMD to demote him to his orginal position, but the latter refused to oblige. AK now pulled strings through a top national level leader of the INTUC who happened to be on the Board of PIL. He offered to affiliate both the union and asociation to the INTUC if only his demotion could be secured. Enamoured by the prospect of building a base for his union in this important city, the leader accomplished AK’s demotion as draftsman. The leadership of the union which was in the hands of strong Marxist sympathizers did not immediately invite him to take over leadership, through they were once his disciples. However, AK put up a panel of candidates headed by one PS who had INTUC leanings for the 1973 electons and trounced the Marxists. A wage revision became due subsequently in 1974. AK was invited to be the chief negotiator on behalf of both the union and the association although he held no formal position. As the negotiations were under way a state of Emergency was promulgated in the country. In November1975 a draft agreement giving several benefits was finalized with the joint Secretary in the concerned ministry. As the agreement was pending for approval by the government, the INTUC leader pressurized AK to affiliate both the bodies to his union as had been promised. The leader’s fear was that once the

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settlement was through AK would become all powerfull and might refuse to affiliate. AK pleaded that since PIL was a stronghold of communists, and he himself had no formal position, he had to first secure a favourable settlement and win confidence before moving towards formal affiliation. The INTUC leadership grew suspicious of AK. They offered to send him on a tour of some Asian countries if he formally affiliates the union to the INTUC, but he was silent. In tripartite negotiations held in January 1976, the government went back on the draft settlement reached in November 1975 on the ground that the Bureau of Public Enterprises (BPE) had certain objections. AK believed that there was foul play. The enterprise level management could not persuade the government to stand by the promise. In the meanwhile, the undertaking got a new CMD. Taking advantage of the Emergency, the new CMD introduced a second shift to augment production, besides introducing a multi-trade system to make better use of skilled manpower. Negotiations were started afresh and a new wage settlement was worked out by December 1976 within the framework of BPE norms, providing for an incentive system instead of DA based on the local cost of living index. The agreement was to take effect from September 1974 from which period arrears were to be calculated. The workers expected that the arrears would be substantial. The union wanted a quick implementation of the settlement but the CMD wanted time. Soon there was a change of heart and pay slips were prepared for the month of January with the EDP facilities of a neighbouring enterprise (although PIL had its own EDP). The pay slips came as a rude shock to the workers since hardly anyone benefited financially inspite of the many commitments made in the settlement and conveyed to the workers by the leader-ship. Most workers got no arrears and in some cases excess payments were sought to be recovered. AK wrote to the CMD immediately to stop the distribution of the pay slips, pointing to the grave consequences of such manipulation of trade union affairs and called for discussion to sort out the discrepancies arising out of the arbitrary understanding of the management in calculating the arrears. Management paid no heed to his letter. Irate workers beat up AK and his associates within the factory premises. In an emergency meeting of the union’s general body held soon after, the leadership was seized by the Marxists. With the workers’ hopes dashed, production and productivity began to slide down. The downstream has continued unbated. The second shift had to be reduced to a skeleton shift. The multi-trade system became inoperative. A study conducted by the BPE acknowledged that the 1977 wage agreement was principally responsible for the strained industrial relations and low productivity.

Questions 1.

Identify the personnel policies which affected industrial relations climate in this case.

2.

Which of the problems in this case are a creation of the enterprise level management and which are a result of the public enterprise environment?

3.

What is your assessment of the management’s way of handling the unions and union leadership?

4.

Could the management have avoided political intervention at various levels?

5.

Was the 1977 wage agreement principally responsible for the strained industrial relations and low productivity? How could it have been handled?

Case 10: Grievance Procedure vs Collective Bargaining* The Andhra Pradesh State Road Transport Corporation has been providing passenger transport *

Case prepared by Prof. P. Subba Rao: S. K. Institute of Management. Sri Krishnadevarya University. Anantpur (A.P.).

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facility since 1956. It has been extending its operation from one region to another by nationalising the passenger transport companies in a phased manner. Presently. it nationalised two routes in East Godavari District in the State in October 1988. Normally, it absorbs all the employees working in passenger transport companies before the nationalisation and fixes their wages at par with the scales of similar categories of jobs. The pay scale in the Corporation are determined on the basis of mutual agreement between the management and the recognised trade union. The scales are revised once in three years. The recent agreement came into force with effect from September 1988. There are two classes in driver category: class 1 (drivers working on long distance buses). and class II (drivers working on short distance buses). The pay scale of class II drivers was enhanced from Rs. 600-1200 to Rs. 900-1600 with effect from September 1988 in consequence to the latest agreement. The agreement further stated that the pay scale of the drivers drawing the scale of Rs. 600-1200 would be fixed in the scale of Rs. 900-1600. The Corporation absorbed 10 drivers who were with the private passenger transport companies upon the recent nationalisation of two routes. The personnel department fixed the scale of these 10 drivers in the scale of Rs.600-1200 and it rejected their plea of fixing their pay in the scale of Rs. 9001600 saying that only drivers drawing the scale of Rs. 600-1200 are elgible to draw the new scale Rs. 900-1600. The Corporation has set up both the grievance machinery and the collective bargaining machinery to resolve employee problems. These drivers submitted this issue to the foreman who was their immediate superior. The foreman told them to raise this issue in collective baragaining with the help of the trade union leaders as it was a policy matter. The drivers approached the trade union leaders and persuaded them to solve the issue. The trade union leaders included this item in the draft agenda of the collective bargaining committee scheduled to meet in January 1989. But the collective bargaining committee deleted this item from the draft agenda saying that the issue could be settled through grievance machinery as only 10 drivers out of 3000 drivers of the Corporation were concerned with the issue.

Questions 1.

Who is correct: the personnel department, the foreman, or the collective bargaining committee?

2.

Where do you place the issue for redressal? Give reasons.

3.

How will you redress this issue?

Case 11: The Bulb Manufacturing Company* Bulb Manufacturing Company, the subsidiary of a well-known international corporation, specialized in the manufacture of electrical equipment like bulbs. electric stoves, heaters, coolers and presses. It had been operating in India for about two decades. The company had recently finalised the expansion plans of its only factory in India. It was decided to shift the factory to a new location, five miles away. The company had to do the shifting because the expansion plans required more space than was available at the old site. Since the present factory was situated in the heart of the town, the workers did not have much transport difficulty. The old factory site was easily accessible, and it did not cost much on transport either. The new site though far-off was well connected by train and bus service. There was no transport difficulty and some of the workers were already living in that area. The workers agreed to shift to new premises only if the company granted a flat increase of Rs. 25 in their monthly salary. The company instead offered to give the workers a lump sum of Rs. 30 as a resettlement allowance and a permanent increase in salary of Rs. 5 per month to each worker. This was the situation in October, 1979. *

Case prepared by Prof. S.S. Mehta. Former Director. Indian institute of Foreign Trade. New Delhi.

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When the plant was being shifted to new site, negotiations between the company management and the workers representatives went on uninterrupted for about six months. The workers modified their orginal demand and content with a lump sum of Rs. 70 as resettlement allowance and a permanent increase of Rs. 5 per month as a conveyance as allowance. After further negotiations and some informal bargaining the agreed amount was Rs. 45 as lump sum and Rs. 5 as conveyance allowance.The company’s representatives promised to consider this demand. This was taken by the union leaders to mean that the company has already conceded this demand. The management’s attitude became stiff and it struck to its old offer. The workers refused to compromise on those terms. A stalemate ensued. The workers threatened to adopt the ‘go-slow” tactics. For 3 months since December they went slow, the company’s production of bulbs was adversely affected. The production went down. The company assembled 30,000 bulbs per month previously and with the “go-slow” the production declined to 20,000. The management refused to intimidate. It sat stiff on its stand. During this period also, the negotiations were going on. It was at this stage that the union sought the ministerial intervention. The company argued that unless the workers resumed normal production, it would not consider the inflated demands much less concede to them. The Labour Minister agreed. The Central Government was absolutely against “go-slow” tactics. The workers stressed that the production figure of 30,000 was the result of overtime work and double shift and that if there were no overtime the normal production would only be 20,000 bulbs. The company proved to the Minister, by quoting previous records, that the workers were going slow. The Minister could not help the workers. He could intervene only when the workers resumed normal production. It was at this stage that the company charge sheeted the 10 ring leaders and suspended them pending inquiry. This proved too much for the workers. The labour leader agreed to accept the very original terms of the company and offered to give normal production provided the suspended leaders were reinstated. The company refused to take any notice of even this modified demand. Then the workers gave notice of a strike on February 28, 1980. The whole idea was to put pressure on the company in the most critical month of the year, namely, March when the company needed maximum production to dispose of outstanding orders for bulbs. This was the assumption on which the workers proceeded. The company refused to yield. During the first three days. the workers staged a stay-in strike. After that, the company dared a lock-out for two days. The company opened the gates of the factory on the sixth day but the strike continued for two months. The company refused to budge an inch from its stand.

Questions 1.

What is the problem in this case?

2.

Are the go-slow tactics and the strike justified? Who are reponsible for them? What is the remedy?

3.

Should the management reinstate the suspended ring leaders?

4.

Comment on the collective bargaining approach of the union and management representatives.

Case 12: High Salary vs. HighTurnover An organisation named XYZ, involved in education/training business, is progressing with around 200% growth every year since the last 5 years. A dynamic leader, who has amazing self-confidence and conviction, apart being aggressive marketing personnel, heads the organisation. The present turnover of the company is around 8 crore with a profit margin of around 60%. The company employs around 80 plus employees. It is very particular about the quality concept in its entire department.

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The company organises regular fortnightly meetings/lunch/dinner. The company is very open in culture, any person can go and talk to the CEO anytime. Employees are paid decent salaries as compared to market standard, providing enough space for entrepreneur spirits. Consultants are hired at enormous fees to see that employees are all happy. Surprisingly, despite all these measures, people at most of the hierarchical levels are not satisfied with the organisation and the turnover ratio is more than 25%. The CEO desperately wants to improve the HR situation prevalent in the organisation, especially the turnover of executives.

Question 1.

Identify why the employees are dissatisfied and employee turnover is so high in organisation.

Case 13: Dilemma of an HR Manager* Everest Auto Industry Ltd. (EAIL) was started in the 1960’s by an entrepreneur family. At that time Government of India gave considerable support and incentive to the Automobile Sector, as it was considered one of the major industries of the country. The Company was headed by Mr. Ashok Chopra who functioned as the Chairman and Managing Director of the Company. He had an excellent academic background--with an engineering degree from India and a Post Graduation in Management from abroad. He worked in one of the multinational companies abroad, before he came to India to set-up the family controlled Everest Automobile Industry Ltd. Though the company was started in a moderate way, under his able guidance it grew quite well. Right from the beginning, it was considered to be a blue-chip company. Mr. Chopra was quite interested in establishing a company of high repute. He started introducing all modern technologies, processes and methods. He gave a lot of importance for product quality, cost, deliveries and all other aspects of business. By early 1990’s the company had a strength of 10,000 employees with multi location operations. To meet the growing demands of manpower, right in the early stage, the company started practice of recruiting young persons directly from various campuses and giving them in-company training to prepare them for job within the company. One of the major training activities in the Company was technical gradual training programme. The engineers were recruited from the Campus. They were given intensive training in the Company and then posted to various departments, according to their aptitudes as also the needs of the company. It was a well established scheme and had an excellent reputation. The “fresh” engineers used to take it as a matter of pride to be selected by the company for its TGT Scheme. However, with the change in the Government policy which initiated liberalization and globalizaiton, things started changing rapidly from the beginning of the 1990’s. There were also other developments in the country. The IT industries which started around the late 1980’s started “blooming up”. There was a great demand for people who had the background of computers. Things started changing rapidly and the IT Industry became a matter of choice by all fresher engineers. By the end of 1990’s, things had so drastically changed in the industrial environment that fresh engineers started preferring jobs in IT industry as also in the Service sector. Earlier, the employees who were strongly in favour of engineering industry had started changing, and by the beginning of the Millennium, the Service sectors had grown substantially well. There was a large number of jobs created in that sector. Today the engineers have wide choice besides opting for manufacturing industry like EAIL. There are Bloom financial sector organisations in addition to the IT sector. EAIL which used to get excellent response for TGT Scheme, was hardly able to attract good engineers. Most of the High profile engineers preferred to go to other sectors as they found things *

K.S. Anandaram: Dilemma of an HR Manager, Indian Journal of T raining and Development, Vol,1, No.1, JanMarch 2001, pp. 73-76.

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were far better there. The moderate profile engineers who joined the industry, hardly remained satisfied and motivated. They always compared their service conditions with those in the Service sector. As one could visualise, the working conditions and the remuneration in the manufacturing sector would not be comparable to those in Service sector or in IT industry. For instance, an engineer is paid about Rs. 20,000/- in the beginning of his carrer, while an engineer in a company like EAIL gets about Rs. 10,000/-. In the IT industry they enjoy better facilities like—flexible working hours, various facilities, social acceptances, growth,challenging task, and so on, whereas in the engineering industry these are not possible. The engineers met the HR Manager and complained about the enormous difference between the two industries. Besides keeping the engineers and others satisfied, the HR manager faced many other difficulties. With the liberalization and globalization,the competition in the market had enormously grwon. Many multinationals have been permitted to bring their products and sell in the Indian market. The company lost its market share. There is, in general, a glut in the automobile field, which is almost coming towards a period of recession. Some of the big automobile companies have been incurring considerable losses in the last few quarters. Besides, there is also a very strong need for technology upgradation and introduction of systems like ISO 9000, QS 9000, ISO 14000 and other things. All these involve huge expenditure, time and effort. While there has been a demand for higher salaries, the company is not in a position to make both ends meet. There was thus an exodus of good people looking for greener pastures. The company has also introduced certain new technologies like CAD (Computer Aided Design), computer aided manufacturing (CAM). All these require engineers with a computer background, versatile in the High-Tech field. Unfortunately, the brilliant one’s do not join the industry. Those who join, get trained and leave for other industries. There has thus been a demand by the ERP consultants for engineers with experience in industry. This has created enormous problems for the Automobile industry. There have been sugestions that the engineers in those departments, where they have better opportunities may be paid higher than those who are in other departments. For Instance, people working in functional areas like CAD, CAM etc., may be paid more and others in manufacturing could be paid lesser. This is likely to have serious repercussion as people would come to know the difference and get further demotivated. The HR Manager is now wondering as to how he could overcome these problems. The questions that arise are:

Questions 1.

How to attract brilliant engineers to the Industry?

2.

How to keep the engineers motivated on their job?

3.

Is it advisable to pay different rates of pay for people in different departments?

4.

How Everest Auto Industry could overcome the problems with respect to service conditions? Is it possible for them to introduce a system like, flexible working hours, etc.?

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Case 14 : Amgen’s Global Workface* Since its inception, Amgen has grown from a few hundred employees at its head quarters in Thousand Oaks, California, to 3,900 people spanning the globle Amgen is a biotechnology firm that discovers, develops, manufactures, and markets human therapeutics (drugs) based on advanced cellular and molecular biology. As soon as the company got ready to launch its first product, Amgen executives decided to establish a facility in Cambridge, England. The company needed to do clinical trials in every country in which they wanted to manufacture or sell a product. Doing the research in England gave the company legitimacy with the British government agencies. Amgen also set up clinical development locations in Australia and Canada and established its European headquarters in Luceme, Switzerland. Originally, when the company first began its distribution abroad, Amgen executives would send an American manager to scout the location, collect data, and make an analysis based on a map. These days, the company relies on the expertise and knowledge of locals in the host country. Another factor that determines where Amgen sets up shop is where it can form the best academic and medical collaborations. The company has establishekd a relationship with the University of Toronto because of its parallel research in biotechnology and has also created a joint venture with Japan’s Kirin Brewery to distribute Amgen products in China. According to their vice president of human resources, Ed Garnett, Amgen has developed a global mindset that influences the way they manage people. Garnett puts it this way: “If you’re a multinational, you’ll have an expatriate program. If you’re global, you’ll only provide one-way tickets”. Indeed, Amgen’s HR strategy reflects this premise. To gain competitive advantage, Amgen hires the top international scientists, medical personnel, and global managers, who are either natives of or familiar with Amgen’s worldwide locations. Further, approximately 15 percent of Amgen’s employees in Thousand Oaks are foreign nationals. With the exception of one worker in Asia, all of Amgen’s foreign-based managers are locals or thire-country nationals. According to Garnet, “We hire locals for management, but we send expats to help with the intergration of processes and special projects”. The company has only six expatriates worldwide–and they are deployed only temporarily, to set things up. What type of employees does Amgen look for? “Global companies need people who’ve experienced many different business environments,” Garnett says. This goes beyond speaking the language and growing up in the country. It requires someone who can execute company directives in any country where Amgen operates. To bolster its global workforce, the company is beefing up its executive development program. While still in the early stages, Amgen’s curriculum will include more information about different countries’ cultures and business practices, and much of the training will focus on leadership skills like communication, performance management, and decision making. Another piece of Amgen’s continuous training is team building. Transnational teams are commonplace in this company. The company’s European HR director. Michael Bentley, noted, “Our teams cut across countries, and in the case of product development, they may cross continents”. Because all team members tend to be cocused on advancements in cellular and molecular biology—the sciences that will provide products to save and enhance lives—their professional culture unites otherwise very different people. Their commonalities help Amgen reinforce the company’s values and still respect the various cultures in which the company operates. The company’s values of openness, diversity, risk taking, and scientific collaboration have led to its growing success worldwide.

Question 1. 2. 3.

What inherent problems do you see with Amgen’s global staffing approach? What do you think would be the biggest HR problems in managing a transnational team? Would this approach to HR work for other firms? What kinds?

* Source: Condenced and adapted from Brands Paik Sunoo, “Amgen’s Latest Discovery,” Personnel Journal 75, no. 2 (February 1996): 38–45.

GLOSSARY A Accountability. A concept whereby persons are held responsible for their own performance and the performance of their subordinates. Action Research: This is a cyclical process identifying system problems, gathering data, taking corrective measures, assessing progress, making ongoing adjustments, and learning from experience. Adjudication. A process of settling disputes through the intervention of a third party appointed by the government. Advertising. Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. Ambiguity. This refers to the discrepancy between the defined and perceived parameters of performance. Application Blank. A formal record of an individual’s application for employment providing essential information about the individual and his or her job qualification. Arbitration. An official process in which the negotiating parties agree to summit the unresolved dispute to a neutral third party whose decision is final and binding. Assessment Centres. A process in which employees are evaluated through a series of exercises to determine the promotability. Attitudes. Feelings and beliefs that largely determine how members will perceive their environment, commit themselves to intended actions, and ultimately behave. Attitudinal Structuring. The process of shaping attitudes towards cooperative, positive favourable, and so on. Attribution Theory. A theory of performance evaluation based on the perception of who is in control of an employee’s performance. Attrition. The normal separation of people from an organisation owing to retirement, resignation or death. Authority. One’s legitimate right to influence others / subordinates . Autonomy: The degree to which a job provides substantial freedom, independence, and discretion to a person in scheduling and carrying out his or her work.

B Bargaining Impasse. The breakdown of negotiations when the union and the employer are unable to reach an agreement. Behaviourally Anchored Rating Scales (BARS).A performance appraisal method that generates critical incidents and develops behavioural dimensions of performance . The appraiser evaluates behaviours rather than traits. Benchmark Job: A job consisting of standardized characteristics easily identifiable with similar jobs in other organisations. Benefits. Membership-based on non-financial rewards offered to attract and retain employees. 436

437

Glossary

Bias. A personal preference or inclination that undermines impartial judgement. Boycott. The combined refusal by employees and other interested parties to buy or use the employer’s products. Brainstorming. An idea-generating process that encourages alternatives while withholding ciriticism. Broadbanding. It is a process reducing salary grades to a limited one and increasing the range between minimum and maximum in a salary grade. Business Environment. The composite of social, economic, political, technological, market and other conditions external to any given business that are likely to have their dent in overall performance of the business.

C Career. A perceived sequence of attitudes and behaviours associated with work-related experiences and activities over the span of the person’s life. Career Anchors. The basic drivers acquired by an individual during the socialization process which urge him to take up a career of a certain type. Career Development. The personal improvement one undertakes to achieve a personal career plan. Career Goal. The future positions one strives to reach in his career. Career Management: This is the process of designing and implementing goals, plans and strategies to enable the organisation to satisfy employee needs while allowing individuals to achieve their career goals. Career Path. The logical and sequential path through which one moves toward his / her career goal. Career Planning. This is the process offered by an organisation to its employees to select career goals and the path to these goals. Case Study. It is a diagnostic and problem solving study of usually a written description of some event or set of circumstances on organizational problems providing relevant details. Central Tendency: A tendency rating all or almost employees in the middle of rating scale as rating them as average. Code of Discipline. A set of self-imposed obligations by the organisation of workers and employers voluntarily. Collective Bargaining: The process through which the representatives of management and the employee’s union meet to negotiate a labour agreement. Compensation: It is all what employees receive from employers in exchange of their work/services. Compensation Administration. The determination of how much an employee should be paid. Competitive Advantage: A unique capability in the organisation that enables organisation to successfully compete with its competitors. Conciliation: It is the process of settling industrial disputes by a conciliator acceptable to the employees and the employers. Co- partnership: A system wherein employees by way of having sharing of the company, get a share in the profits and management of the company in addition to their usual wages and salaries.

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Counselling. Personnel function concerned with giving practical help to employees on personal problems, both at work and in their private lives. Culture. A common perception held by the people: which actions are considered acceptable and which are considered unacceptable.

D Delegation. The process of assigning duties to subordinates who are allowed to act within the authority granted to them. The person assigning retains responsibility for that person’s exercise of authority. Delphi Technique. A group decision making technique in which members of the group never meet face to face. Democracy. Decmocracy is government of the people, by the people and for the people. Demotion. The reassignment of an employee to a lower job with lower pay/salary. Development. Activities that result in behavioural modification in an individual for future responsibilities. Discipline. A condition in the organisation when employees conduct themselves in accordance with the organisation’s rules and standards of acceptable behaviour. Dismissal. An action taken by the employer to permanently remove the employee from the job. Distributive bargaining. A form of bargaining in which labour and management cannot agree on the issues in the work contract, such as wages . One party gains at the expense of other. Downsizing. A process that reduces the number or size of employees working in an organisation. Dry Promotion. It refers to vertical movement of an employee from one job to another without increase in salary.

E Education: Conceptual learning that improves one’s knowledge and understanding about environment/subject/theme. Employee Involvement. A participative process designed to encourage employees to have increased commitment to the organisation’s success. Empowered Groups. These are natural groups that are given a large degree of decision making autonomy and are expected to control their own behaviour and results. Empowerment. A process that provides greater autonomy to employees through the sharing of relevant information and provision of control over factors that affect job performance. Encounter Stage. The socialisation stage where the individual confronts the possible dichotomy between members, expectations about the organisation and reality. Environment. One’s surrounding composed of work, collagues and supervisors, workshop, amenities and facilities. Environmental Scanning. The process of studying the environment of the organisation to pinpoint opportunities and threats. Ergonomics. The design and shape of job to strike fit between the job and jobholder. Esteem Needs. These refer to two slightly different needs: (i) the need for a positive self-image and self-respect, and (ii) the need to be respected by others. Ethics. It is a just, right and normative/code of behaviour.

439

Glossary

Executive Development: This refers to any attempt to improve executive performance by imparting knowledge, changing attitudes, or increasing skills. External Source. Searching for applicants for fillimg up vacancies from the candidates from outside the organisation.

F Fair Wage. A wage which is above the minimum wage but below the living wage. Feedback. This refers to knowledge of results. Foreign Direct Investment (FDI). It refers to operations in one country that are controlled by entities on a foreign country. Franchising. A business system created by a contract between a parent company, called a ‘Franchiser’ and the acquiring business owner, called ‘ Franchisee’, giving the acquiring owner the right to sale goods or services, to use certain products, names or brands, or to manufacture certain products. Fringe Benefits. Extra benefits or facilities provided to employees in addition to their normal wages and salary. Frustration. It is the blocking or slowing down a goal- directed activity.

G Good Faith Bargaining: A term that means both parties are communicating and negotiating and that proposals are being matched with counter proposals with both parties making every reasonable effort to arrive at agreements. It does not mean that either party is compelled to agree to a proposal. Globalisation. This is a tendency of firm to extend their sales or manufacturing to new markets abroad. Graphology. Handwriting analysis. Grievance. A complaint by the employee concerning a possible violation of the labour contract, law, or past practice of the employer. Grievances Procedure. The procedure mutually agreed upon between the union and the management, to be adopted for prompt redressal of grievances after a thorough fact-finding investigation. Group. A collection of two or more interacting individuals who maintain stable relationships, share common goals, and perceive themselves as being a group.

H Halo Effect. The tendency to let our assessment of a person based on one trait influence our assessment of that person on other specific traits or qualities. Head hunters. Private employment agencies specializing in middle-level executive placements. Health. It is a state of ones complete physical, mental and social well-being . Hot-Stove Rule: A Rule of administrating discipline comparable to touching a hot stove, in that a warning is given, the response is immediate, enforcement is consistent, and the rule is applied impersonally to one and all. Human Capital. The total value of human resources to the organisation in the from of knowledge, education, skills, and expertise of employees working therein. Human Engineering. It is a study of people at work and work methods.

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Human Resource Accounting. It is a sophisticated way of measuring the effectiveness of people’s activities and their use in an organisation . Human Resource Development (HRD). A conscious proactive arrangement by employers that seeks to capacitate employees to give their maximum to the organisation and to fully use their potential to develop themselves. Human Resource Information System (HRIS).A computerized system of collecting, storing, classifying, processing, maintaining, retrieving and validating data concerning an organisation’s perssonnel. Human Resource Management. It is a process of procuring, developing, maintaining and controlling human resources for effective achievement of organisational goals. Human Resource Planning. The process by which an organisation ensures that it has the right number and kinds people, at the right places, at the right time, capable of effectively and efficiently completing those tasks that will help the organisation in achieving its overall objectives. It is also referred to as “manpower planning”. Hygine Factor. A work condition related to dissatisfaction caused by discomfort or pain.

I In- Basket. It is a technique that refers to simulation of a series of decisions a trainee might have to make in real life, sitting through a pack of papers and files containing administrative problems. Incentive. Extra wage payment given to employees for superior performance. Indian Labour Conference. An apex body at the national level consisting of representatives of employees, employers and the government to discuss and recommend decisions relating to labour. Indoctrination. Giving instructions to imbue with any doctrine or opinion. Induction. The introduction of a new employee into his or her job and the organisation so that he/she integrates quickly and smoothly. Industrial Accident. It is a sudden and unexpected occurrence in the industry which interrupts the normal and smooth functioning of the work. Industrial Democracy. Government-mandated worker participation at various levels of the organisation with regard to decisions that affect workers. Industrial Dispute. Difference/ disagreement between employees and employers or between employees and employees or employers and employers, connected with employment. Industrial Relations. Relations between trade unions, management and government in an industrial environment. Industrial Revolution. Phenomenon that peaked in the United States in the late nineteenth century and marked the move from an agrarian to an industrial society, from the use of hand– powered tools to mechanised tools, and from small local workshops to large factories. Information Technology. Use of computers software, and telecommunications for a wide variety of productivity and communication application. Integrative Bargaining. A form of collective bargaining that creates a co-operative negotiating relationship whereby both labour and management benefit. Internal Sources. Searching for candiadates for filling up vacancies through promotion and transfer of existing employees in the organisation. Internal Mobility. It is lateral or vertical movement of an employee within an organisation.

441

Glossary

International Business. It refers to doing business in other nations as well. Internet. A worldwide network of computers and computer networks in private organisations, government organisations, and universities, over which people share files, send electronic messages, and have access to vast quantities of information. Intervention. Structured activities designed to help individuals or groups improve their work experience. Interview. A face-to-face interaction between two persons for a specific purpose. Intraorganisational Bargaining. A form of collective bargaining that involves manoeouvring to achieve consensus with the workers and management.

J Job. The various tasks expected of an employee in the context of social and physical environment in which he carries them out. Job Analysis. A systematic investigation into the tasks, duties and responsibilities of a job. Job description. A written statement of what a jobholder does, how it is done, and why it is done. Job Design. The way in which job tasks are organised into a unit of work. Job Grade. A group of different jobs of similar difficulty or requiring similar knowledge and skills to perform it. Job Enlargement. The horizontal expansion of a job to increase responsibilities of the job. Job Enrichment. The vertical expansion of a job by adding planning and evaluating responsibilities to derive more satisfaction from a job. Job Evaluation. A technique used to establish the relative worth of jobs in a job hierarchy. Job Redesign. An organisation development (OD) method that alters jobs to improve the fit between individual skills and demands of the job. Job Rotation. On the job training that involves lateral transfers in which employees get to work at different jobs. Job security. The guarantee of job provided through a seniority system, retraining rights, a nolayoff clause or some other mechanism. Job Specifications. A statement of the minimum acceptable qualifications that an incumbent must possess to perform a given job successfully. Job Stress. The physical or psychological response by an individual caused by an external action, situation, or event in the work place. Joint Venture. A legal organisation created through investments by two or more companies to pursue a commercial activity.

L Lay-off. The failure or refusal of the employer to provide employment due to factors beyond his control such as shortage of inputs and infrastructure, break-down of machinery, etc. Learning. A relatively permenant change in behaviour or potential behaviour that results from direct or indirect experience. Leniency. A supervisor’s tendency to rate his or her subordinates high.

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Living Wage. wage that is sufficient for a worker to support himself and his family by providing the basic necessities of life. Lockout. An employers refusal to allow employees to return to work until an agreement is signed.

M Management by Objectives (MBO). A performance appraisal method which sets specific measurable goals with each employee and then periodically reviews the progress made. Management Games. A technique in which teams of managers compete with one another by making decisions regarding realistic but simulated companies. Management Information System: (MIS) A formal, usually computerized, structure for providing management with information , often through an MIS department. Marxist Approach. An IR approach grounded on the perceptions that haves (capistalist) exploit have nots (labour) and as consequence, trade union comes in picture as a reaction to exploitation by capitalists. Mediation. The intervention of a neutral third party into collective bargaining when the union and management are unable to reach an agreement. Mental Health. It means a person’s mental soundness or fitness. Mentoring. This is advising and guiding by a senior employee to a new junior employee on how to move effectively through the organizational system. Merit Rating. One-to-one ranking of employees’ performance in order to decide their relative worth in the organisation. Metamorphosis Stage. The socialization statge whereby the new members must work out problems discovered during the encounter stage. Minimum Wage. Wage that is sufficient to sustain and preserve the efficiency of the worker and to provide him the basic amenities such as education, medical care and other needs. Morale. Level of (job) satisfaction within a group. Mission. The unique reason for an organisation’s existence that makes it different from others. Motivation. Motivation is the process of steering a person’s inner drive and actions towards certain goals and committing his energies to achieve these goals. Multinational Corporation. A company running its business in more than one nation.

N Need. The positive driving forces which impel a person towards certain objectives or conditions. Norms. Directives what the organizational members ought or ought not to do in certain circumstances.

O Objectives. The targeted goals of an organisation to which resources and efforts are channeled. Occupation. A group of jobs similar as to the type of tasks and training involved. Occupational Hazards. These are the unsafe work conditions that impair the employee’s health.

443

Glossary

Organisation Development (OD). A process of systemwise change at varios levels (group, inter-group and total organisation) designed to make organisations more adaptive. Organisational Culture. A set of values that help people in an organization understand which actions are considered acceptable and which are considered unacceptable. Orientation. The activities involved in introducing new employees to the organisation and their work units.

P Participation. It is the mental and emotional involvement of a person in a group situuation which encourages him to contribute to group goals and share in the responsibility of achieving them. Participative Management. A way of decision making in which employees are allowed the oportunity to participate in decision-making activity. Payment by Results (PBR). A system of remuneration payment which links workers’ earnings to a measure of therir performance. Performance Appraisal. A systematic assessment of an individual’s performance in order to as-sess the changing needs, potential for promotion, or salary review, etc. Performance Review. A formal process of assessing the actual performance of an employee as compared to pre-determined goals and standards. Personnel Audit. An examination and verification of policies, programmes and procedures relating to personnel working in an organisation. Personnel Management. It means dealing with human relationships within an organisation. Personnel Research. It is systematic investigation and analysis into any aspect of personnel management. Physical Health. It refers to the physical infirmity of a person. Placement. Assignment of specific job to each one of the selected candidate. Plateauing. A condition of stagnating in one’s current job. Pluralistic Approach. An IR approach grounded on the product of concessions and compromises between management and trade unions. Polygraph. A device that records physiological changes caused by stress. This is often referred to as a “lie detector” test. Positive Discipline. Discipline that affects unsatisfactory behaviour through help and support and focuses on the correction of the behaviour. Pre- Arrival Stage. The socialization stage that recognizes that members arrive in an organisation with a set of organizational values, attitudes and expectations. Productivity. Measurement of a worker’s performance relative to resource utilization, i.e, output to input. Profit sharing. A scheme wherein employers agree to pay a portion of organizational profit to employees also. Promotions. Upgradation in the status of employees alongwith increase in pay, rights and responsibilities. Punitive Behaviour. Discipline based on fear, relying on threats, harassment and intimidation.

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Q Quality Circle(QC). A work group of employees who meet regularly to discuss their quality problems, investigate causes, recommend solutions, and take corrective actions. Quality of Work Life(QWL). A multifaceted concept whereby the work environment is meaningful to employees. Components include autonomy, recognition, belonging, progress, development, and external rewards.

R Raiding. An act to attract suitable candidates to join one’s organisation from other organisations. Recruitment. The process of locating, identifying, and attracting capable applicants for jobs available in an organisation. Recruitment Cycle. The time taken from commencement to completion of recruitment process. Reliability. The ability of a selection device to measure the same thing consistently. Research. It is a systematic and purposive investigation of facts with the object of determiining cause-and-effect relationship among such facts to solve some problems. Resignation. A voluntary termination of service by an employee by serving a notice/resignation on the employer. Retirement. Termination of service on reaching the age of superannuation. Retrenchment. Termination of service of an employee by the employer for reasons other than punishment but excluding retirement or termination on healthground. Revolutionary Unionism. A union which is extremely radical both in viewpoint and action. Being class conscious, it tends to repudiate the existing institutional order. Role Play. A training method in which trainees act out the roles of people in a realistic management situation.

S Salaries. Remuneration paid to the employees employed on a monthly yearly basis. Salary Progression. A procedure which relates increase in salary to the performance of the employee. Scanlon Plan. Proposed by Joseph N Scanlon in 1937, is a suggestion scheme designed to involve the workers in making suggestion for reducing the cost and improving working methods and sharing in the gains of increased productivity. Scientific Management. An approach wherein employee performs a small part of a complete task and are paid on a piece-rate system. Proposed by Frederick W. Taylor, the approach served as the foundation for job specialization and mass production. Screening. Assessment of basic suitability of candidates for the jobs to eliminate the unsuitable candidates from further processing. Selection. The process of choosing the most suitable candidates from among the applications for jobs. Self-Actualisation Needs. This refers to need to become all that one is capable of becoming. Self- efficacy. It is an internal belief that one has the necessary abilities and competencies to perform a task, fulfil role expectations, or meet a challenging situation successfully.

445

Glossary

Sensitivity Training. This is an unstructured group interaction in which participants discuss themselves and their interactive process. Separation. This is a decision that the employee and the organisation should part. Socialisation. A process of adaption that takes place as individuals attempt to learn the new values and norms of work roles. Social Assistance. Security afforded to the workers without any contribution from them. Social Insurance. A device to provide security to the workers as their right with contribution from them and employers, with or without subsidy from the government. Social Security. Retirement, disability, and survivor benefits paid by the society/government to aged, former workers, the disabled, or their survivors. Standing Orders. Rules and regulations which govern the conditions of employment of workers in an organisation. Strategic Human Resource Management. The means used to aid the organisation in anticipating and managing the supply and demand for human resources. Stress. It is a dynamic condition in which an individual is confonted with an opportunity, constraint, or demand related to what he or she desires and for which the outcome is perceived to be both uncertain and important . Strike. A spontaneous and concerned withdrawal of labour from work. Succession Planning. An employee (executive) inventory report indicating what individuals are ready to move into higher positions in the company. Suspension. A period of time off from work as a result of a disciplinary process. SWOT Analysis. It examines the strengths and weaknesses of the organisations internally and the opportunities and threats externally. Sympathy Strike. A strike that takes place when one union goes on strike in support of the strike of another. Synergy. This is the process of putting two or more elements together to achieve a sum total greater than the sum total of individual elements separately . This can best be described as 2 + 2 = 5.

T Task. An organisation’s mission, purpose or goal carried out for a distinct purpose. Team Building. An OD intervention designed to improve the effectiveness of a work group. Test. A standardized objective measure of a sample behaviour. Trade Union. An organisation of workers formed to promote , protect and improve, through collective action, the social, economic, and political interests of its members. Training. The process of teaching new employees the basic skills they need to perform their job. Transactional Analysis. An approach that is used for defining and analysing communication interaction between people. Transfer. Lateral shifting of employee from one job to another or from one place to another without any change in the status.

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U Unitary Approach. An IR approach founded on mutual co-operation, team work and common/ shared goal that benefits all viz., the employee, the employer and the government.

V Validity. The proven relationship that exists between a selection device and some relevant criterion. Values. Basic convictions about what is right or wrong, good or bad, desirable or not. 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/place. Virtual Organisation. It is a network of cooperation made possible by information and communication technology, which is flexible and comes to meet the dynamics of the market. It is a boundaryless organisations. Vision. Challenging and crystallized long-range portrait of what the organisation and its members can and should be – a possible (and desirable) image of the future.

W Wage. The amount paid by the employer for the services of hourly, daily, weekly. fortnightly employees. Wage Structure. A pay scale showing ranges of pay within each grade. Wildcat Strike. Any work stoppage not authorised by the union.

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447

Glossary

ABBREVIATIONS AAA

:

American Accounting Associates.

A CO G

:

Atlanta Committee for the Olympic Games

AIMO

:

All India Management Organisation

AIOE

:

All India Organisation of Employees

AITUC

:

All India Trade Union Congress

ASSOCHAM :

Associated Chamber of Commerce

BHEL

:

Bharat Heavy Electrical Engineering

BMS

:

Bharat Mazdoor Sangh

BPE

:

Bureau of Public Enterprises

CEO

:

Chief Executive Officer

CII

:

Confideration of Indian Industry

CTI

:

Computer Telephony Integration

CITU

:

Centre of Indian Trade Union

CMD

:

Chief Managing Director

EDP

:

Executive Development Programme

EFI

:

Employers Federation of India

FDI

:

Foreign Direct Investment

FICCI

:

Federation of Indian Chamber of Commerce and Industry

GIGO

:

Garbage-In Garbage-out.

HCL

:

Hindustan Chemicals Ltd.

HCN

:

Host Company National

HLL

:

Hindustan Lever Limited

HMS

:

Hind Mazdoor Sabha

HMT

:

Hindustan Machine Tools

HR

:

Human Resource

HR

:

Human Resource

HRA

:

Human Resource Accounting

HRA

:

Human Resources Auditing

HRD

:

Human Resource Development

HRM

:

Human Resource Management

HRIS

:

Human Resource Information System

IBM

:

International Business Machines

ICICI

:

Industrial Credit and Investment Corporation of India.

ICT

:

Information and Communication Technology

IHRM

:

International Human Resource Management

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Human Resource Management

IIPM

:

Indian Institute of personnel Management

ILC

:

International Labour Conference

ILO

:

International Labour Organisation

INDAL

:

Indian Aluminium Company

INTUC

:

Indian Natioanl Trade Union Congress

INV

:

Individualism

IR

:

Industrial Relations

JAC

:

Joint Action Committee

JIT

:

Job Instruction Training

JMC

:

Joint Management Council

LPG

:

Liberalization, Privatization and Globalization

MASC

:

Masculinity

MBO

:

Management by Objectives

MDC

:

Management Development Centres

MDP

:

Management Development Programme

MIS

:

Management Information System

MMTC

:

Minerals and metals Trading Coporation

MNC

:

Multinational Corporation

NCL

:

National Commission on Labour

NEP

:

New Economic Policy

NILM

:

National Institute of Labour Management

NIPM

:

National Institute of personnel Management.

NPC

:

National Productivity Council

OD

:

Organisation Development

OJT

:

On the Job Training

ONGC

:

Oil and Natural Gas Commission Ltd.

PBR

:

Pay by Results

PCN

:

Parent Company National

PDI

:

Power Distance

PLC

:

Plant Level Committee

PRP

:

Performance Related Pay

QC

:

Quality Circle

QR

:

Quantitative Restrictions

QWL

:

Quality of Work Life

SBI

:

State Bank of India

SLC

:

State Level Council

SMS

:

Short Mail Service

SWOT

:

Strengths, Weakness, Opportunities and Threats

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Glossary

TELCO

:

Tata Electric Lomotive Company

TISCO

:

Tata Iron and Steel Company

TUA

:

Trade Union Act

UAI

:

Uncertainty Avoidance

UCC

:

Union Carbide Corporation

UCI

:

Union Carbide India

UNO

:

United Nations Organisations

USA

:

United States of America

UTUC

:

Union Trade Union Congress

VRS

:

Voluntary Retirement Scheme

VO

:

Virtual Organisation

WAN

:

Wide Area Network

WPM

:

Workers’ Participation in Management.