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Definition of HRM Human resource management is to make the most productive use of human resource to the greatest benefits of the organization and individuals. Organization: profits and social commitments. Individuals: development and achievement.
Definition By Pettigrew & Whipp (1991) “Human resource management relates to the total set of knowledge, skills and attitudes that firms need to compete. It involves concern for and action in the management of people, including: selection, training and development, employee relations and compensation. Such actions may be bound together by the action of an HRM philosophy”
FUNCTIONS OF HR Managerial functions Operative functions Advisory functions
2. Operative functions The operative functions are those tasks or duties which are specifically entrusted to the HR. a) Employment Employment of proper kind and number of persons necessary to achieve the objectives of the organization. b) Development Training and development of personnel is a follow up of the employment function. c) Compensation This function is concerned with the determination of adequate and equitable remuneration of the employees in the organization of their contribution to the organizational goals
d) Maintenance (Working Conditions and Welfare) Provide good working conditions so that employees may like their work and workplace and maintain their efficiency. e) Motivation Design a system of financial and non-financial rewards to motivate the employees. f) Industrial Relations The human resource manager can do a great deal in maintaining industrial peace in the organization as he is deeply associated with various committees on discipline, labor welfare, safety, grievance, etc. g) Seperation The personnel manager has to ensure the release of retirement benefits to the retiring personnel in time.
3. Advisory functions Human resource manager is an expert in his area and so can give advise on matters relating to human resources of the organization. a) Advised to Top Management Personnel manager advises the top management in formulation and evaluation of personnel programs, policies and procedures. b) Advised to Departmental Heads Personnel manager offers advice to the heads of various departments on matters such as manpower planning, job analysis and design, recruitment and selection, placement, training, performance appraisal, etc.
RECRUITMENT Definition of Recruitment: “Recruitment is the process of searching for prospective employees and stimulating and encouraging them to apply before the job.” - Flippo EB “Recruitment acts set of activities and organization uses to attract job candidates possessing appropriate characteristics to help the organization reach its objectives.” - William F Glueck
Recruitment can be defined as: all activities directed towards locating potential employees the attraction of applications from suitable applicants. Recruitment is the process of finding and hiring suitable candidates to fill the positions. The process involves searching, sourcing and selecting right candidates for the roles to the organizationThe aim of recruitment is to get the best person suited to the job based on objective criteria for a particular job
Types of Recruitment Based on the source recruitment is divided into categories: Internal Recruitment: This involves recruiting candidates within an organization to fill the vacancy. External Recruitment: This involves recruiting a candidate through references, networks, job portals or they may approach recruitment agencies.
Internal Recruitment Internal sources of recruitment are readily available to an organization. Internal sources are primarily three - Transfers: It implies shifting of an employee from one job to another without any shift in change of responsibilities. Promotion: It refers to shifting of an employee to a higher position carrying higher status, responsibilities and pay. 3. Re-employment of ex-employees: It is one of the internal sources of recruitment in which employees can be invited and appointed to fill vacancies in the concern. There are situations when ex-employees provide unsolicited applications also.
Advantages of Internal Recruitment No cost and less time consuming No need of training Builds strong relationship with employees. Motivates others of hard work to get high positions. Easy to pick best talents within an organization very quickly Long stay with the company when promoted to high position.
Disadvantages of Internal Recruitment The positions of the persons who is promoted will be vacant. There may be partiality in promoting employees. No new opportunities for external candidates. Dissatisfied employees may quit if his co-worker is promoted to high positions. All vacancies cannot be filled from within organization.
External Recruitment External sources are external to a concern. But it involves lot of time and money. The external sources of recruitment includes 1. Educational Institutions: Various companies visit many colleges which have made arrangements for campus interviews and recruit candidates. 2. Recruiting Agencies: There are certain professional organizations which look towards recruitment and employment of people. 3. Employment exchanges: These exchanges provide information about job vacancies to jobseekers. These can be private and also government exchanges.
4. Labor Contractors: These are the specialist people who supply manpower to the Factory or Manufacturing plants. 5. Recommendations: Employees recruited through recommendations by trade unions. 6. Gate recruitment: In this method a notice on the noticeboard of the company specifying job details of job vacancies can be put. This method is also called direct recruitment. 7. Advertisement: It is an external source which has got an important place in recruitment procedure. Medium used is Newspapers and Television.
Advantages of External Recruitment Create new opportunities for external employees. Best candidates can be placed for the roles Cost of employees can be minimized. Increase in the selection ratio. There are less chances of partiality. Uniqueness in employees worked for different companies can take the current company to extra mile. Able to recruit the skills it needs.
Disadvantages Of External Recruitment Time consuming and expensive. Employees unfamiliar with organization and its orientation. If higher level jobs are filled from external sources, motivation and loyalty of existing staff effected. Sourcing quality candidates becomes difficult for the companies.
SELECTION PROCEDURE Selection: The Process of making a “Hire” or “No Hire” decision regarding each applicant for a job. OR It is the process of choosing qualified individuals who are available to fill the positions in organization.
Selection Criteria The Purpose is to reduce the method of selection as much as possible, and this means selecting those who will, by and large ,perform well in the organization and reject who will not .
Selection Process The selection process refers to the steps involved in choosing people who have the right qualifications to fill a current or future job opening. The selection process consists of five distinct aspects: Criteria development: All individuals involved in the hiring process should be properly trained on the steps for interviewing, reviewing resumes and developing interview questions. Application and resume review: People have different methods of going through this process, but there are also computer programs that can search for keywords in resumes and narrow down the number of resumes that must be looked at and reviewed.
Interviewing: After the HR manager and/or manager have determined which applications meet the minimum criteria, he or she must select those people to be interviewed. Test administration: Any number of tests may be administered before a hiring decision is made. These include drug tests, physical tests, personality tests, and cognitive tests. Making the offer: The last step in the selection process is to offer a position to the chosencandidate. Compensation and benefits will be defined in an offer.
Selection Methods The Three most Common Methods used are:
1. Testing Tests measure knowledge, skill, and ability, as well as other characteristics, such as personality traits. TESTING TYPES Cognitive Ability Test Integrity Test Personality Test Drug Test Physical Ability Test Work Sample Testing
2. Information Gathering Common methods for gathering information include application forms and resumes, biographical data, and reference checking. Application Forms and Resumes Generally ask for information such as address and phone number, education, work experience, and special training. Biographical Data Historical events that have shaped a person’s behavior and identity. Reference Checking Involves contacting an applicant’s previous employers, teachers, or friends to learn more about the applicant issues with reference checking.
3. Interviewing The interview is the most frequently used selection method. Interviewing occurs when applicants respond to questions posed by a manager or some other organizational representative (interviewer). Typical areas in which questions are posed include education, experience, knowledge of job procedures, mental ability, personality, communication ability, social skills.
CAMPUS SELECTION PROCEDURE Some organization in India have recently started visiting college campuses for recruitment purposes. Selection teams from different organization, announces jobs, market there companies – the opportunities, compensation package, generate the shortlist of application and finally select the desire number.
Campus Selection procedure includes following steps: Organization’s presentation. Written test /Online test (Aptitude +technical). Group Discussion(Optional). Technical Interviews. HR interviews.
The advantage of this process are most of the applicants are present at one place and interviews can often be arranged at short notice. Disadvantage of this type of recruitment is that organization probably have to limit their selection only and “entry” position. For higher level positions, campus recruitment is neither feasible nor an attractive proposition.
TYPES OF INTERVIEW Unstructured interview Questions are changed to match the specific applicant. for example, questions about the candidate’s background in relation to their resume might be used. Structured interview There is a set of standardized questions based on the job analysis, not on individual candidates’ resumes. Different Techniques of Interview: 1. Traditional interview Takes place in the office and consists of the interviewer and the candidate, and a series of questions are asked and answered.
2. Telephone interview A telephone interview is often used to narrow the list of people receiving a traditional interview. 3. Panel interview A panel interview occurs when several people are interviewing one candidate at the same time. 4. Information interview Informational interviews are usually used when there is no specific job opening, but the candidate is exploring possibilities in a given career field.
5. Meal interviews Many organizations offer to take the candidate to lunch or dinner for the interview. To gather more information about the person, such as their manners and treatment of wait staff. 6. Group interview Two or more candidates interview at the same time. 7. Video interviews Same as traditional interviews, except that video technology is used. This can be cost saving if one or more of your candidates are from out of town. For example, Skype.
8. Nondirective interview (Unstructured interview) In a nondirective interview, some very general questions that are planned ahead of time may be asked, but the candidate spends more time talking than the interviewer. It can give candidates a good chance to show their abilities.
WAGES, INCENTIVES, BONUS, AND SALARY
Wages: A Wage is a monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done. Wages are an example of expenses that are involved in running a business. Incentives: An incentive is something that motivates an individual to perform an action. Incentives can be classified according to different ways in which they motivates agents to take a particular course of action.
Salary: A salary is a form of periodic payment from an employer to an employee which may be specified in a employment contract. It’s a fixed amount of money or compensation paid to an employee by an employer in return for work done. Salary is determined by comparing market pay rates for performing similar work in similar industries in the same region. Bonus: A bonus is an incentive payment that is given to an employee beyond one's normal standard wage. It is generally given at the end of the year and does not become part of base pay.
TYPES OF WAGES Wages have been classified into three categories: Living wages Minimum wages Fair wages
Living Wages The best definition is given by Justice Higgins which reads "Living wage is a wage sufficient to ensure the workman food, shelter, clothing, frugal comfort, provision for evil days etc. as regard for the skill of an artisan, if he is one". According to Fair Wages Committee Report: "The living wage should enable the male earner to provide himself and his family not merely the basic essentials of food, clothing and shelter but a measure of frugal comfort including education for the children, protection against ill-health, requirement of essential social needs and measures of insurance against old age.“
Minimum Wages “The minimum wage may be defined as the lowest wage necessary to maintain a worker and his family at the minimum level of subsistence, which includes food, clothing and shelter. “ Minimum wage in a country is fixed by the government in consultation with business organizations and trade unions.
Fair Wages Fair wage is a mean between the living wage and the minimum wage. While the lower limit of the fair wage must obviously be the minimum wage, the upper limit is the capacity of the industry to pay fair wage compares reasonably with the average payment of similar task in other trades or occupations requiring the same amount of ability. Fair wage depends on the present economic position as well as on its future prospects.
Depending Factors of Fair Wages Minimum Wages. Capacity of the industry to pay. Prevailing rates of wages in the same or similar occupations in the same or neighboring localities. Productivity of labor. Level of national income and its distribution. The place of the industry in the economy of the country.
TYPES OF WAGE PAYMENT PLANS All wage system must satisfy the basic need of the employee for food, shelter, clothing and reasonable compensation for their efforts. Time Based Wage System Piece Base Wage System All other wage systems are combination of these two methods of wage system.
1. Time Wage System Wages are calculated in the basis of time worked irrespective of the quality of work done. Thus the wages are calculated by multiplying the time spent by predetermined rate of wages. Wage = Time spent * Rate per unit of time = T * R where T = Time spent in hours R = Rate per hour
Advantages of Time Wage system Simple system and economical. It gives workers a sense of security as they know that they will be compensated for time spent within the organization irrespective of efficiency. Minimize material wastages as the work is not done in hurry. This system works best on artistic jobs where quality of output is of prime consideration. Workers can easily understand the calculation of their wages.
Disadvantages of Time wage system It requires continuous supervision. As the workers are not in hurry to work, production can suffer. Under this process the workers generally adopt the policy of go slow. This system has no positive inducement for workers so that they could enhance their efficiency. The system doesn’t differentiate between efficient and inefficient workers. As wages are paid in terms of time spent, it decrease the morale of efficient ones.
2. Piece Rate System Under this system, the wages are paid to a worker on the basis of output produced by him without considering the time taken in performing the work. Wages = N * R where N = no. of unit produced. R = Rate per unit The earning of workers depends on the speed of the work and his own individual skills and efficiency.
Advantages of Piece Rate System Works as an inducer for workers to produce more. Here reward is related to efforts. This method is fair to all as inefficient workers are panelized and efficient worker are rewarded.
Disadvantages of Piece Rate System In an effort to produce more and earn more workers may exert themselves to fatigue. Workers feels insecure in this system because they will lose wages for the period of absence. This system requires an up-to-date records of output produce by each workers which increase the clerical works.
TYPES OF INCENTIVE WAGE PLANS
1. Individual Incentive Wage Plans Also known as Personnel Incentive Wage Plans. These plans motivate the individuals to produce more. Such plans may be based on time or production.
1.1. Time Based Individual Incentive Wage Plans a) The Halsey Premium Plan A mechanical engineer F.A. Halsey devised this plan. It is a simple combination of the time - speed basis of payment. The worker gets his wages for the time he works. For the calculation of premium, a standard time is fixed for each job on the basis of past performances. If the worker finishes the job before this standard fixed time, he gets bonus for the time saved by him.
Example: Rate of bonus is 30% to 50% of the wage payable for the time saved. Suppose a worker gets his wages @ Rs 60 per hour. He finishes his work in 15 hours for standard time fixed is 20 hours. Thus he saves 5 hours. He will get a total wage of Rs. 1050. Wage for 15 hours @ Rs 60 i.e. = 15 * 60 = Rs 900Wages for 5 hours (the time saved) @ 50% of the usual hourly rate = (5 * 60 * 50 ) / 100 = Rs 150 So, total earning for him = Rs 900 + Rs 150 = Rs 1050 He will get Rs. 1050 and will also earn something more by utilizing the time saved i.e., 5 hours.
b) The Rowan Premium Plan It was introduced by James Rowan of David Rowan & Sons, Glassgow in 1901. It is modification in the Halsey's Plan. The premium is calculated on a percentage of wages for the time worked and not for the time saved. This gives more bonus to the workers.
It is calculated by the following formula: Total Wage = Time Taken ? Time Rate + Time Saved / Standard Time ? Time Taken ? Time Rate Total Wage = ( 15 ? 60 ) + ( ( 5 / 20) ? 15 ? 60) = 900 + (0.25 ? 15 ? 60 ) = 900 + 225 = Rs. 1125 Thus, if the worker finishes the job in 15 hours for standard time of 20 hours and the hourly rate of wage is Rs. 60 , a worker will get a total of Rs. 1125 .
c) Emerson's Efficiency Bonus Plan This plan has been introduced by Harrington Emerson. Under this plan every worker is guaranteed his day wages irrespective of his performance. A standard output is fixed, and is represents 100% efficiency. According to the plan up to 66 2/3 % the guaranteed time wages are paid to the workers, after this they are paid bonus at stated ratio of the time wages. Emerson used 32 empirical bonus percentages for efficiency beyond 66 2/3% i.e. 67%(approx.) under this plan, the bonus starts from 0.01% above 67% efficiency and increases to 20% at maximum efficiency. After this point the bonus is 20% above the basic wages plus 1% for each 1% increase in efficiency.
In a manufacturing concern the daily wages guaranteed for workers is Rs. 2. The standard output for the month is 2000 articles representing 100% efficiency. The rate of wages is paid without bonus to those workers who show up to 66 2/3 % efficiency. Beyond this bonus is payable on a graded scale: Calculate the total earning of A, B, C, and D who have worked 26 days in a month. A’s output 1000 articles, B’s output 1800 articles, C’s output 2000 articles and D’s output 2400 articles.
Further increase of 1% on bonus for every 1% further rise in efficiency
d) The Bedaux Points Premium Plan Under this plan, Standard time is divided into Standard minutes. Each minute of standard time is called Bedaux point or B's. B's are indicated on each job ticket. Time wages are paid until 100% efficiency is reached. Bonus is paid on the basis of number of Beduax Points saved. Bonus at 75% of wages of Bedaux saved is paid to the worker and 25% is paid to the foreman.
Thus the standard hour would consist of 60 B’s , or a standard day of 8 hours ,480 B’s . Suppose a worker earns 600 B’s in a day ; if the rate per point is Rs 1 , his total earnings would be : =(Rs 480 x 1 ) + ( 3 / 4 ) x ( 600 – 480 ) x 1 =Rs 480 + 90 = Rs 570
1.2. Output Based Individual Incentive Wage Plans a) Taylor's differential Piece Rate Plan Under this plan, a standard task is established by the techniques of time and motion study and two piece rates are set up for each job. A high piece rate is allowed to those who can make equal to higher than the standard performance; and for others who cannot reach the standard, a lower piece rate exists. This method penalize the slow and lazy worker and pays incentive to efficient workers.
Example: A standard output of 200 units is fixed in an 8 hours time. A rate of 45% is paid if the output is 200 or more units and 35%, if production is less than 200 units. Worker A has produced 240 units and B produced 180 units. The wages to be paid to worker, A will be Rs. 108 i.e. (240 x 0.45) and that to B will be Rs63 i.e. (180 x 0.35).
Merrick's Multiple Piece Rate Plan It is an improvement over Taylor's Differential Plan. According to this plan, three piece rates for a job is fixed. None of these three piece rates are fixed below the normal level. These three rates are applied in the manner given below: Rates Bonus Incentive 1. Up to 83 '/3% Normal Rate 2. Above 83 1/3 % to 100% 110% of Normal Rate 3. Above 110% 120% of Normal Rate
Example: Case 1 -> Output = 80 units Efficiency = (80 /100 ) x 100 = 80 % Earnings : As the efficiency is less than 83% ,only the base pie-rate applies : 80 x 10 = Rs. 800. Case 2 -> Output = 90 units Efficiency = (90 / 100 ) x 100 = 90 % Earnings : As the efficiency is 83 % but less than 100 % , 110 % the base pie-rate applies :(90 x 110 /100 ) x 10 = Rs. 990.
Case 3 -> Output = 110 units Efficiency = (110 x 100 / 100 ) = 110 % Earnings : As the efficiency exceeds 100 % , 120 % of the base piece – rate applies : 110 x (120 / 100 ) x 10 = Rs 1320 .
c) The Gantt Plan Introduced by H.L. Gantt Its an associate of Taylor, devised this scheme on the basis of Taylor's plan. Under this scheme, fixed time rates are guaranteed. Output standards and time standards are established for the performance of each job. Workers completing the standard job within the standard time or a shorter time receive wages for the standard time plus a bonus. The bonus is a percentage, varying from 20 to 50, of the wage for the standard time. When a worker fails to turn out the required quantity of products, he simply gets his time rate without any bonus.
2. Group Incentive Wage Plan Group incentive bonus schemes are introduced where it is difficult to measure the performance of one worker is affected by the performance of other workers. Under this scheme, bonus is made payable to all the workers on a collective basis. This bonus is promised by management in advance of the commencement of work for securing in effective teamwork. In all cases, a fixed standard of performance is established and the bonus is given for the results shown over the standard performance.
Group incentive wage plan is most suitable in the following cases: Where it is not possible to measure the performance of each individual worker. Where the number of workers making a group is not very large. Where the workers making a group, possess the same or equal skills and abilities. Where the finished product is the result of collective efforts of a group
Types of Group Incentive Wage Plan a) Priestman Plan Proposed by Priestman's in 1917. It is applied to workers who work in groups. It provides for payment of group bonus in addition to the ordinary time rate to the individual workers. Thus if during a year, an enterprise is able to reach the predetermined standard output or exceed the previous year's output, workers are paid increased wages in the same ratio in which output has increased.
Example: If in 1990, the output per worker-hour was 10 units and in 1991, it rises to 11 units per worker-hour, the wages in 1991 would be 10% higher than those in 1990.
Advantage : It brings about team-spirit among the workers of a group. If the group as a whole works well, this is bound to add to overall output of the enterprise and in that case all the workers would stand to benefit. Disadvantage : It may be insufficient to motivate individual workers, particularly these who possess greater skills and experience.
b) Scanlon Plan This plan is the most popular for shaving the gains from increase in productivity. It provides for payment of 10% participating bonus for every 10% increase in productivity. The benefit is extended to all employees except the members of top management. Under the plan, workers are not paid the entire amount of bonus earned by them in any month. One half of the first 15% of such bonus is set apart for the creation of a reserve fund. This fund is used to neutralize the effects of any fluctuations in labor costs.