Chapter 1

INTRODUCTION

Changing economic scenario and powerful competitions are causing Indian public
sector to go through the radical changes in the approaches to business. In the era of
this rapidly increasing competition, it has been imperative for every department to
develop long-term, healthy and strong bonding with the employees. The long-term
bonding with the employees is mostly dependent primarily to the superior quality of
facilities being delivered to the internal customers i.e., employees 1; as they are
playing a major role in the process of service being delivered to external customers.
Thus, an intensive study of Human Resource Management (HRM) in Public Sector
Enterprises (PSEs) is the demand of the time.

1.1 Human Resource Management: A Brief Discussion

Human Resources (HRs) are being considered a very critical source for well-being of
any type organization. The emerging value of humanization in the organization has
made it the most important of all the assets therein. The effectiveness of any
organization is mostly reflected by its development, hence development must be
considered as the soul of the human resource management. HRM in a growing
economy like India is the need of the time. In fact, manufacturing sector having been
the most effective instrument for the development of Indian economy, for which, a
well developed human resources and its management has become essential to achieve
the objectives.

Human Resource Management (HRM) as a subject of study and discipline even

though of relatively recent origin. The concept upon which its theory is based dates
back to 400 B.C. Minimum wage and incentive wage plans etc. were in Babylonian
codes or Hammurabi around 1800 B.C. The Chinese had originated the principle of
division of labour as early as 1650 B.C. Around 1200 B.C the ‘Span of Management’
and other related concepts of organization were well understood by Moses. In India,

1. A. F. Stoner, R. Edward Freeman, Daniel R. Gilbert JR, Management, Pearson Education (Singapore) Pvt. Ltd,
Indian Branch, New Delhi, 2004, p. 375
 Introduction

Kautilya had observed sound bases for systematic and effective management of
human resource in organization, as early as 4th Century B.C.2

1.1.1 Meaning of Human Resource Management

In common parlance, the management of human resources is meant by employing

people in organization, developing and enhancing resources present in them, utilizing
the same, maintaining and compensating their services according to the job done as
well as the requirements of the organization.

HRM can be defined as managing which consists of planning, organizing, directing,

and controlling; the mechanism of employing, developing and compensating human
resources for the establishment of string human relations with a view to contribute to
the organizational, individual as well as social goals.

1.1.2 Concept of HRM

People i.e., personnel are the most important and valuable resource for any
organization, in the form of employees3. It has been observed that only dynamic
people can build dynamic organizations. Effective employees can contribute towards
the effectiveness of the organization. Competent and motivated people can make
things occurred and enable the organization to achieve its goals. Therefore, it is
imperative to HR manager to ensure that the level of dynamism, competency,
motivation and effectiveness in the organization among the people remain at high.

Thus, Human Resource Management is a continuous process in which the HR

manager ensures the development of competencies, dynamism, motivation and
effectiveness of employees within the organization in a systematic and planned way.

1.1.3 Some Important Definitions

Byers and Rue have defined HRM as it “encompasses those activities that are
designed to provide for and co-ordinate the human resources of an organization”.4

According to Edwin B. Flippo, “Recruitment is a process of searching for prospective

employees and stimulating and encouraging them to apply for jobs in an

2. Deepak Kumar Bhattacharya, Human Resource Management, Excel Books, New Delhi, 2012, P. 4
3. V.S.P. Rao, Human Resource Management – Text and Cases, Excel Books ,New Delhi, 2005, PP. 2 to 3
4. Lloyd L. Byars and Leslie W. Rue, Human Resource and Personnel Management, Richard D. Irwin,
Homewood, Illinois, 1984, p.7

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 Introduction

organization”.5

Glueck defined HRM as “the function of all enterprises which provide for effective
utilization of people to achieve both the objectives of the enterprises and the
satisfaction and development of the employees”.6

According to Yoder Dale, “Recruitment is a process to discover the sources of

manpower to meet the requirement 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”.7

1.1.4 Extract of the Definition

HRM is concerned with the development of human resources which consists of

knowledge, capability, skill, potential and ability to achieve goals along with job
satisfaction. It is a continuous and everlasting process. In integrated approach, it aims
to basically attain the goals of organization, individual as well as society. For an
organization, HRM is that central sub-system which activates all type of functional
managements, viz., financial management, production management and marketing
management.

1.2 Functions of HRM

The overall functions of HRM can be categorized into two major heads i.e., Operative
Functions and Managerial Functions.

1.2.1 Operative Functions

Mainly the activities of an HR manager viz. employment, development, compensation

and relations are categorized as the operative functions of HRM. Nature wise all these
functions are operative and are to be performed in concurrence with the management
of the organization.

1.2.1.1 Employment

The very first operative function of Human Resource Management is comprised of

searching and employing the people having required kind and level of resource

5. Flippo, Edwin B., Personnel Management, p.131

6. D. Guest ,Management, Press Illinois, 1981, p.669
7. Robbins, Stephen P., The Management of Human Resources, p. 75

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 Introduction

necessary to attain the organizational objectives. It covers the functions such as job
analysis, HR Planning, Recruitment, Selection, Placement, Induction and Internal
Mobility. The achievement of organizational goals of any organization depends on
this first operative function of HRM to a greater extent.

1.2.1.1.1 Job Analysis

It refers to process of collection of information about the operations and

responsibilities associated with a particular job. It includes:

 Collection of information, ideas and facts related to various aspects of a

particular job including men, machines and materials.

 Preparation of employees for job description, job specification, job

requirements as well as employees’ specification, which helps in identifying
the nature, level and quantum of human resources.

 Providing the guidance, plans and basis required for job design and for all
other operative functions of HRM.

1.2.1.1.2 HR Planning

It refers to the process of assessment whether the organization will appoint or hire
adequate quantum of qualified and competent people, available at a particular time,
executing jobs for the fulfillment of the needs of the organization along with the
satisfaction to the individuals involved therein. It covers:

 Estimation of present as well as future requirements of human resources and

their supply on a stipulated time based on organizational objectives and plans
of the organization for long term.

 Assessment of requirements of net human resources taking the present

inventory of the same into consideration.

 Doing needful to develop and enhance the strength of existing human

resources within the organization so as to meet their future requirements.

 Development of effective plan to procure the rest of the required human

resources from outside and for the development of the existing human

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 Introduction

resources within the organization.

1.2.1.1.3 Recruitment

It refers to the process of searching for prospective employees and attracting them to
apply for jobs in the organization. It includes:

 Screening of existing sources of applicants and developing them.

 Creation of new sources of applicants for the organization.

 Attracting the candidates to apply for jobs.

 Balancing the internal and external sources.

1.2.1.1.4 Selection

It refers to the process of ascertaining the qualifications, skills, knowledge,

experience, etc., of an applicant with a view to assess his/her suitability to a specific
job. It deals with:

 Framing and developing application blanks.

 Development of valid and reliable testing techniques.

 Formulation of interview techniques

 Checking of recommendations / references.

 Determination of medical examination policies and procedures.

 Decision Line Manager.

 Sending letters of appointment or rejection.

 Employment of selected candidates who report within stimulated time.

1.2.1.1.5 Placement

It refers to the process of assigning the most suitable job to the selected candidate. It
includes8:

 Counseling the functional managers regarding placement.

8. Dr. G. Srinivas Rao, HR Practices in Public Sector Organisations, Himalaya Publishing House Pvt. Ltd.,
Mumbai, 2012, p.8

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 Introduction

 Conducting follow-up study, appraising employee performance in order to

determine employee adjustment with the job.

 Correcting misplacements, if any.

1.2.1.1.6 Induction and Orientation

These are the techniques which help in rehabilitation of a new employee who comes
in the changed surrounding. By these techniques organizational practices, policies,
purposes and people etc. are introduced to the employee. It covers:

 Introduce the employee with the company’s philosophy, company history

objectives, culture, policies, market share, product, career planning and
development, opportunities, ethics, social and community standing, etc.

 Introduction of the people to the employee with whom he/she has to work
such as peers, supervisors and subordinates.

 Mould the employee’s attitude and value by orienting him/her to the new
working and social surroundings.

1.2.2 Managerial Functions

The five main functions of management i.e., planning, organizing, directing, co-
ordination and controlling are also the major managerial functions of HRM.

1.2.2.1 Planning

The pre-determined course of action is termed as Planning. It is the fixation of

personnel programs and expected changes in advance for achieving the organizational
goals. It involves in one hand, the forecasting of requirements of human resources,
recruitment, selection, training, etc. and on another hand, forecasting of changing
behavior, values and attitudes of employees’ which draw a significant impact on
organizational goal.

1.2.2.2 Organizing

In common parlance, organizing means arrangement of required human resource at a

certain place in the form of employees so that they can collectively contribute for
achieving organizational goals. In the words of J.C. Massy, an organization is a

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 Introduction

“structure and a process by which co-operative groups of human beings allocated its
task among its members identities relationships and integrates its activities towards
common objective”.9

1.2.2.3 Directing

This is the next function after completion of planning and organizing in the execution
of the plan. The fundamental function of HR management at any level is motivating,
commanding, leading and activating people. Thus, direction is an important
managerial function in building sound industrial and human relations besides securing
employee contributions. By a good direction in the form of motivation and command
the maximum potentialities of the employees of the organization can be utilized.

1.2.2.4 Co-ordination

To ensure successful attainment of an objective, it is passive to establish a helping,

friendly and coordinating environment among the personnel of an organization. The
HR manager has to co-ordinate various managers at different levels of the
organization to maintain coordination among other functions of management like
management of material, machine and finance.

1.2.2.5 Controlling

Controlling involves checking, verifying and comparing of the actual with the plans,
identification of deviations if any, and correcting of identified deviations.10 After
planning, organizing, directing at various level, the performance is to be verified in
order to know whether the HR functions are performed in accordance with the plans
and directions or not. On identification of any deviation, action and operations are
adjusted to pre-determined plans and standards, this is termed as controlling. Some of
the major controlling functions are, audit of training programs, analysis of labour
turnover, directing morale surveys, conducting separations interviews etc.

9. Dr. G. Srinivas Rao, HR Practices in Public Sector Organisations, Himalaya Publishing House Pvt. Ltd.,
Mumbai, 2012, p.11
10. ibid p.8

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 Introduction

1.3 Scope of Human Resource Management

At initial stage, the scope of HRM was limited to employment and maintenance of
human resources and payment of wages and salary. With the passes of time, the scope
enlarged, for providing welfare facilities, motivation, performance appraisal, and
maintenance of human relation, strategic human resources and the like. The scope has
been continuously enlarging. The Scope of Human Resource Management Includes:

 Objectives of HRM

 Wages and Salary Administration/Compensation

 Organization of HRM

 Motivation

 Development

 Employment

 Strategic HRM

 Industrial Relations

 Participatory Management

 Recent Developments in HRM

1.4 Importance of Human Resource Management

Human resources are playing a crucial role in the development process of modern
economy. In this globalised era when every country has equal opportunity to access
modern technology and other resources, the human resources are the unique one
which makes difference among all the countries. Arthur Lewis observed, “There are
great differences in development between countries which seem to have roughly equal
resources, so it is necessary to inquire into the difference in human behavior.”

It is often observed that availability of physical and financial resources as well as

international aid plays a prominent role in the development and growth of modern
economies though the exploitation of natural resources. But it can be seen that none of
these factors are more significant rather than efficient and committed manpower.

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 Introduction

Thus, if someone says that all development comes from the human mind, it will not
be hyperbole.

1.4.1 Nation’s Well-Being and Human resources

A nation with abundance of physical and natural resources will be not benefited itself
unless the use of human resources. In fact, human resources with appropriate attitude
are the mere responsible factor for making use of nation’s physical resources for
transforming traditional economy into the modern industrial and knowledge economy.

1.4.2 Man versus Machine

Most of the big problems in an organization are human and social rather than
physical, technical or financial. No industry can be rendered efficiently and smoothly
so long unless the basic factor i.e., human, is recognized. It is not a mass of machines
and technical processes but a body of men. Obviously, machine can do nothing
without the function of human. Spending lots of money for machine with better
features is meaningless unless a qualified and efficient human resources.

1.4.3 Human Resources System as Central Sub-system

HR system in an organization is not mere a specific sub-system but also a principal

and central sub-system. It operates upon and controls all other sub-systems within the
organization.

According to Yonder and Heinemann, the importance of human resources

management is discussed from three standpoints11.

 Social Significance

 Professional Significance

 Individual Enterprise Significance

1.4.3.1 Social Significance

Proper management of HR enhances their dignity by satisfying their social needs.

This includes:

 Equilibrium between the job availability and the jobseekers according to the

11. Human Resource Management: Best Practices, Case Folio, p. 39-58, September 2005.

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 Introduction

qualifications and requirements.

 Providing suitable and most productive employment.

 Making maximum utilization of the resources.

 Paying the employee a reasonable compensation in proportion to the

contribution made by the employee.

1.4.3.2 Professional Significance

It promotes an effective team among the employees by providing a healthy working

environment within the organization. It deals with:

 Maintaining the dignity of the employee.

 Providing maximum opportunities to employees for personal development.

 Providing healthy relationship among different work groups.

1.4.3.3 Individual Enterprise Significance

HR management helps the organization in accomplishing its goals. For this it

executes:

 Creating right attitude among the employees through effective motivation.

 Utilizing effectively the available human resources.

 Securing willing co-operation of the employees for achieving goals.

1.5 Indian Public Sector Enterprises: An Overview

There is no definition of Public Sector Enterprises which has universal acceptance. In

simple words, “Public Sector Enterprise is an activity of a business character,
managed and owned by the Government up to 51 percent or more whether by Central,
State or Local government providing goods or services for a price.

According to Public Enterprises Survey12, "Public Sector in India includes all

activities funded out of government’s Budget. Hence, the size of public sector in
terms of its coverage is noticed to be indeed quite a large. The PSUs form a part of

12. Singh. A. B. & Singh, Anurag, Public Sector Reforms in India, A.P.H. Publishing Corporation, 2004, New
Delhi, p.28

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 Introduction

Public Sector as it whole and have been established as Government Companies or

Statutory Corporations. They are also called Non-Departmental Enterprises of Central
Government.

The relevance of Public Sector Enterprises depends to a large extent upon prevailing
political ideology in the country, social customs, phases of economic development
and requirements of citizen. In a developing economy, it needs of a deal of deliberate
government planning including rational allocation of resources over various valuable
projects considered desirable during a specific period from the viewpoints of set of
objectives on the nation.

The role of Public Sector Enterprises differs from country to country because of
different situations of the countries. But the cruel bells of poverty, inequality,
unemployment and inflation etc. appear to be the most common at least among all the
developing countries.

Thus, the PSEs can be considered as catalytic agents for economic development
through Industrialization. To overcome from the vicious circle of poverty and to
reduce unemployment and inequality, the process of industrialization can be initiated
effectively by the government. The direct involvement of the government becomes
inevitable because the private sector never come forward to make investment on
infrastructure which is by virtue of its qualification, a prerequisite for expansion of
both production activities as well as consumption activities.

1.5.1 Growth of Public Sector Enterprises in India

Prior to Independence, there were few Public Sector Enterprises in India. These were
the Railways, the Posts and Telegraphs, the Port Trusts, the Ordinance Factories, All
India Radio, few enterprises like the Government Salt Factories, Quinine Factories,
etc. All these were departmentally managed.

Free India adopted planned economic development policies with a democratic, federal
political system. The country was facing problems like inequalities in income and low
levels of employment, regional imbalances in economic development and lack of trained
manpower. India at that time was predominantly an agrarian economy with a weak
industrial base, low level of savings, inadequate investments and infrastructure facilities.

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 Introduction

In view of this type of socio-economic set up, our visionary leaders drew up a
roadmap for the development of Public Sector as an instrument for self-reliant
economic growth. This guiding factor led to the passage of Industrial Policy
Resolution of 1948 and followed by Industrial Policy Resolution of 1956. The 1948
Resolution envisaged development of core sectors through the public enterprises.
Industrial Policy Resolution of 1948 laid emphasis on the expansion of production
both agricultural and industrial; and in particular on the production of capital
equipment and goods satisfying the basic needs of the people, and of the exportable
commodities which would increase earnings of foreign exchange.

In early years of independence, capital was scarce that is why the base of
entrepreneurship was also not strong enough. Hence the 1956 Industrial Policy
Resolution gave primacy to the role of' the State which was directly responsible for
industrial development. Consequently the Five Year Plan was initiated taking into
account the needs of the country. The new strategies for the public sector were later
outlined in the policy statements in the years 1973, 1977, 1990 and 1991. Among all
the years, the year of 1991 can he termed as the watershed year, heralding
liberalisation of the Indian economy.

1.5.2 Government’s Policy towards PSEs

The main elements of the present NDA Government’s policy towards Public Sector
Enterprises as contained in the National Institute of Public Finance and Policy
(NIPFP) are given below:

 To lower the import bill of the country.

 Corporate Social Responsibility funds to be spent as per the new India dream.

 To devolve full managerial and commercial autonomy to successful, profit

making companies operating in a competitive environment.

 PSEs have to define a theme every year for focused spend of CSR funds.

 To Emphasis more on the need for ramping up import substitution.

 To increase their Geo-Strategic reach

 Generally, profit-making companies will not be privatized.

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 Introduction

 To integrate their innovation and research arms with each other.

 Every effort will be made to modernize and restructure sick public sector
companies and revive sick industry.

 Private industry will be inducted to turn-around companies that have sufficient

potential for revival.

 Privatization revenues will be used for designated social sector schemes.

 Public sector companies and nationalized banks will be encouraged to enter

the capital market to raise resources and offer new investment avenues to retail
investors.

1.5.3 Contribution of PSEs

The public sector's contribution in meeting India's industrial needs is considerable

now. The Heavy Engineering Corporation has facilities to set up millions ton capacity
steel plant a year. The Bharat Heavy Electricals Limited can supply all the power
generating equipment as per the country’s needs. It is admitted that one of the banes
of the public sector under utilization of capacity seems to be solved gradually. Vital
capital resources went waste as a result of' unused capacity, but now this situation is
seen to be better day by day. An attempt is also being made to introduce flexibility by
manufacturing different types of equipment based on substantially the same
fabricating facility with only slightly more investment.

1.5.4 Maharatnas & Navratnas

Fulfilling the fixed criteria, a number of PSEs have been granted Maharatnas and
Navratnas respectively13.

1.5.4.1 Maharatnas

 Bharat Heavy Electricals (BHEL)

 Coal India

 Gas Authority of India Limited (GAIL)

 Indian Oil Corporation (IOC)

13. Public Enterprises Survey Report, 2016-17

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 Introduction

 Oil and Natural Gas Company (ONGC)

 National Thermal Power Company (NTPC)

 Steel Authority of India Limited (SAIL)

1.5.4.2 Navratnas

 Bharat Electronics Limited

 Bharat Petroleum Corporation Limited

 Hindustan Aeronautics Limited

 Hindustan Petroleum Corporation Limited

 Mahanagar Telephone Nigam Limited

 National Aluminum Company Limited

 Neyveli Lignite Corporation Limited

 NMDC Limited

 Oil India Limited

 Power Finance Corporation Limited

 Power Grid Corporation of India Limited

 Rashtriya Ispat Nigam Limited

 Rural Electrification Corporation Limited

 Shipping Corporation of India Limited

 Engineers India Limited

 Container Corporation of India

 National Buildings Construction Corporation Limited

1.6 Bharat Heavy Electricals Limited: An Overview

Today, Bharat Heavy Electricals Limited (BHEL) is the largest engineering and
manufacturing enterprise of India in the energy-related infrastructure. It has been

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 Introduction

established in 1964, ushering in the indigenous Heavy Electrical Equipment Industry

in India with a dream that had been more than realised with a well-recognized track
record of performance. The company has been more earning profits continuously
since 1971-72 and paying dividends since then.

BHEL has grown in stature over the years with continued inflow of orders,
manufacturing prowess, continued thrust on technology leading to a strong presence
in domestic and international markets as a major supplier of power plant equipment
besides establishing substantial inroads in select segment of products in Industrial
sector and Railways. The company has realised the capability to deliver 22,000 MW
per annum and the capacity expansion programme is underway to reach 28,000 MW
per annum by 2022. Currently, 74% of the total power generated in the country is
through BHEL sets.14

BHEL caters to core sectors of the Indian Economy viz., Power Generation and
Transmission, Industry, Transportation, Renewable Energy and Defence etc. The
wide network of BHEL is 15 manufacturing divisions, 2 repair units,4 power sector
regions, 8 service centers, 15 regional offices, 1 subsidiary and a large number of
Project Sites spread all over India and abroad enables the Company to promptly serve
its customers and provide them with suitable products, systems and service
efficiently and at competitive prices15.

The company has entered into a number of strategic joint ventures in supercritical
coal fired power plants to leverage equipment sales besides living up to the
commitment for green energy initiatives. The Quality Systems as per ISO-9000 have
taken deep roots in BHEL. The company has made significant achievements in Total
Quality Management (TQM) by adopting the CII/EFQM model for Business
Excellence. With six CII-EXIM Commendations secured during 2009-10, BHEL
stands highest among public and private sector companies in the country. In
recognition to BHEL's excellent performance on sustainability development, the CII-
ITC Sustainability Award 2009 was conferred on BHEL's Hyderabad unit.

In recognition of BHEL's contribution to the greening of the Lakshadweep Islands,

14. Annual Report of BHEL, 2016-17

15 . ibid

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 Introduction

BHEL was awarded the 'India Power-Jury Award 2009' For the fourth consecutive year,
BHEL's performance was recognised by the prestigious publication `Forbes Asia',
which featured BHEL in its fourth annual 'Fabulous 50' list of the 'Best of Asia-Pacific's
Publicly-Traded Companies' with revenues or market capitalisation of at least USS 5
billion, having highest long-term profitability and sales & earnings growth.

BHEL is one of the only four Indian companies, ranked at 590, in The Global
Innovation 1000' of Booz & Co., a list of 1,000 Publicly-traded companies which are
the biggest spenders on R&D in the world. Significantly, BHEL won EEPCs Top
Export Award for the nineteenth year in succession. BHEL and its 6 units were
awarded 'ICWAI Awards for Excellence in Cost Management' for 2009 — the
maximum among both public and private sector companies. BHEL is the only Indian
PSU to be recognised as Star PSU Company of the year by leading business daily
Business Standard'. BHEL has acquired certifications to Quality Management
Systems (ISO 9001), Environmental Management Systems (ISO 14001) and
Occupational Health & Safety Management Systems (01-1SAS 18001) and is also
well on its journey towards Total Quality Management.

1.7 Objective of the Research

This is an exploratory research. This research aims to mainly elaborate the various
aspects of Human Resource Management in current scenario having focus on various
Human Resource Policies formulated for Public Sector Enterprises. Observing to
what extent these policies are being implemented in Bharat Heavy Electricals
Limited.

Apart from these, this study tries to appraise the various positive and negative impact
of globalization on Human Resource Management in PSEs in general and in BHEL in
particular.

1.8 Research Methodology

The present study is totally based on secondary data. The data has been collected
mainly through various Governments’ Reports like Public Enterprises Survey, Annual
Reports of BHEL, and Annual Reports of NIPFP etc. Some books, journals, etc. have
also been referenced for the completion of this research work. Very simple statistical

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 Introduction

tools such as simple average, percentage, ratio etc. have been used in the present
research work.

1.9 Significance of the Study

The topic of the present research suggests that this is the need of the time to have an
intensive study on HRM in PSEs. In this era of changing economic scenario and
increasing competition, the success of any organization depends on its effective and
efficient HR management. Now it is felt that all other factors of production can be
utilized to their maximum only in the presence of strong and effective HR system
within the organization.

1.10 Limitation of the Study

The study is totally based on secondary data therefore, the correctness and reliability
of the study depend on the correctness and reliability of the data used. The topic of the
study covers a very broad aspect of HRM and PSEs. Efforts have been made to cover
maximum aspects of HRM and PSEs But taking into consideration the time limit of
the research, length of thesis and practicality of the study, some of the aspects might
be uncovered in the study.

1.11 Chapter Plan

The overall study has been divided into six chapters which are as follows:

Chapter 1 Introduction

Chapter 2 Review of Literatures

Chapter 3 Human Resource Management in Public Sector Enterprises

Chapter 4 Human Resource Management in Bharat Heavy Electricals Limited

Chapter 5 Impact of Globalization on Human Resource Management in Bharat

Heavy Electricals Limited

Chapter 6 Conclusions and Suggestions



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