BSACET UNIT-2 SHRM

Implementation of Strategic HRM: Staffing, Training & Development, Strategic Options of Human Resource
Development, Impacts of SHRM on Performance, Practicalities in Measuring SHRM Outcomes,
Compensation, and Employee Separation. Case Studies

Staffing

The managerial function of staffing involves manning the organization structure through proper and effective
selection, appraisal and development of the personnel’s to fill the roles assigned to the employers/workforce.

According to Theo Haimann, “Staffing pertains to recruitment, selection, development and compensation of
subordinates.”
CONCEPTS:

1. Staffing is an important managerial function - Staffing function is the most important managerial act along
with planning, organizing, directing and controlling. The operations of these four functions depend upon the
manpower which is available through staffing function.
2. Staffing is a pervasive activity- As staffing function is carried out by all mangers and in all types of concerns
where business activities are carried out.
3. Staffing is a continuous activity- This is because staffing function continues throughout the life of an
organization due to the transfers and promotions that take place.
4. The basis of staffing function is efficient management of personnel’s - Human resources can be efficiently
managed by a system or proper procedure, that is, recruitment, selection, placement, training and
development, providing remuneration, etc.
5. Staffing helps in placing right men at the right job - It can be done effectively through proper recruitment
procedures and then finally selecting the most suitable candidate as per the job requirements.
6. Staffing is performed by all managers depending upon the nature of business, size of the company,
qualifications and skills of managers, etc. In small companies, the top management generally performs this
function. In medium and small scale enterprise, it is performed especially by the personnel department of that
concern.
Nature of Staffing
Staffing is an integral part of human resource management. It facilitates procurement and placement of right
people on the right jobs. The nature of staffing function is discussed below:
(i) People Centred
Staffing is people centred and is relevant in all types of organizations. It is concerned with all categories of
personnel from top to bottom of the organization.
(ii) Responsibility of Every Manager
Staffing is a basic function of management. Every manager is continuously engaged in performing the staffing
function. He is actively associated with recruitment, selection, training and appraisal of his subordinates.
These activities are performed by the chief executive, departmental managers and foremen in relation to their
subordinates. Thus, staffing is a pervasive function of management and is performed by the managers at all
levels. It is the duty of every manager to perform the staffing activities such as selection, training,
performance appraisal and counseling of employees. In many enterprises. Personnel Department is created to
perform these activities. But it does not mean that the managers at different levels are relieved of the
responsibility concerned with staffing. The Personnel Department is established to provide assistance to the
managers in performing their staffing function. Thus, every manager has to share the responsibility of
staffing.

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(iii) Human Skills
Staffing function is concerned with training and development of human resources. Every manager should use
human relations skill in providing guidance and training to the subordinates. Human relations skills are also
required in performance appraisal, transfer and promotion of subordinates. If the staffing function is
performed properly, the human relations in the organization will be cordial.
(iv) Continuous Function
Staffing function is to be performed continuously. It is equally important in the established organizations and
the new organizations. In a new organization, there has to be recruitment, selection and training of personnel.
In a running organization, every manager is engaged in various staffing activities. He is to guide and train the
workers and also evaluate their performance on a continuous basis.
Importance of Staffing
It is most importance for the organization that right kinds of people are employed. They should be given
adequate training so that wastage is minimum. They must also be induced to show higher productivity and
quality by offering them incentives. In fact, effective performance of the staff function is necessary to realize
the following benefits:

1. Efficient Performance of Other Functions

Staffing is the key to the efficient performance of other functions of management. If an organization does not
have competent personnel, it can’t perform planning, organization and control functions properly.
2. Effective Use of Technology and Other Resources
It is the human factor that is instrumental in the effective utilization of latest technology, capital, material, etc.
the management can ensure right kinds of personnel by performing the staffing function.
3. Optimum Utilization of Human Resources
The wage bill of big concerns is quite high. They also spend money on recruitment, selection, training and
development of employees. In order to get the optimum output from the personnel, the staffing function
should be performed in an efficient manner.
4. Development of Human Capital
The management is required to determine the manpower requirements well in advance. It has also to train and
develop the existing personnel for career advancement. This will meet the requirements of the company in
future.
5. Motivation of Human Resources
The behaviour of individuals is shaped by many factors such as education level, needs, socio-cultural factors,
etc. that is why, the human aspect of organization has become very important. The workers can be motivated
through financial and non-financial incentives.
6. Building Higher Morale
Right type of climate should be created for the workers to contribute to the achievement of the organizational
objectives. By performing the staffing function effectively, management can show the significance it attaches
to the personnel working in the enterprise. This will increase the morale of the employees. At the enterprise
level, employee training and development are main areas of human resource development. The efficiency of
an organization depends directly on the capability and talent of its personnel, and how motivated they are.
Capability of a person depends on his ability to work and the type of training he receives. While his personal
capability is evaluated through proper selection procedure, his training is taken care of by the organisation
after he has been employed by the organisation. After employee have been selected for various positions in
an organisation, training them for those specific tasks to which they have been assigned assumes great
importance. It is true in many organisations that before an employee is fitted into a harmonious working
relationship with other employees, he is given adequate training. Training is the act of increasing the
knowledge and skills of an employee for performing a particular job. The major outcome of training is
learning. A trainee learn new habits, refined skills and useful knowledge during the training that helps
him improve performance. Training enables an employee to do his present job more efficiently and prepare
himself for a higher level job.

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Training, Education, Learning and Development

Training
Training is an act of increasing knowledge, skill and attitude of an employee for improving his
performance on the job. Training is concerned with imparting specific skill for doing particular job. For
example, a clerk on typing. It is task-oriented activity. It is for job related purpose and short-term.
Education
Education is concerned with increasing general knowledge and understanding of an employee’s total
environment. Education is directed more towards the future of an individual .It prepares him for future
challenges of life,shapes his career and grooms him for social responsibilities.
Learning
Learning is the process of accumulation of knowledge,skills and attitudes by whatever means. Learning is a
broad one which includes both training and education. Learning is observable modification of behaviour as a
result of some experience. Learning may be through experience, reading, observation, discussions, electronic
media including internet, experimentation, facing the new challenges, travel and exploration, etc.
Development
Development has a broader meaning. Its aim is to grow or improve the overall personality of an
individual. It is continuous process and is on the initiative from individual. Development is to meet
an individual’s future needs. Efforts tow ards development often depend on personal drive and
ambition. It helps individual’s in the progress towards maturity and actualisation of their
potential capacities. Development is whole process by which employee learns, grows, improves
his abilities to perform variety of roles within and outside the organisation. He acquires socially
desirable attitudes and values.

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Need for Training
 Employees selected for a job might lack the qualifications required to perform the job In some cases,
the past experience , attitudes and behaviour patterns of experienced personnel might not be
appropriate to the new organisation. Remedial training should be given to such people to match, the
needs of the organisation. New employees need to provided orientation training to make them
familiar with the job and the organisation.
 Rapid technological innovations impacting the workplace have made it necessary for people to constantly
update their knowledge and skills.
 Training is necessary to preparing employees for higher-level jobs (promotion).
 Existing employees require refresh training so as to keep abreast of the latest development in job operations.
In the phase of rapid technological changes , this is an absolute necessity.
 Training is necessary when a person moves from one job to another (transfer).
 Training is necessary to make employees mobile and versatile. They can be placed on various jobs depending
on organizational needs.
 Training is needed for employees to gain acceptance from peers.
 Training is needed to make employees more productive and useful in the long run.
Types of Training
Training is required for several purposes. Accordingly, training programmes may be of the following types:

1. Orientation Training_-In orientation training, new hires get a first hand view of what the company
stands for, how the work is carried out and how to get along with colleagues. In short, they learn the
specific ways of doing things in proper manner. When a new employee is from different country and
culture, this initial training is important in helping new employees adjust in the company.
2. Job Training:- It refers to the training provided with a view to increase the knowledge and skills of an
employee for improving performance on-the-Job. Employees may be taught the correct methods of
handling equipment and machines used in a job. Such training helps to reduce accidents, waste and
inefficiency in the performance of the job.

3. Safety Training Training provided to minimize accidents and damage to machinery is known as safety
training, it involves giving instructions in the use of safety devices and in safety consciousness.

4. Promotional Training
It Involves training of existing employees to enable them to perform higher level jobs .Employees with
potential are selected and they are given training before their promotion, so that they do not find it difficult to
shoulder the higher responsibilities of the new positions to which they are promoted.
5. Refresher Training
Rapid changes in technology may force companies to go in for this kind of training. When existing techniques
become obsolete due to the development of better techniques, employees have to be trained in the use of new
methods and techniques. By organizing short-term courses which incorporate the latest developments in a
particular field, the company may keep its employees up-to-date and ready to take on emerging challenges. It
is conducted at regular intervals by taking the help of outside consultants who specialize in a particular
descriptive.
6. Remedial Training
Such training is arranged to overcome the shortcomings in the behavior and performance of old employees.
Some of the experienced employees might have picked up appropriate methods and styles of working. Such
employees are identified and correct work methods and procedures are taught to them. Remedial training
should be conducted by psychological experts.

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Steps to Identify Training Needs
All training activities must be related to the specific needs of the organization and the individual employees.
A training programme should be launched only after the training needs are assessed clearly and specifically.
The effectiveness of a training programme can be judged only with the help of training needs identified in
advance. In order to identify training needs, the gap between the existing and required levels of knowledge,
skills performance and aptitudes should be specified. The problem areas that can be resolved through training
should also be identified.
Training need can be identified through the following types of analysis :
i.Analysis of objectives
This is the study of short term and long term objectives and the strategies followed at various levels to meet
these objectives.
ii.Resource utilization
How the various organizational resources (human,physical and financial) are put to use is the main focus of
this study. The contributions of various departments are also examined by establishing efficiency indices for
each unit. This is done to find out comparative labour costs, whether a unit is undermanned or over-manned.
iii.Environmental scanning
Here the economic, political, socio cultural and technological environment of the organization is examined.
iv.Organisational climate analysis
The climate of an organization speaks about the attitudes of members towards work, company policies,
supervisors, etc. Absenteeism, turnover ratios generally reflect the prevailing employee attitudes. These can
be used to find out whether training efforts have improved the overall climte within the company or not.
2. Task or role analysis
It is a systemic and detailed analysts of jobs to identify job contents, the knowledge skills and aptitudes
required and the work behaviour. On the part of the job holder, particular attention should be paid to the tasks
to be performed, the methods to be used, the way employees have learnt these methods and the performance
standards required of employees. Also called operations analysis, the purpose is to decide what should be
taught. Questionnaire, interviews human resource records, reports, tests, observation and other methods can
be used to collect information about jobs in the organisation.
3. Manpower Analysis
Here the focus is on the individual in a given job. There are three issues to be resolved :
i.It is necessary to decide whether performance of individual is sub-standard and training is required.
ii.Whether the employees is capable of being trained .
Iii.Whether poor performers on the job need to be replaced by those who can do the job.

Other options to training such as modifications in the job or processes should be looked into. Personal
observation, performance reviews, supervisory reports, diagnostic tests help in collecting the required
information and select particular training options that try to improve the performance of individual workers.

Difference between Training & Development

Basis of Difference Training Development
1) Nature Training is mainly concerned with the Development is concerned with enhancing
improvement of practical, technical and theoretical and conceptual knowledge of managers.
mechanical skills of the trainees.
2) Emphasis Training emphasises on the proficiency andDevelopment programme emphasises on the
behaviour of the employees that may be enrichment of knowledge of the learners regarding
required for a specific job. those functions which are of non-technical nature. It
also improves the understanding of the employees.
3) Relevance Training programmes are more relevant and The development process is more relevant for the
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beneficial for the non-managerial staff. higher authorities such as managers and supervisors.
4) Focus Training focuses on preparing the learners Development focuses on preparing the trainees for
for current job opportunities. upcoming job opportunities.
5) Goals The main goal of training agenda is to attain Development processes aim at achieving growth and
short period objectives. retaining it for a longer duration of time.
6) Orientation The training plans are occupational by The development process is personnel-oriented as it
nature and are mainly job-oriented. inspires the managers and executives to become
more inventive, enthusiastic and loyal towards the
organisation.
7) Process Training is conducted for a particular Development is a long-term process that continues
duration and thus, is a short-term process. for the entire lifetime of an individual in one way or
the other.
8) Growth In training methods, the growth mainly Development programmes focus on the overall
Opportunity occurs in the particular skills of the trainees. growth of the personnel.
9) Motivation Under training programmes, the motivation In development programmes, the growth of an
is given by the external factors such as employee completely depends upon the internal
organisation and the trainer. motivation of the learner.
10) Voluntary/ Training is not voluntary but obligatory for Development programme provided for management
Imposed the employees to fulfil the standards of the is voluntary in nature and cannot be forced on the
company. higher level employees.
11) Relationship The correlation between the learning process The employees have clear understanding about the
with Career and career advancement is uncertain to the association between the individual development and
Development employees. career advancement of the individual.

Strategic Options of Human Resource Development

Sometimes, it has been observed by many theorists and professionals that 'HRD should be used more
strategically in the entire organisation'. However, having a different strategic role of HRD in the most of the
organisations is not easy. It seems' quite strange that the relationship between the organisational competencies
and the competitive advantages highlights the importance of developing human capabilities. Nowadays, the
importance of knowledge economy and knowledge organisation is quite significant, however irrespective of
focusing on the manpower, the main focus of knowledge management remains on information technology.

This situation is mainly driven due to the ongoing relationship between HRD, training and the operational
dimension of these trainings. This also deals with the comprehensive topic of credibility of HR professionals.
Learning as Socialisation
The implementation of conventional methods in the human capital development is related to the learning as
socialisation. The formal learning initiative such as, training courses, coaching sessions, and education
programmes are in the centre of attention in which the main responsibility of HRD professional is seen as
'training expert' and the majority of training is facilitated using off-the-job method. The method is mainly
dependent on the providing the learning from the 'classroom' to the work stations. The extent to which the
changes are promoted by the learning environment of the organisation and the new capabilities will decide the
transferring of the learning.

The focus of these formal initiatives remains on improving the capability of the manpower in order to fulfil
the performance goals and parameter. On the other hand, these are also developed for ensuring the alignment
of the organisational values and the beliefs with the manpower.

From last many years, the corporate universities have been developed by some of the renowned brands of the
world in order to deal with those training and educational courses which are related to their strategic options.
On the other hand, several multimillion dollar campuses have also developed. Some of the main examples of
corporate universities are Intel University, Motorola University, Disney Institute, Harley-Davidson
University, and McDonald's Hamburger University. Sometimes, a decision to build a corporate university
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may change an organisation's training and development approach. Although, most of the times, this indicates
the rebranding of the current centralised training and development centre or similar type of training centre that
facilitates a wide variety of formal initiatives provided at the centre or with the help of internet or intranet.
Devolved Informal Learning
In recent years, the trends related to the development of responsibilities for learning to manpower (employee
and managers) results in devolved informal learning. The combination of formal initiatives supports the
ability to have a better understanding of elements of learning and development. These initiatives are
formulated and provided by HRD experts. For example, e-learning courses which motivate the self-managed
learning, training workshops related to the learning styles and reflective practice; coaching sessions that are
helpful for the line managers to inculcate facilitation skills.
Line manager has a very important role in this entire process. Greater the number of managers receiving
training on how to support and coach; more the probability that employee implement new capabilities in the
organisation. In fact, it is essential for the managers to have the better insight about the different factor that
initiates the informal learning and the manner in which these learning chances can be improved for the
manpower. This knowledge can be developed by an improved interaction between the line manager and the
employee with the help of enhanced communication and information exchange. Line manager are required to
boost the social interactions with the co-workers and to admiring the importance of the learning requirements.
For utilising the informal learning in a dedicated manner, some certain method like micro-training can be
implemented.
In micro training, a short session of about 15-20 minutes is used which can: be helpful in refreshing and
enhancing the knowledge of a person with the help of collaborative problem-solving within the organisation.
A suitable skilled employee within the work team can be used for this purpose rather than using an HRD
expert as a trainer. This strategic selection is also related to the importance of lifelong learning and career
advancement.
Empowered Informal Learning
The main focus of the empowered informal learning is on the development of the potential presented by the
social capital. This method will require a strategic alignment between the HRD and the business strategy with
the help of organisational learning environment which boosts social capital. This depends on the definition of
HRD given by Marquardt and Engel that particularly given importance to the learning environment. On the
other hand, Watkins and Cervero state that, there are some proofs related to the human resource
development areas which show that the concentration towards the individual's learning less important than the
focus on the organisation leaning framework.
Line managers along with the employees have the main responsibility for the HRD initiatives in this strategic
choice. The HRD expert is mainly involved in the strategies for developing the learning environment but not
having any direct participation in designing, execution, delivery and evaluating the different HRD
interventions and initiatives. The strategic choice depends on the fact that if the perspective is appropriate then
details will automatically be corrected. It is important for the managers to have a control-focused attitude and
have trust on their team member's capabilities.

In fact, it is not only the firm which is instable internally, but for developing a learning environment in which
the social capital plays a significant role requires high trust between the manpower and the managers. Most of
the organisations keep it as a goal rather than the reality. A long term change in the attitude of the
management is suitable for mentoring and therefore the organisational learning environment is greatly
affected by it.
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There are number of methods for the empowerment of informal learning. For example, greater
responsibilities and more demanding activities can be delegated with the help of line managers. It is also vital
to assist the manpower for the development of social networks. HRD professionals need to have an OD focus
for this strategic choice. It is completely opposite than the upcoming choice.
Engineering of Learning
The main focus of engineering of learning is on OD initiatives which are proposed to the social capital
development. A managerial control mode is represented by this strategic method in which managers take
learning as a source of manipulation of manpower and convincing them to change as per the organisational
objectives. At the same time, it is possible to have an intense control over the direct initiatives which are
focused on the development of human capital; this situation is completely different with the social capital
which is treated as most successful when it is permitted to appear within the organisation. Social capital is
related to the community development, whether it is physical or virtual, collected or individual. Alvesson and
Karreman noticed that the management finds it hard to manage or attain the community.
It is primarily a living, social quality having a certain background, long term involvements, low level of
hierarchy and sufficient place for the non-instrumental qualities related to a certain social background. The
corporate form is not a background which promotes the development of the community in fact; it opposes it
within the entire organisation.
Employee Separation

The termination of employees from membership of the organization is referred as employee separation. The
rate at which employees leave the organization is measured by the rate of employee separation. The Costs of
Employee Separation

The employee separation is always resulted in some costs. The intensity of the incurring costs varies on the
basis of the decision of the management that either the empty position of separated employee is replaced by a
new employee or the position may be eliminated permanently. Following are the costs that are linked with
the employee separation.

 Recruitment Costs
 Selection Costs
 Training Costs
 Separation Costs

Benefits of Employee Separation

On one hand there are costs attached with the employee separation, but on the other hand there are some
resulting benefits too. Following are some of the Employee Benefits that are associated with the employee
separation.

 The labor cost is reduced

 The employees who perform poorly, are replaced
 The innovation is increased in the organization
 The diversity is enhanced in the organization

Types of Employee Separation

There are two main types of employee separations on the basis of the initiation of the employment
relationship termination. These two types of employee separations are as follow.
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1. Voluntary Separation
When an employee terminates the employment relationship, then this form of employee separation is known
as voluntary separation. Voluntary separation is further divided into two categories.

 Quits
 Retirements

2. Involuntary Separation
When employer of an organization ends the employment relationship with any employee, then this employee
separation is called involuntary separation. There may be a number of reasons for involuntary separations
like the employee does not fit with the requirements of a particular job or due to economic necessity.
Involuntary separation is further divided into the following categories.

 Discharges
 Layoffs
 Rightsizing or downsizing.

Managing Separation
Following are the guidelines for managing separations:
Providing the Employee with All Concerned Documents: The employee must be provided in his/he
personnel file with all the documents related to dismissal alongwith performance appraisal reports
recommendations for improvement, warning letters, counselling memos and results of any enquiry foi
misconduct. In order to avoid any surprises by the termination decision, the employee must have gone
through these documents in earlier discussions pertaining to the problems.
Avoiding Legal Issues: The employers might face legal implications in case of a sudden termination of an
employee without notice. The employer can be accused of discrimination, revengeful or wrong dismissal by
the employee.
Adherence to Policies and Procedures: The emphasis should be laid on strict adherence to the policies and
procedures of the organisations related to discipline and conduct. In addition, the employer must have an
authentic ground if any irregularities are found.
Consistency in Treating Employees: Consistent behaviour toward the employees working on similar jobs,
history of performance and experience must be ensured rather than treating all the employees in the same
manner.
Complete Enquiry and Analysis: In the event of indiscipline or misconduct, the employer must undertake a
deep and convincing enquiry before dismissing the employee in a hurry or after being influenced
emotionally.
Respecting Employee's Dignity and Privacy: The dignity and privacy of the employee must be given due
respect. For this purpose, the termination should take place at a proper time in a superior's office rather than
the employee's workstation or any other unsuitable place.
Proper Preparation and Record of the Meeting: The employer must be ready in advance and be specific
about what has to be stated during the termination. He/she must not indulge into a discussion with the
employee regarding any justification for the termination decision. The entire conversation and discussion of
the meeting must be properly recorded.

Practicalities in Measuring SHRM Outcomes

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Introduction
There is a discussion among the academics about the activity that connects the HRM with the organisational
results, senior colleagues often invite the HR expert to facilitate the management information about the
contribution of HR activities. Ulrich and Brockbank noticed that, the HR experts who are looking to
improve their reliability need to improve their capability to facilitate this kind of data. But there is a more
complex demand from HR manager to provide this sort of information.

On the other hand, large firms may require data such as return on investment, balanced scorecard
assessments of the HR division and HR activities or benchmarking of HR policies and practices against other
businesses. In fact, there is a more complex requirement from the HR experts to provide information at
present. 'Big data' is given more emphasis that can be defined as any data which is quite large for a normal
database tool in order to seize, store, manage and evaluate'. In case of HR field, big data can be seen as
highly advanced analytics which is useful not only to monitor the current result but also to use quantitative
and qualitative information in cloud-based data systems having the ability to forecast.
For example, it has been possible in McDonald's to find out the way through which the demographics of
manpower, conduct of the management and attitudes of the employees interact with each other to have
improved performance of the restaurant.
HR Data and Analytics
Data and analytics capabilities are critical to shaping and intelligently managing the workforce of the future.
Forward-looking businesses are already exploiting data's unprecedented capability to dramatically improve
decision-making and predict behaviours and outcomes. Apart from collecting data on an employee, HR
analytics provide insights into each organisational process by evaluating the data at hand, allowing the
executives to improve the processes, make relevant decisions, and boost operational performance.

A survey conducted by Best Practice Institute showed that 82% HR executives use analytics to determine the
best training and development approaches for their top talents. About 80% turn to analytics to determine the
characteristics that demonstrate or predict team leader effectiveness. 73% said that the top retention analytic
goal is determining who HR professionals should strive to keep based on projected future contribution.

To emphasise on the importance of HR data and analytics, here are a few examples of world renowned
organisations that are using one or a combination of tools and methods. About one-third portion of Google's
HR department comprises of data scientists. They are specialised in dealing with a wide range of analytic
industries, from organisational psychology and operations to statistics and physics. These data experts are
responsible for conducting experiments to get in-depth insights, which are used for establishing innovative
programs to optimise Google's HR functions.

Another good example is of Black Hills Corp, a 130-year-old energy conglomerate that doubled its
workforce by utilising HR analytics. It faced a number of challenges, such as the need for specialised skills,
an aging workforce, and a lengthy training and development process for employee to achieve full
competence. To mitigate risks and develop strategic action plans, the company used workforce analytics to
calculate the number of possible retirees yearly, new hires, and the type of talent required for each vacating
position.
Boudreau and Ramstad's LAMP Framework

This framework was developed for the organisation to get innovative talent decision. LAMP stands for
Logic, Analytics, Measures and Process. These are stated below.
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Logic competitive advantage, talent points

Analytics Valid
Process effective
questions and results
knowledge
management

Measure quality data

Figure 2.4: LAMP Framework

 Logic (What are the Vital Connections): Logic provides the story behind the connections between the
measurement systems to enhance their decisions. As per study, it provides optimising the required elements
like assigning right employee at right time. This establishes the quantitative integration between workforce
and management practices. Wrong logical decision leads the management to fail.
 Measures (Getting the Numbers Right): Timeliness, completeness, reliability and consistency are the
different measures before taking any decision. Hence HR professionals gave more priority to this part.
Organisation may differ in giving the priority like long- term sustainable employees, performance based
employees or employees turnover. In this type of situation, measures support the management to take good
situation.
 Analytics (Finding Answers in the Data): Analysis of the data is important, since wrong analysis will
worsen the logic and thereby fails even the effective measures. It includes, statistical tools, plan for analysis,
solving issues and constructing logical framework for organisation. Obviously with the help of correct logic
and remedial measures, analytics will through proper insight to the organisation.
 Process (Making Insights Motivating and Actionable): This is the last part of this framework. Logic and
HR measures are the part of the management process." First stage for good measurement is to make the
managers to believe the HR analysis and logical decisions. For example turnover cost is not sufficient to take
perfect decision. There is a need for basic projection of investments, usage of technology and requirement of
human resources.
. Issues in HR Measurement
Whilst approaches to measuring HR's contribution have become ever more sophisticated, it is important to
bear in mind the constraints and complexities that this entails the following
 Seeking to quantify HR's contribution places the emphasis on areas that can easily be measured, rather than
what is necessarily most important.
 Service-level agreements can lead to an overemphasis on meeting the needs of other departments, and
downplay longer-term HR strategic objectives.
 Relevant data may not be easy to obtain. Boudreau and Ramstad (2007) cite the example of turnover
measures the greatest value knows why people are leaving and where they are going, which are rarely
measured.
 The link between HR interventions and organisational performance is complex and multi-layered; the
collection of HR metrics risks oversimplifying the process and creating a misleading impression.
 Simply measuring outcomes does not lead to change or improvement.
 The relevance of different measures varies between industries and organisations. What is relevant in one
context may be less so in another. Benchmarking may therefore not be as useful as managers believe.

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 To be useful, HR measures need to focus on people outputs rather than HR processes.

Compensation

Compensation of employees for their services is important responsibility of human resource management.
Every organization must offer good wages and fringe benefits to attract and retain talented employees with
the organization. If at any time, the wages offered by a firm are not competitive as compared to other firms,
the efficient workers may leave the firm. Therefore, workers must be remunerated adequately for their
services. Compensation to workers will vary depending upon the nature of job, skills required, risk involved,
nature of working conditions, paying capacity of the employer, bargaining power of the trade union, wages
and benefits offered by the other units in the region or industry etc., Considering that the current trend in
many sectors (particularly the knowledge intensive sectors like IT and Services) is to treat the employees as
“creators and drivers of value” rather than one more factor of production, companies around the world are
paying close attention to how much they pay, the kind of components that this pay includes and whether the
are offering competitive compensation to attract the best talent

Compensation consists of four distinct components: Compensation = Wage or Salary + Employee benefit
+Non-recurring financial rewards+ Non-pecuniary rewards.

“Employee compensation refers to all forms of pay going to employees and arising from their employment.”
The phrase ‘all forms of pay’ in the definition does not include non-financial benefits, but all the direct and
indirect financial compensations.
Characteristics of Best Compensation Plans
Characteristics of the best compensation plans are as follows:
 Availability: First and foremost requirement for high performance is the availability of the compensation.
Low compensation does not motivate employees to do work. Employees mostly wish for maximum hike but
their wish is never fulfilled in reality. False reporting, theft, etc. are the negative results of low hike.
 Timeliness: Compensation must be provided to the employees on time because untimely or long duration
taken for payment of compensation may produce detrimental results.
 Performance Related: Compensation should be based on the performance of the employee. It motivates
the employee and sends the right message to other members of the organisation.
 Durability: Some types of compensations are more valuable and have a long lasting effect than the others.
For example, non-monetary compensation such as autonomy, challenging tasks, accountability gives long
lasting effects as compared to monetary compensation.
 Visibility: Management must ensure that the system of compensation is visible in an organisation. To make
such a perception, it is important that the persons are given important assignments and delegated important
tasks such as to lead a committee. This will create a competitive and positive environment in an organisation
 Flexibility: Compensation should be given to employees at regular intervals. It should be designed in such a
way that it covers both qualitative and quantitative aspects of satisfying the employees.
 Cost Effective: While planning compensation, it should be kept in mind that compensation requires funds
of the organisation. Therefore, compensation should be distributed in a cost effective way.
Objectives of Compensation
Objectives of compensation are as follows:

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 Establish Equity: One of the most important reasons for making compensation plans is to establish equity.
It refers to increasing the wages of the employees who are paid low and eliminating inequalities in the
organisation. For this, concept of equal work for equal pay should be followed.
 Increase Worker's Efficiency: One of the most important reasons for compensation is to increase the
efficiency of the employees. It plays vital role in the motivation of the employees.
 Macroeconomic Stabilization: Compensation is aimed at achieving macroeconomic stability. This can be
attained by high employment rate and low inflation rate.
 Maintain Income-Expenditure Ratio: If there is a proper compensation plan, then the employees will get
the amount of wages they deserve. They will neither be under-paid nor over-paid. In that case, employees
will not switch the job and organisation will remain in a healthy financial condition.
 Avoid Conflicts: If the compensation system is well planned, the workers will be satisfied and the workers'
union will have nothing to be unhappy and this will create harmony and peace in the organisation.
 Legal Compliance: An effective compensation always complies with the laws. In this way, employer is
also saved from the legal problems.
Role of Compensation
Roles of compensation are as follows:
 Helps in Attracting High Skilled People: Compensation packages which are offered by the organisations
are one of the primary factors that an employee seeks in a job. So, high quality professionals will seek
higher packages. Components of compensation package can be different from person-to-person. High salary
will attract young and bachelor employees, whereas flexible working hours is a lucrative option for a family
person. So, organisations should match the profile of the candidate and his needs in order to give him the
most lucrative offer.
 Improves Efficiency of Organisation: Effectiveness of an organisation can be achieved by high skilled
persons. To increase efficiency of an organisation, high quality professionals are needed. High quality
workers are attracted by lucrative compensation packages, so compensation is an effective way of acquiring
good talent.
 Acts as a Link between Employer and Employee: Compensation is a link between employee and
employer as it affects both and brings them together. Thus, compensation management is good for the
organisation and employees as well.
Components of Compensation
Basic Wages/Salaries
Basic wages / salaries refer to the cash component of the wage structure based on which other elements of
compensation may be structured. It is normally a fixed amount which is subject to changes based on annual
increments or subject to periodical pay hikes. Wages represent hourly rates of pay, and salary refers to the
monthly rate of pay, irrespective of the number of hours put in by the employee. Wages and salaries are
subject to the annual
Increments. They differ from employee to employee, and depend upon the nature of job, seniority, and
merit.

Dearness Allowance
The payment of dearness allowance facilitates employees and workers to face the price increase or inflation
of prices of goods and services consumed by him. The onslaught of price increase has a major bearing on the
living conditions of the labour. The increasing prices reduce the compensation to nothing and the money’s

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worth is coming down based on the level of inflation. The payment of dearness allowance, which may be a
fixed percentage on the basic wage, enables the employees to face the increasing prices.
Incentives
Incentives are paid in addition to wages and salaries and are also called ‘payments by results’. Incentives
depend upon productivity, sales, profit, or cost reduction efforts. There are:
(a) Individual incentive schemes, and
(b) Group incentive programmes.
Individual incentives are applicable to specific employee performance. Where a given task demands group
efforts for completion, incentives are paid to the group as a whole. The amount is later divided among group
members on an equitable basis.
Bonus
The bonus can be paid in different ways. It can be fixed percentage on the basic wage paid annually or in
proportion to the profitability. The Government also prescribes a minimum statutory bonus for all employees
and workers. There is also a bonus plan which compensates the managers and employees based on the sales
revenue or profit margin achieved. Bonus plans can also be based on piece wages but depends upon the
productivity of labour.
Non-Monetary Benefits These benefits give psychological satisfaction to employees even when financial
benefit is not available. Such benefits are:
(a) Recognition of merit through certificate, etc.
(b) Offering challenging job responsibilities,
(c) Promoting growth prospects,
(d) Comfortable working conditions,
(e) Competent supervision, and
(f) Job sharing and flexi-time.

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