Month: June 2020

Employee Attrition

Attrition in business describes a gradual but deliberate reduction in staff numbers that occurs as employees retire or resign and are not replaced. The term is also sometimes used to describe the loss of customers or clients as they mature beyond a product or company’s target market without being replaced by a younger generation.

How Attrition Works?

This type of reduction in staff is called a hiring freeze. It is one way a company can decrease labor costs without the disruption of layoffs.

Reducing staff by attrition naturally is less devastating to company morale. However, it can still have a negative impact on the remaining employees if it leads to an increase in their workload. It also can limit promotional opportunities and movement within the company, resulting in an unhappier workplace or more attrition than was intended.

About Customer Attrition

Attrition can also refer to a shrinking customer base. This, of course, is not deliberate. The word is most pertinent when used to describe a product whose customer base is shrinking because its loyal customers are aging and younger consumers are not taking their place.

Customer attrition is usually found when a company has failed to adapt its product to changing trends. The Sears department store chain and the Oldsmobile car brand might be examples of products that failed to capture a younger generation of customers.

 Because attrition is voluntary, as opposed to layoffs, it is seen as a less disruptive way for a company to decrease labor costs.

Attrition versus Layoffs

Changes in management, company structure, or other aspects of a company’s operations can cause employees to leave voluntarily, resulting in a higher attrition rate.

Laying off employees results in attrition as long as the company doesn’t immediately hire as many new employees as it laid off. For example, a company might reduce its administrative staff by six in order to create a new internet team of six.

Turnover occurs in a company for many reasons. It can only be called attrition if the company decides not to fill the vacated position.

When a company is faced with a financial crisis, it must make tough calls and cut back its workforce in order to stay afloat. In these cases, the company might implement a layoff with no intention of filling those positions again.

In less drastic cases, such as changes in the company structure or business model or a merger, certain departments are trimmed or eliminated. This usually requires layoffs rather than attrition.

Unlike layoffs, a reduction in staff due to attrition is voluntary. The employee has decided to take a new job, retire, or move to another new city. An attrition policy takes advantage of this inevitable changeover to reduce overall staff.

Employee Retrenchment

Retrenchment is a form of dismissal due to no fault of the employee, it is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees.

The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making such a decision or the retrenchment may be considered unfair.

How retrenchment laws work in India?

The original legislation of 1947 does not have the definition of the word retrenchment; it was in 1953 that with an amendment Act this definition was inserted. It would also be interesting to know that till 1983 the courts of law used to consider termination of service due to nonrenewal of the agreement of employment as the act of retrenchment in pronouncements like of Hindustan Aluminium Corporation v. State of Orissa. later, the judgment was held to be a bad one and with the Amendment 49 of 1984 the provision of (bb) was inserted in the definition of retrenchment declaring such kind of termination not to be included within the ambit of retrenchment.

Retrenchment refers to discharge of surplus labour by the employer. It may be due to inevitable reasons including rationalization or installation of new labour-saving machinery. Retrenchment may also be said as the right of an employer. An employer has a right to organize his business in any lawful manner he considers best and courts cannot question its proprietary. If reorganization results in surplus employees, no employer is expected to carry their burden. There is a consensus of judicial opinion in deciding retrenchment on the facts and circumstances of each case. Courts have decided that termination of services is due to loss.

In the landmark case of State Bank of India v. Sundara Money, the Supreme Court adopted the literal meaning of retrenchment, which is exhaustive and comprehensive, and held that the expression “for any reason whatsoever” was very wide and admitted almost no exceptions to it. Therefore, the word retrenchment means termination of a worker’s services for any reason whatsoever other than those specified in section 2(oo) of the Industrial Dispute Act (IDA), 1947.

 Chapter V-A of the IDA requires an establishment employing 50 or more workers, in case of valid retrenchment to provide the workers with 30 days’ notice and 15 days’ pay for every year of continuous work by the workmen at the firm. In case of closure or sale, it must fulfil the same conditions unless the successor takes on these obligations. For an establishment employing 100 or more workers, the IDA, under Chapter V-B, requires prior permission from the Government before the firm’s closure or retrenchment.

The procedure of retrenchment has been given under Section 25G. It is when any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, than in the absence of any such agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. Section 25F of the IDA provides mandatory conditions for retrenchment of workers. It prescribes conditions to be obeyed for terminating services without conferring any right on the worker for permanent absorption. Any employee working in a firm for 240 days or more in the previous 12 months can in principle claim retrenchment compensation.

The employers in India have responded to the restrictive retrenchment laws in several ways including the greater use of contract, temporary and/or casual labour, the use of golden handshakes and setting up of production in the States where labour is not organized. The Government is pursuing privatization and disinvestment. Any anomaly in retrenchment laws, which addresses the basic functioning of companies, needs the immediate attention of lawmakers.

The legal requirements with respect to termination of services are more onerous once a company employs more than 100 employees. In terms of the IDA, if an industrial establishment employs more than 100 employees, it may not retrench, that is, terminate the services of any employee who has been in continuous service for not less than one year unless the (i) the employee has been given three months’ notice indicating the reason for retrenchment and the period of notice, and (ii) the prior permission of the concerned State Government has been obtained for the retrenchment (Section 25N of the IDA).

Moreover, if the permission is not obtained, the retrenchment will be deemed to be illegal from the date on which the notice was given and the employee will be entitled to all the benefits under law as if no notice had been given to him. From a practical standpoint, obtaining the State Government’s approval for retrenchment is considered nearly impossible due to the implications of the resulting unemployment. Therefore, companies rarely apply to the State Government for permission for retrenchment. Penalty for contravening the aforesaid provisions on retrenchment is imprisonment up to one month or fine which may extend to Rs 1,000, or with both. Assuming that the State Government’s approval is obtained, the services of the employees can be terminated upon provision of three months’ prior notice and payment of 15 days’ average pay for each completed year of service in excess of six months.

HRM stands for Human Resource Management, and human resource management strategies are the plans that lead to implementing different functions in the human resources department of an organization. Typically, these strategies are guided by the overall strategies of the business and serve to help the business attain its long-term goals via its staff. These strategies can be divided into four key areas:

1. Talent and Human Capital

Talent represents the human capital of an organization and is crucial to the success of that business. It is an important asset that the business should strive to maintain. How does the human resources management system help with these? By having a comprehensive staffing blueprint. The human resources department should forecast the staffing needs of the business in the future while also recruiting, hiring, and keeping the best talent in the organization. The most successful businesses in the world pride themselves in hiring the best talent in the world.

In order to do this effectively, the HRM department needs to identify the various competencies required for each job, such as the skills, abilities, and knowledge required to perform various tasks effectively. This will allow them to draw detailed job descriptions that will ultimately guide them to find the best people for the job.

2. Leadership of an Organization

The leadership of the organization is likened to what the head is to a body. It is through leadership that a business succeeds or fails in its endeavors. The HRM department plays a key role in the leadership of the organization because it is tasked with finding the best executives to steer the business in the right direction.

An HRM department that can boast past success in choosing the right executives will generally find it easier to convince the board of its recruits the next time an executive is required. In order to do this job effectively, HR managers need to be active in an advisory capacity when engaging with other organizational leaders so as to give their input on what is best for the company’s future.

3. Human Resources Planning

The HRM department plays an important role in helping the business to plan for the future. Take employees, for example: by conducting regular surveys of the employees to determine employee satisfaction, the HRM department can give important insights to business leaders on what needs to be done in the future to contribute to a happier workplace.

4. Performance Metrics and Corporate Culture

An organization with well-defined performance metrics is an organization with high potential for success. The HRM department plays a role in this, as well. Through developing well-defined performance metrics, regular performance evaluations, and schemes to reward employees for high performance and creativity in accomplishing their tasks, the HRM department will create a high-performance culture where the interests of the employees are aligned with those of the business, and they are genuinely motivated to do their best. Employees who feel appreciated by their companies and receive recognition for their achievements in the workplace are likely to want to do more.

As a result of the scarcity of qualified managers which can lead to constraints on global office expansion for businesses, an effective global human resources strategy can be vital in building and securing a sustainable advantage over their competition. Good HR management requires an integrated approach, which begins to merge into career management. A cohesive network will ensure that the right people are in the right jobs, and that all costs are attributed appropriately. This can ultimately allow the business to identify good ideas on a global scale. Ultimately, the building of this network comes down to an effective global human resources strategy, and here, we’re taking a look at the ten steps businesses can take to ensure this is in place.

1. Ending favouritism

One of the fundamental steps towards building a global human resources strategy should be to end favouritism towards managers that are nationals of the country in which they are based. Whilst many companies consider nationals of their headquarters country as potential expatriates and refer to everyone else as ‘local nationals’, this should be reconsidered for numerous reasons. Ethnocentric companies put the most confidence in nationals of their headquarters’ country, and thus this is the reason why these nationals receive the better assignments and climb the ladder much faster. Most surprisingly, big contrasts can be found between expatriate and local national pay, including the bonuses and benefits they receive. In order to create an effective global human resources strategy, businesses must weigh up the advantages and disadvantages of using expatriates and local nationals to determine the best solution according to the desired outcome.

2. Identify activities that achieve success

The next step towards an effective global human resources strategy is identifying activities that best achieve success across the globe and identify the positions that held responsibility for ensuring their success. The positions that hold the responsibility for performing these good acts represent the ‘lifeline’ of a company. Once the activities that achieve success have been identified, businesses can then revisit the lifeline and role descriptions on a regular basis to ensure they accurately represent the business strategy.

3. Finding who & where your talent is

Once a company has identified the activities that achieve success, they can find who and where their talent is via a global database, focusing on more than just the top of the organization and considering middle managers in the country markets and potential stars leaping through the ranks. Organizations seeking to build a useful global human resources database must start with an array of personal-profile templates that ask questions that go beyond each manager’s experience to determine cultural ties, language skills, hobbies and interests. For overseas assignments, especially, Human Resources Directors must consider these skills and adaptability to be as important as functional skills if not more so!

4. The mobility pyramid

Another way for businesses to build an effective global human resources strategy is by constructing a mobility pyramid to easily evaluate managers regarding their willingness to move to a new location to gain experience. Whilst many human resources departments refuse to look at mobility beyond ‘movable’ and ‘not movable’, it is paramount that there is more behind the decision to transfer an employee abroad should they need to relocate, and even more so because managers can move up or down the mobility pyramid at various stages during their career. By constructing a mobility pyramid, businesses can find different ways to effectively use available in-house talent and encourage an increased number of managers to consider saying yes to an overseas assignment.

5. Leadership capital

The next step businesses need to take to create an effective global human resources strategy is to identify their leadership capital. One of the best ways for businesses to identify their leadership capital is by building a database of their company’s mix of managerial skills by requiring people to provide more information on their CV’s regarding their experience in management and skills they possess. This way, HR departments can kick-start the process by holding senior meetings and those in lifeline posts to complete the form first, prior to adding others from across the globe with the potential to progress in their career.

6. Bench strength & skills gap

The following step businesses must take towards an effective global human resources strategy is to assess their bench strength and skills gap. To do this, businesses must ask each executive to compare their skills and characteristics against the requirements identified for the executive’s current position. Not only is this an effective way to compare skills with ease, but it can also help close personal skills gaps through in-house training or by participating in outside courses to heighten global success.

7. Regular recruitment

In order to construct an effective global human resources strategy, businesses must search for new recruits on a regular basis in the local market, as well as in the headquarters’ country. Whilst this can be challenging from time to time, one of the best ways to attract national recruits is by demonstrating how far they can climb up within the organization, as this is one of the most appealing aspects job seekers look for. Recruitment and selection not only helps to ensure that the business has the necessary knowledge and skills required to fulfill objectives, but it also forms part of the strategic management of human resources.

8. Advertising internally

As mentioned previously, regular recruitment is a great way to attract new talent, but when a business advertises their posts internally, it allows a competitive internal job market to work across nationalities and genders alike, and proves to employees that they can in fact broaden their horizon and make a future in the company. Moreover, advertising internally helps attract those that may be in the process of finding an alternative job, and thus reduces employee retention and creates a positive work environment.

9. Succession planning

In regard to regular recruitment in order to construct an effective global human resources strategy, managers in a lifeline role should nominate at least three candidates who could take over that position in the upcoming week, three months down the line or within the next year. Whilst this will not resolve all succession questions, it will certainly go a long way and significantly help everyone involved to identify potential future leaders with ease. Moreover, succession planning provides businesses with the bigger picture and is paramount to sustain income and support expenses should a disaster occur.

10. Challenging & retaining talent

Lastly, another step to an effective global human resources strategy is to challenge employees in order to retain talent. The need to retain talented employees is increasing every day, and for good reason. Retention of talent is crucial for the continued growth and success of any business, which is why is it paramount that colleagues are provided with consistent and regular communication about what needs to be done, and feedback to ensure the business moves with the market. One of the most effective ways to retain talent is by being open to employees about their potential and future within the future, paying well and not pondering over promoting people who have shown rock-solid ability.

Businesses often struggle to construct an effective global human resources strategy because they are unaware of what an effective global human resources strategy should include, but with these ten steps, businesses can create a beneficial global human resources strategy with ease and confidence.

An efficiently run human resources department can provide your organization with structure and the ability to meet business needs through managing your company’s most valuable resources its employees. There are several HR disciplines, but HR practitioners in each discipline may perform more than one of the more than six essential functions. In small businesses without a dedicated HR department, it’s possible to achieve the same level of efficiency and workforce management through outsourcing HR functions or joining a professional employer organization.

The six main function of HR are recruitment, workplace safety, employee relations, compensation planning, labor law compliance and training.

1. Recruiting the Right People for the Right Job

The success of recruiters and employment specialists generally is measured by the number of positions they fill and the time it takes to fill those positions. Recruiters who work in-house as opposed to companies that provide recruiting and staffing services play a key role in developing the employer’s workforce. They advertise job postings, source candidates, screen applicants, conduct preliminary interviews and coordinate hiring efforts with managers responsible for making the final selection of candidates.

2. Maintaining a Safe Environment

Workplace safety is an important factor. Under the Occupational Safety and Health Act of 1970, employers have an obligation to provide a safe working environment for employees. One of the main functions of HR is to support workplace safety training and maintain federally mandated logs for workplace injury and fatality reporting. In addition, HR safety and risk specialists often work closely with HR benefits specialists to manage the company’s workers compensation issues.

3. Employer-Employee Relations

In a unionized work environment, the employee and labor relations functions of HR may be combined and handled by one specialist or be entirely separate functions managed by two HR specialists with specific expertise in each area. Employee relations is the HR discipline concerned with strengthening the employer-employee relationship through measuring job satisfaction, employee engagement and resolving workplace conflict. Labor relations functions may include developing management response to union organizing campaigns, negotiating collective bargaining agreements and rendering interpretations of labor union contract issues.

4. Compensation and Benefits

Like employee and labor relations, the compensation and benefits functions of HR often can be handled by one HR specialist with dual expertise. On the compensation side, the HR functions include setting compensation structures and evaluating competitive pay practices. A comp and benefits specialist also may negotiate group health coverage rates with insurers and coordinate activities with the retirement savings fund administrator. Payroll can be a component of the compensation and benefits section of HR; however, in many cases, employers outsource such administrative functions as payroll.

5. Labor Law Compliance

Compliance with labor and employment laws is a critical HR function. Noncompliance can result in workplace complaints based on unfair employment practices, unsafe working conditions and general dissatisfaction with working conditions that can affect productivity and ultimately, profitability. HR staff must be aware of federal and state employment laws such as Title VII of the Civil Rights Act, the Fair Labor Standards Act, the National Labor Relations Act and many other rules and regulations.

6. Training and Development

Employers must provide employees with the tools necessary for their success which, in many cases, means giving new employees extensive orientation training to help them transition into a new organizational culture. Many HR departments also provide leadership training and professional development. Leadership training may be required of newly hired and promoted supervisors and managers on topics such as performance management and how to handle employee relations matters at the department level.

Professional development opportunities are for employees looking for promotional opportunities or employees who want to achieve personal goals such as finishing a college degree. Programs such as tuition assistance and tuition reimbursement programs often are within the purview of the HR training and development area.

Performance appraisal is a process that needs to be undertaken meticulously if obtaining desirable results is anything to go by. Many managers conduct this kind of evaluation on their employees from time to time majorly because it is an organizational tradition or requirement but not necessarily because of its impact on the future.

However, there are those who do it for a purpose but in some instances tend to face a myriad of challenges along the process. There are various problems with performance appraisal that managers often face. These problems include;

Some of the Problems with Performance Appraisal

1. Compare/contrast error

When appraising employees, it is important never to compare their abilities and using it to make a judgment.

Each employee is gifted in their unique way and thus has different strengths and weaknesses. When you try to compare or contrast their abilities, it means that you will not get a fair review because high performers will certainly make relatively low performers for particular tasks to look below average, which on some occasions is never the case.

Of essence is to ensure that you appraise every worker by their performance against established standards and criteria, individually.

2. Similarity error

In every organization, some employees have a resemblance of different aspects with the manager. Now some managers usually find it easy to reward such employees highly compared to those who portray contrasting behaviour or opinion.

As a manager, it would be significant to ensure that you perform your employee appraisal objectively and considering that diversity should be respected, try to carry out the appraisal process based on performance and results that they provide and not primarily by similarity/dissimilarity that you have.

3. Bias

Bias is also one of the problems with performance appraisal managers often encounter. As a matter of fact, everyone has some biases towards someone or something irrespective of how we portray them. However, as a manager, it is imperative not to let the biases hinder the manner in which you approach performance evaluation process.

Your biases can manipulate the objectivity of appraisal hence it is important to ensure that you keep it off as much as possible to make sure that you do not compromise the results of your findings. Biases may also lead to inconsistencies among different employees bearing in mind that the key element for attaining best results from appraisal is consistency.

If you do not like someone it will not be right to use that feeling in making review judgment, it is unprofessional.

4. Stereotyping

Stereotyping is closely related to biases only that in this case, you tend to make your judgment by your predetermined mindset towards a particular employee’s race, gender, political affiliation, religious background, culture and other characteristics.

Stereotyping is problematic when assessing employees’ performance because it implies that you will only be able to provide judgment based on what you label the group similar to one that the particular employee belongs to.

What you need to know is that stereotyping can also be positive or negative and thus can significantly influence your judgment respectively. It is only ideal to look beyond the labels and evaluate the employee by set standards and performance.

5. The Halo effect

This is also known as the horns effect. It is a situation where you let your positive or negative feelings towards an employee to influence your evaluation easily. It is necessary to judge each criterion independently without compromising what you feel for the employee.

You should also be careful when doing appraisal evaluations so that in the event you realize that most criterions are coming out with similar appraisals, you should halt and check yourself for the halo effect. It is a fact that each employee will always portray certain areas as their weakness and others as their strengths.  What you need to do is to ensure that you do not colour the entire evaluation with a particular impression

6. Recency effect

This is majorly about carrying out an appraisal for a short period before it takes place. As stated earlier, an appraisal is an activity that takes place continuously, which means that the focus should not only be for the short period before it happens but rather the entire time of the year.

In many organizations, problems with performance appraisal usually arise when a manager decides to determine results by basing their evaluation on what an employee has achieved just before the assessment. In this case, it sounds unfair to employees who have been outstanding throughout but later faulted few days to assessment and vice versa because the appraisal will not be able to reveal the actual reality.

7. Attribution error

This is one of the trickiest problems with performance appraisal. It involves making your independent belief on possible causes of some behaviours or outcome and letting that influence your judgment.

It is never a good idea to develop an assumption of what transpired or made the employee behave in the manner that he or she did and later use it as a basis for reviewing the appraisal process. It is only essential if you stick by the stipulated standards and criterion and how the performance of each employee compares to such standards. It only becomes a fair when the employee is judged on their performance in line with the set standards rather than preconceived notion.

8. Leniency and Severity tendencies

These mistakes usually arise as a result of distribution errors, which imply that the overall dissemination of appraisal does not stand firm to the classic bell. This means that some managers are too lenient and will end up appraising all employees above average, others will give average whereas others would provide below average.

In the typical occasion, the results need to reflect the classic bell curve where some employees are graded as high performers; others average while other poor performers. But in the unlikely event that all appraisal results come out as similar, you need to ensure that entire performance measures are given sufficient consideration. It helps in a great way of making sure that fair appraisal has been carried out.

Definition: Key result areas or KRAs refer to the general metrics or parameters which the organization has fixed for a specific role.

Key Result Area can be understood as the fundamental areas of the outcome, for which a department is accountable. It is the strategic factor, implicit or explicit to the firm, from where favourable outcomes can be attained, to reach the final goal and take a step ahead towards the organization’s vision.

In human resource management, KRA implies the metrics set by the organization for a specific role. Therefore, it highlights the scope of the job profile. It helps the employees in understanding the role and responsibilities, in a better way. So, it needed to be clearly determined and quantified, so that the employee can line up their role with that of the aim of the firm.

Description: Key result areas (KRAs) broadly define the job profile for the employee and enable them to have better clarity of their role. KRAs should be well-defined, quantifiable, and easy to measure. It also helps employees to align their role with that of the organization.

KRAs are broad categories or topics on which the employee has to concentrate during the year. For example, an employee who is working at a managerial level in a manufacturing company would have a different KRA than somebody who is in a technology firm.

A manager who is working in a manufacturing firm would have to focus on maintaining the budget of the department, safety of the employees, coordination with different departments, training, reporting as well as introducing new technologies to improve productivity.

The next step is to define objectives and standards for each KRA which should be easily quantifiable. The employee should have a clear understanding of his/her KRAs to perform his/her tasks efficiently.

Key result areas are those areas in which you have to take complete ownership. The first step is to list out daily activities which could be part of the KRAs. In some organization even a team meeting everyday is part of a manager’s KRA.

So, KRAs could be vary from organization to organization and from one work profile to another. There are no set rules to define KRAs, but broadly they sum up the job profile as well as the key impact areas on which the employee is expected to deliver.

Definition of KPI

Key Performance Indicator, as the name signifies, is the financial and non-financial metric used by the firms to gauge and fortify the success, towards the goals of the organization. After the ascertainment of the organization’s mission, identification of stakeholders and determination of goals, the progress towards the goal is evaluated through key performance indicator.

The key performance indicator is used at different levels by an enterprise to track the progress of the firm in the realization of targets. It plays the role of a compass that helps in understanding whether the company has chosen the right way to reach the final aim or not.

Different types of organization have different performance indicators, such as the KPI of a business entity can be income percent. Likewise, the pass out rates of the students is the key performance indicator of a school. Therefore, it can be anything like profit, cost, turnover, consumer satisfaction, customer base, customer attrition, employee turnover ratio, employee satisfaction and so forth.

Key Differences  between KPI and KRA

The points given below are substantial, so far as the difference between KPI and KRA is concerned:

1. Key Result Area can be described as the essential areas of business that requires excellent performance to obtain the favourable result, to survive and grow in the industry. On the other hand, Key Performance Indicator, or otherwise called as KPI is a performance metric, used by the organization to ascertain how effectively the firm is performing.
2. Key result area is a strategic business unit, wherein great efforts are needed to achieve success. As against, the key performance indicator is a metric that gauges the level to which business goals are achieved.
3. KPI is a quantifiable measure, meaning that it gauges the performance of a product, service or the business unit in the market, in quantitative terms. On the contrary, KRA is qualitative in nature, in the sense that it determines the areas that can help in attaining high value for the organization.
4. The key result area is used to find out the scope of a particular product or unit. In contrast, key performance indicator measures the success of the organization towards goals at various levels.

By and large, the business entities work continuously for the achievement its mission. However, it is difficult to ascertain that how far the business has worked towards the realization of goals. Key Performance Indicator acts as a tool to determine the achievement of an objective, while KRAs are those areas that require a high level of performance to gain a competitive position in the market.