Month: April 2021

Management Notes

Performance appraisal and performance management system (PA vs PMS)

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Performance Management System

Performance management refers to the set of activities and tasks that make sure that the employees meet their goals on time. The goals need to be aligned with the objectives of the organization. Performance management ensures the efficiency and effectiveness of the performance of the employees when the goals are reached. Performance management has a holistic approach in the sense, it analyzes employee performance keeping in mind the development needs of the employee & organization.

It is the process of managing and developing employee performance throughout the organization. It aims at planning, tracking and assessing employee performance for a specific period. The end result of performance management is to motivate employees and further increase their efficiency and effectiveness.

Performance Appraisal

Performance appraisal, on the other hand, is nothing but the evaluation of an employee’s performance. Feedback forms are given to the employee. After the employee has given self-feedback, the manager gives a final review. Performance appraisal also deals with the evaluation of an employee’s competencies such as commitment to the organization’s core values, ability to take initiatives, responsibility for tasks, strengths, and weaknesses, skill set and training, etc.

The process of evaluating employee performance on a regular basis is called as performance appraisal. Although, unlike performance management, it is restricted to evaluating past performance and conducted once or twice a year, depending upon the organisation’s policies.

Thus essentially, performance appraisal is an integral part of a comprehensive performance management approach.

Performance Management

Performance Appraisal
Performance management is about actually helping an employee to develop and increase his performance and productivity. Performance appraisal evaluates the actual performance of the employee, but it does not focus on the employee’s performance productivity.
Performance management looks at an employee’s performance keeping in mind the present and the future.  Performance appraisal evaluates the employee’s performance based on how he has performed in the immediate past. 
Performance management proactively manages an employee’s performance and ensures that the employee has accomplished all the goals, vision, mission and the core values of the organization.  Performance appraisal only looks at the employee’s performance objectively for the year and give a final feedback to the employee. 
Performance management has a holistic approach that evaluates the relationship between the employee and the organization and examine ways in which employee engagement can be fostered.  Performance appraisal is individualistic in nature and pertains to the employee and his past performance. 
Performance management is strategic in the sense that it is constantly measuring an employee’s performance and formulating new strategies for the employee’s development. A performance appraisal system is operational because it follows certain protocol for performance, and it focuses only on the result of the employee’s performance. 
Performance management is very dynamic because it involves a lot of dialog between the employee and the senior managers. There is more room for discussion in performance management.  Performance appraisals are very linear in terms of the communication because it has a very top down approach towards employee performance. There is a discussion that takes place only after the performance appraisal process. 
Performance management is future oriented keeping in mind the strategies required for maintaining the employee performance for the next year. Performance management finds ways to improve employee performance.  Performance appraisal is very retrospective in the sense that it looks back on past events and situations. It looks at an employee’s performance over a period. Performance appraisal is very past oriented. 
Performance management is a continuous ongoing process by giving real time instant performance reviews. Luckily, with the advent of an employee performance management software, there is a performance management tool that has a continuous feedback mechanism for effective performance management.  Performance appraisal system facilitates performance appraisals only once or twice a year. There is a performance management tool for appraisals, feedback happens in a periodic manner during appraisals, but the feedback may not focus on development. Typically, the discussion during appraisals revolves around justifying the rating and feedback. 
Performance management has a qualitative and quantitative approach in the sense it has ratings and more continuous feedback. If an organization has an employee performance management software, then performance management is usually in the form of comprehensive feedback given to the employees and their performance.   Performance appraisal on the other hand, has a quantitative approach towards an employee’s performance. In an employee performance management software, performance appraisals use rating scales to evaluate employee performance. There is minimal scope for constant feedback. The ratings are the only final measurement that is used for performance appraisal.  
Performance management is flexible in terms of keeping in mind the growth of the organization. Compensation and salary revisionsare a part of PMS, but performance management comes up with developmental plans for more improvement Performance appraisal is usually rigid because it is only confined to an employee’s past performance. It has little to do with his growth.

Management Notes

Performance Management System (PMS) Meaning, Definitions, Objectives

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Performance Management System is the systematic approach to measure the performance of employees. It is a process through which the organization aligns their mission, goals and objectives with available resources (e.g. Manpower, material etc), systems and set the priorities.

The execution administration framework is a constant procedure of characterizing and conveying the activity parts and duties, execution desires, goals and set their needs between boss (administrator) and subordinates (workers). It incorporates association, office and representative shared objective and targets which are lined up with frameworks and assets. It is the channel of providing clarity about goals and also to improve the business processes through various methods and mechanism.

Performance management can be defined as the development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organization which supports and encourages their achievement.

Michael Armstrong have defined performance management is a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.

Performance assessment has a long history based on comparative judgements of human worth. In the early part of the 19th century, for example, Robert Owen used colored wooden cubes, hung above work stations, to indicate the performance of individual employees at his New Lanark cotton mills in Scotland. Various merit ratings were represented by different colored cubes which were changed to indicate improvement or decline in employee performance.

According to Michael Armstrong and Angela Baron: ‘Performance management is a process which contributes to the effective management of individual and teams in order to achieve high levels of organisational performance.’

According to Dr. T. V. Rao: ‘Performance management involves thinking through various facets of performance, identifying critical dimensions of performance, planning, reviewing and developing and enhancing performance and related competencies.’

According to Manuel Mendonca and R. N. Kanungo: ‘Performance management refers to the process of setting and communicating performance targets, defining evaluative criteria to be employed at different levels of performance, monitoring performance, reviewing performance, providing feedback and taking corrective measures to remove performance snags.’

According to Ronnie Malcom: ‘Performance management may be defined as a planned and systematic approach to managing the performance of individuals ensuring their personal development and contributing towards organisational goals.’

According to John Storey: ‘Performance management includes the whole cycle of agreeing goals and objectives (which may vary in their degree of specificity), providing feedback, offering coaching and advice and motivating staff to perform at a high level.’

Objectives

  • To identify systematically the need and requirements of some learning and training aspects;
  • To promote better and high work culture in the organisation;
  • To focus more on systems approach to perform appraisals rather than to make any formalities;
  • To foster a positive relationship between managers and employees through a two-way communication process;
  • To appreciate, recognise and to give reward and compensate employees for achievement of performance objectives successfully in a more objective, transparent and justified way.
  • To emphasise on career planning and future growth opportunities for employees;
  • It is ensuring to raise the efficiency and productivity of employees;
  • To encourage belongingness, team spirit and devotions among employees with the job;
  • To provide feedback about HR planning and potentialities to implement the planning facts.

Types

Performance Management in Self-Managed Teams:

Performance management in self-managed work team is managed by the team itself. This empowerment varies from organization to organization, or even from department to department, and also depends upon the readiness of the team members to assume those responsibilities.

A fully empowered mature self-managed team would decide their own jobs, set performance standards, give feedback to members about work progress, performance and team skills, appraise their own performance, and identify and support the training and development needs of the members. The organization, particularly the HR department, in this set up will provide guidelines and a framework for that performance management in terms of organizational policies and compliance regulations.

Traditional Performance Management:

Performance management in natural work groups usually operates according to the traditional performance management model in which the focus is on the work performance of an individual and his or her contributions to the mission of the organization, as observed and assessed by the evaluating manager.

While the evaluating manager may solicit the input and involvement of the employee in each step in the process, authority and ultimate responsibility remains with the HR manager or the HR head of the organization.

Performance Management in Cross Functional Teams:

A cross-functional team typically operates without formal supervision, though it may have a team leader. Members usually report to evaluating managers in their concerned departments.

These managers are often not present or be aware of what and when the team members are participating in the work of the team and may only know about the results of the team’s work and the team member’s performance through the reports of others, evidence of the team’s products, or via customer feedback. Hence performance evaluation in this case definitely is a complexes process.

Factors

Business Culture:

At the national level, culture affects performance management through sociopolitical traditions and attitudes which determine whether performance assessment is acceptable, and to what degree. Cultural norms dictate ‘acceptable’ standards of performance and the management methods by which they are assured.

Legislation:

In today’s globalized economy, the employment relationship between workers and employing organizations is seen as a contractual matter. This relationship is expressed in formal or legalistic statements of obligation between the two, such as written employment contracts, job descriptions and performance objectives.

Employers taking HR and administrative decisions on the basis of performance assessment have to be mindful of possible legal action on the following grounds:

  1. Validity or accuracy of assessment ratings as predictors of future performance and promotion potential.
  2. Validity or accuracy of ratings as measures of past behaviour.
  3. Statutory norms laid down by the Government and Government authorities.

General Economic Conditions:

Prevailing attitudes towards employees and, in turn, their response to performance assessment are considerably affected by issues such as unemployment and economic conditions of the nation. Growth and shrinkage in the job market which are influenced by changes in the economic scenario of a nation is conventionally believed to be followed by changes in the behaviour of workers and employers.

At times of high unemployment, workers are thought to be concerned about losing their jobs and hence more conscientious and tolerant of strict management. When suitable employees are scarce, managers must be cautious  unflattering assessments can trigger an employee’s move to another organization leading to high attrition.

Industry Sector:

Methods of performance management vary considerably between different industrial sectors, partly as a matter of the nature of the work involved, tradition and fashion. Sales and service dominated industries, such as retail business and financial services, tend to have clear individual or team objectives which can be translated readily into performance targets.

Performance-related pay (PRP) is common in this sector. In other sectors like manufacturing sector performance objectives are more diffuse and difficult to measure so that PRP is not easily justified.

Technological Change:

Technological change, particularly changes in information technology has a dramatic effect on the nature of supervision, and hence performance assessment. Work can be done at a distance by traveling executives, overseas affiliates or telecommuters working from home. This raises intriguing issues for performance management.

Further, technology has the capability to provide extensive information and statistics regarding an individual’s performance that is being recorded on a real time basis into the information system. This information not only provides a meaningful measure of job performance but also provides a clear cut picture on the areas of performance improvement and skill development.

Flexibility and Diversification:

In the new business environment, the traditional nature of the employment relationship has considerably changed, moving the balance of power firmly in favour of employers. Organizations in today’s highly competitive era have seen job descriptions have disappeared or, at least, have been diluted, so that employees can be asked to do virtually anything required by the organization.

Conversely, performance criteria have been more tightly defined, typically expressed in the form of demanding objectives; forever-moving goalposts. Performance assessment has become the crucial means of monitoring this relationship.

Employee Relations:

Performance management is a means of enhancing managerial control, particularly through individual performance-related pay schemes. Individualization of pay (performance based pay systems) diminishes or neutralizes the role of collective bargaining. The purpose and influence of trade unions is thereby getting day by day diluted, reducing both their effectiveness and attractiveness as an alternative focus for employee involvement.

Workforce Composition:

One important function of performance assessment is the identification of individual strengths and weaknesses of the employees. Strengths may indicate a potential star performer, worthy of a management career route and promotion. Assessment employed to determine development needs ultimately serves to increase a nation’s human capital. This helps the organization to identify and streamline the composition of their workforce with people who are the most competent in terms of their talents and abilities.

Management Notes

Projecting future performance of an employee

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Recruitment is a two-sided coin, one side of opportunity and the other of risk. Hiring a new member of your team or finding a trusted freelancer can be like flipping the coin. They may be a perfect fit or they may carry risks. Risks including damage, costs, and loss of time can be hard to recover from.

For a startup, the risks can be fatal, while larger companies face increased expectations to find the best talent. You are searching for a perfect fit, someone to inspire the team, to provide new ideas, to stimulate morale and productivity. But if you hire someone that does not connect with your company, you may need to jump some hurdles along the way. Companies that strategise their recruitment process to predict job performance experience better hiring results.

Cognitive Ability Tests

A cognitive ability test measures different aspect of cognition. This is because the job of a Python Developer requires a different cognitive ability to that of a Sales Manager. Dependant on your company, you will assess new employees using methods that best suit your ethos. The different aspects of cognition are as follows;

Numerical Reasoning: Ranging from mental mathematics to complicated critical reasoning

Verbal Reasoning: Evaluates the understanding of English language (grammar, vocabulary, comprehension)

Abstract Reasoning: Involves incomplete symbols or diagrams with missing items to assess the ability to draw conclusions based on specific information

Logical Reasoning: Aimed to assess critical thinking skills through the understanding of complicated texts.

General Aptitude Test: Most commonly covers verbal reasoning, numerical reasoning, and cognitive ability, this test aims to determine innate ability at a number of levels.

Raven’s Progressive Matrices (RPM) Also used in educational settings, this test aims to measure abstract reasoning through non-verbal means. The test involves multiple choice questions consisting of visual geometric designs with a missing piece.

Criteria Cognitive Aptitude Test (CCAT): Measures problem-solving, skill learning, and critical thinking abilities. This test consists of 50 questions and has a 15-minute time limit.

The Five-Factor Model of Personality

Researchers originally developed this model to understand and explain a person’s personality through five separate traits. Psychological research of this kind has since been used to benefit the criminal justice system, the education system, and more recently the recruitment system. The following model can help to show what traits of a person’s personality are relevant for job performance. Your recruiter will look for certain behaviours or traits that can benefit your team. The Five-Factor Model of Personality includes;

Emotional Stability

(self-esteem, self-efficacy, life satisfaction etc.)

Extraversion

(incentive reward sensitivity, positive emotion, happiness etc.)

Openness

(intelligence, creativity, broad-mindedness etc.)

Agreeableness

(cooperativeness empathy, sympathy etc.)

Conscientiousness

(dutifulness, orderliness, discipline etc.)

When recruiting you can test for each personality measure in different ways. One method involves specific behavioural questions during an interview, while an alternative method is to use a personality assessment. You ideally want to measure all aspects of the personality to create a candidate profile.

Past Behaviour

One of the most common types of interview questions are those related to how a candidate behaved in the past. This is because past performance is one of the most accurate factors to predict job performance. Past behaviour is also important within a variety of public and private sectors, ranging from education to the legal system. You can best predict job performance by focusing on records of past behaviour rather than relying on first impressions and gut feelings (e.g. volunteering for responsibilities, involved in challenging tasks, past rewards/promotions).

Management Notes

Identification of Five Dark Qualities in an Individual Before the Selection and Placement Process

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In the selection and placement process, identifying potential candidates’ dark qualities or negative traits is crucial for ensuring a positive and productive workplace. Dark qualities can adversely impact team dynamics, organizational culture, and overall performance.

  1. Narcissism

Narcissism refers to an excessive focus on oneself, often manifesting as a grandiose sense of self-importance, a need for admiration, and a lack of empathy for others. Individuals with narcissistic tendencies often display characteristics such as arrogance, entitlement, and a tendency to exploit others for personal gain.

Identification Techniques:

To identify narcissistic traits in candidates, organizations can employ various techniques:

  • Behavioral Interviews: Ask situational questions that reveal how candidates handle teamwork, feedback, and conflict. For example, inquire about a time they faced criticism and how they responded.
  • Psychometric Assessments: Utilize personality tests designed to measure narcissism levels, such as the Narcissistic Personality Inventory (NPI). These assessments provide insight into the candidate’s self-perception and interpersonal dynamics.
  • Reference Checks: Gather feedback from former colleagues or supervisors regarding the candidate’s interpersonal relationships, focusing on any signs of entitlement or manipulation.

Impact on Workplace:

Narcissistic individuals can disrupt team cohesion, foster a toxic work environment, and undermine collaboration. Their self-centeredness may lead to conflicts, poor morale, and high turnover rates.

  1. Machiavellianism

Machiavellianism is characterized by manipulative behavior, deceitfulness, and a focus on self-interest. Individuals displaying this quality often prioritize personal gain over ethical considerations and may use cunning tactics to achieve their goals.

Identification Techniques:

To identify Machiavellian traits, organizations can implement the following methods:

  • Situational Judgment Tests (SJTs): Present candidates with hypothetical scenarios involving ethical dilemmas or conflict resolution. Assess their responses to gauge their propensity for manipulation or unethical behavior.
  • Behavioral Assessments: Inquire about past experiences where candidates had to influence others or navigate complex interpersonal dynamics. Look for indications of deceit or a lack of ethical considerations.
  • Reference Evaluations: Seek insights from references regarding the candidate’s integrity, ability to collaborate, and approach to ethical dilemmas in previous roles.

Impact on Workplace:

Machiavellian individuals can create a culture of distrust, where manipulation and deceit thrive. Their behavior can lead to toxic competition, decreased employee morale, and unethical practices within the organization.

  1. Psychopathy

Psychopathy is characterized by a lack of empathy, remorse, and guilt, often accompanied by impulsivity and antisocial behavior. Individuals with psychopathic traits may exhibit charm and charisma while lacking genuine emotional connections with others.

Identification Techniques:

Identifying psychopathic traits requires careful assessment:

  • Clinical Assessments: Utilize standardized psychological tests, such as the Hare Psychopathy Checklist-Revised (PCL-R), to evaluate psychopathic tendencies.
  • Behavioral Interviews: Ask candidates about their responses to morally ambiguous situations and how they handle interpersonal relationships. Look for signs of emotional detachment or disregard for others’ feelings.
  • Group Exercises: Observe candidates in group settings to assess their interactions and emotional responses. Psychopathic individuals may exhibit manipulative behaviors or lack genuine concern for team dynamics.

Impact on Workplace:

Psychopathic individuals can severely disrupt workplace dynamics, creating an environment marked by fear and distrust. Their manipulative tendencies may lead to unethical behavior, high turnover, and increased conflict among employees.

  1. Authoritarianism

Authoritarianism is characterized by a strong desire for control, a rigid adherence to rules, and a tendency to dominate others. Authoritarian individuals often display traits such as intolerance for dissent, a lack of flexibility, and a need for submission from others.

Identification Techniques:

To identify authoritarian traits, organizations can use the following approaches:

  • Personality Assessments: Utilize tools like the California Psychological Inventory (CPI) to measure authoritarian tendencies and related characteristics, such as dominance and rigidity.
  • Behavioral Interviews: Ask candidates about their leadership style, decision-making processes, and responses to differing opinions. Look for indications of intolerance for dissent or inflexible attitudes.
  • Role-Playing Exercises: Conduct role-playing scenarios that simulate conflict resolution or team collaboration. Observe candidates’ responses to differing viewpoints and their willingness to compromise.

Impact on Workplace:

Authoritarian individuals can stifle creativity, inhibit open communication, and create a culture of fear. Their rigid approach may lead to low employee engagement, high turnover, and decreased innovation.

  1. Resentment and Cynicism

Resentment and cynicism refer to a pervasive negative outlook on life, characterized by distrust, bitterness, and a belief that others act primarily out of self-interest. Individuals displaying these traits often have a pessimistic view of organizations and their leadership.

Identification Techniques:

To identify resentment and cynicism, organizations can employ these methods:

  • Behavioral Interviews: Ask candidates about their perspectives on workplace culture, leadership, and team dynamics. Look for signs of bitterness, negative generalizations, or dismissive attitudes.
  • Group Discussions: Facilitate group discussions or team exercises where candidates express their views on workplace challenges. Observe their responses for indications of cynicism or negativity.
  • Reference Checks: Inquire with references about the candidate’s attitude towards their previous organizations, focusing on any signs of resentment or bitterness.

Impact on Workplace:

Cynical individuals can negatively influence team morale and foster a toxic work environment. Their bitterness may lead to disengagement, decreased collaboration, and a lack of trust in leadership.

Management Notes

Difference between HRM and IHRM

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Management is the efficient operation of a business or organization towards the achievement of its goals and objectives. It involves the management of its financial, capital, and human resources which comprises its financial value.

It has several branches such as: financial, marketing, strategic, production, operations, service, information technology, human resource management, and in the case of organizations that hire expatriates, international human resource management.

Human Resource Management (HRM) is defined as a management function that deals with the recruitment, management, and development of employees in order to maximize their potential and roles in the company or organization.

Not only is it utilized in personnel management but also in manpower, organizational, and industrial management.

International Human Resource Management (IHRM), on the other hand, is defined as a management function which deals with the management of personnel who are stationed in other countries or who are citizens of other countries that are hired to work in the organization.

Like HRM, its functions also include recruitment, planning, training, performance appraisal, and compensation. Unlike it, however, IHRM functions involve cross-cultural training such as orienting employees with different cultural, ethical, and religious values.

It also involves global skills management. While HRM is affected only by internal factors, IHRM is affected by both internal and external factors because it involves the management of employees that come from several countries.

Human Resource Management (HRM) is defined as a management function that deals with the recruitment, management, and development of employees in order to maximize their potential and roles in the company or organization.

Not only is it utilized in personnel management but also in manpower, organizational, and industrial management. It is previously referred to as personnel management. Its functions include:

  • Job analysis and planning, determining the specific personnel needs of a certain job.
  • Personnel and workforce planning, choosing whether to hire contractors or independent employees.
  • Recruitment and selection, hiring the best candidate for the job.
  • Induction and orientation, making sure that the employees are aware of the organization’s goals and policies.
  • Wage and salary regulation, making sure that employees are properly compensated.
  • Training, development, and performance appraisal in order to enhance employees’ potential and utilize his expertise in the achievement of the organization’s goals.
  • Benefits administration, to make sure that employees get what are due to them.
  • Resolving labor disputes, making sure of good relations between the management and employees.
  • HRM strategies always pursue the achievement of the organization’s goals and objectives. It cooperates with senior management in developing corporate strategies and in the proper management of its personnel.
Management Notes

Differences between personnel Management and Human Resources Development

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Personnel Management is a part of management that deals with the recruitment, hiring, staffing, development, and compensation of the workforce and their relation with the organization to achieve the organizational objectives. The primary functions of the personnel management are divided into two categories:

  • Operative Functions: The activities that are concerned with procurement, development, compensation, job evaluation, employee welfare, utilization, maintenance and collective bargaining.
  • Managerial Function: Planning, Organizing, Directing, Motivation, Control, and Coordination are the basic managerial activities performed by Personnel Management.

Human Resource Development

Human resource development (HRD) is defined as the cultivation of an organization’s employees. It entails providing workers with skills and relevant knowledge that may help them to grow in the workplace. That makes human resource development an integral part of human resource management.

HRD starts with a clear vision for employee development, and most times, it is achieved through organization-wide activities and training. Typically, the HRD team is in charge of developing these initiatives to position employees for career advancement and other related goals.

Roles like instructional coordinators, training specialists, and program developers may involve aspects of human resource development.

HR developers are important members of the HR team as they oversee a variety of areas within the human resources branch of an organization, including training, employee development, executive and leadership development, human performance technology, and organizational learning. On any given day, their responsibilities might involve creating training programs, designing systems to attract and retain talent, and planning organizational development activities, which may be in the form of workshops and more.

A background in human resource development may prepare you for specialized training, instructional design, program development, and general HR positions. For example, training and development specialists are in charge of designing manuals, online learning modules, and course materials for onboarding employee’s External link.

Personnel Management Human Resource Development
Meaning The aspect of management that is concerned with the work force and their relationship with the entity is known as Personnel Management. The branch of management that focuses on the most effective use of the manpower of an entity, to achieve the organizational goals is known as Human Resource Management.
Approach  Traditional Modern
Treatment of manpower Machines or Tools Asset
Type of function  Routine function Strategic function
Basis of Pay Job Evaluation Performance Evaluation
Management Role Transactional Transformational
Communication Indirect Direct 
Labor Management Collective Bargaining Contracts Individual Contracts 
Initiatives Piecemeal Integrated 
Management Actions Procedure Business needs
Decision Making Slow Fast
Job Design Division of Labor Groups/Teams
Focus Primarily on mundane activities like employee hiring, remunerating, training, and harmony. Treat manpower of the organization as valued assets, to be valued, used and preserved.
Management Notes

Human Resources Management Challenges

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Challenge 1. Demographic and Employee Concerns:

HR managers need to be concerned about the changes taking place among the workforce and their expectations in addition to the competitive changes. Demographic changes and cultural changes cause considerable impact on HRM.

Challenge 2. Managing Diversity:

Managing diversity means being adequately aware of characteristics common to employees and at the same time managing these employees as individuals. The most important aspect of diversity management is valuing diversity in the work place followed by developing appropriate culture, arranging needed opportunity and providing effective leadership.

Developing Appropriate Culture:

  1. Fostering mutual respect and a sense of belonging,
  2. Accepting differences,
  3. Providing diversity-training programs,
  4. Maintaining equity in performance expectations, pay and rewards, and
  5. Promoting multicultural employees.

Arranging Needed Opportunity:

  1. To develop new skills,
  2. To help climb the ladder to reach top positions,
  3. To encourage differently-abled and minority people, and
  4. To motivate affirmative action.

Challenge 3. Containing Costs:

Managers are increasingly under pressure to lower cost and improve productivity to maximize efficiency. Similar to other functional departments, HR department also is required to show financial results. HR department is in a dilemma to contain costs related to people.

  1. Labour costs are one of the larger expenditure of any organization, particularly, in service-and knowledge-intensive firms.
  2. Healthcare costs pose a much bigger burden to the firms.

To contain operational costs, firms are resorting to many activities such as downsizing, outsourcing, offshoring and employee leasing, which all have a big impact on HR policies and practices.

  1. Downsizing or Rightsizing:

It is the planned elimination of jobs. It is also called ‘smart cost reductions’. Instead of terminating employees some firms resort to early retirement, voluntary separation programs and sabbaticals for continuing education.

Downsizing is not a short-term answer. Now, it is being increasingly used to adjust to changes in technology, globalization and the firm’s business direction. However, while some firms improve efficiency and lower costs, many others fail to reap any benefits by downsizing.

Downsizing, instead of reducing costs, may backfire through the following hidden costs:

  1. Severance and rehiring costs.
  2. Accumulated vacation and sick-day payments.
  3. Lumpsum pension benefits.
  4. Loss of trust in the management resulting in reduced business.
  5. Unavailability of skilled workers when the firm comes back to form.
  6. Potential lawsuits from terminated workers.
  7. Reduced productivity as the remaining workers are likely to be demotivated.

It is hard to get dedicated and productive workers when the company is known for terminating employees whenever there is a problem. Downsizing signals that employees are expendable. There are companies which consider employees as assets/intellectual capital, make special efforts to reassign and retrain employees to new positions when their jobs are eliminated.

  1. Outsourcing:

It means hiring someone outside the company to perform tasks that could be done internally.

Nowadays, it is common to find hiring of:

  1. Accounting firms to take care of financial services of firms,
  2. Advertising agencies to handle product/service promotions,
  3. Software companies to develop data processing systems, and
  4. Law-firms to handle legal issues.

In many companies, maintenance, security, catering and payroll are being outsourced to increase the organization’s flexibility and lower its overhead costs. Outsourcing is gaining momentum as the executives feel that they could concentrate on their core activities rather than wasting their time and energy on peripheral activities. Increasingly outsourcing is changing the way HR departments operate. But whether outsourcing has resulted in reduced cost or not is a moot question to answer.

  1. Offshoring:

It is almost similar to outsourcing, the main difference being that the jobs are done by people of other countries. It is also called ‘global sourcing’. Cost reduction is the overwhelming motivator of off shoring. Companies in developed countries are able to save a substantial amount in offshoring jobs to developing countries where the highly educated workers can perform the same as workers of developed countries.

But there are problems to face such as finding the right foreign vendors, productivity loss during transition, domestic lay off costs, language inadequacy, offshore countries’ regulations and political/economic instability.

HR managers will be able to help the management in offshoring by addressing issues such as skill and language requirements, labour costs, alternative talent pools, workforce training, retraining and change management.

  1. Employee Leasing:

It is the process of terminating employees who are then hired by a leasing company and contracting with the leasing company to lease back the employees. Generally, smaller companies opt for employee leasing. The leasing company takes over management of smaller company’s HR functions and becomes a co-employer to its employees.

Challenge 4. Responding to Market Forces:

In the present scenario of business competition is inevitable. Managers are required to take care of the customers’ needs of quality, innovation, variety and responsiveness. Total quality management (including six sigma) and process reengineering are two important approaches to respond to customers.

  1. TQM, Six Sigma and HRM:

Total Quality Management (TQM) is a set of principles and practices which include understanding of customer needs and striving for continuous improvement from the start. Many TQM programmes, initially thought to be a cure-all for every problem, failed to respond to customer needs and to improve quality.

This was attributed to little changes in organizational philosophies and HR programmes. Later, many companies start adopting a more systematic approach to quality known as Six Sigma.

Six Sigma is a statistical process used to translate customer needs into a set of optimal tasks that are performed in concert with one another. Six Sigma includes many major changes in management philosophy and HR programs. Six Sigma process is able to find out the mistakes before they happen. In a true Six Sigma environment variations from standard is only 3.4 defects per million.

HR and Six Sigma:

  1. The importance of HR to Six Sigma begins with the formation of teams and extends to training, performance management, communication, culture and rewards.
  2. Through Six Sigma training individuals progress from ‘green belt’ to eventually ‘black belt’ status.
  3. In some companies HR positions are reserved for black-belt certified professionals.
  4. In six sigma process, the stress is on motivation, change in corporate culture and employee education.
  5. HR programs are essential to help balance to opposing process viz. the need for order and control and the need for growth and creativity.

Challenge 5. Managing Human Capital:

Human capital is the knowledge, skill and capabilities of individuals that have economic value to the organization. As human capital is intangible and elusive, it cannot be managed the way jobs, products or technologies are managed. This is because human capital is owned by the employees themselves and not by organizations.

Managing human capital is highly crucial because if valued employees leave an organization, they take their human capital with them and any investment made in training and development is lost. Hence, success increasingly depends on an organization’s ability to retain and manage human capital.

Role of HRM in Retaining and Managing Human Capital:

Managers must continue to develop superior knowledge, skills and experience within their workforce to build human capital.

  1. Staffing programs should focus on identifying, recruiting and hiring the best and brightest talent available.
  2. There must be effective training skill enhancement and opportunities for development on the job.
  3. Managers must provide development assignments and ensure their job duties and requirements are flexible enough to allow for growth and learning as highly valued intelligence tends to be associated with competences and capabilities learned from experience.
  4. Talent should not be left unused. There must be efforts to empower employees and encourage their participation to fully utilize the available human capital.
  5. In many companies, managers are evaluated on their progress towards meeting development goals that focus on skill development and gaining new competencies and capabilities. In many cases pay is attached to additional knowledge or skill acquired.
  6. HR programmes and assignments are the means through which knowledge is transferred among employees.
  7. Identifying the ways of utilizing the knowledge to benefit the firm.

Challenge 6. Change Management:

The major forces driving changes in organizations as well as HRM are globalization and technology. In the present business scenario business success mostly depends on how changes are managed. Companies are successful as they develop a culture that keeps moving all the time. In highly competitive business environment, change management is the core competency of organizations.

Changes could be reactive, proactive or both. Reactive change is one where change occurs after external forces have already affected performance. In the case of proactive change, change is initiated to take advantage of environmental opportunities. The main thrust of change management program is to involve employees in establishing continuous innovation and excellent customer service.

Challenge 7. Ever Changing Technology:

The effect of advancements in information is so dramatic that organizations are changing the way they do business. Use of internet to do business is so pervasive in both large and small organizations that e-commerce is rapidly becoming a challenge.

As computer-mediated work style is resulting in ‘virtual’ office in which people can work from home or any outstation spots, the implication for HRM are mind-boggling.

Impact of Technology on HRM:

  1. Advanced technology tends to reduce the number of jobs which require less skill and to increase jobs requiring high skills.
  2. The shift from ‘touch labour’ to ‘knowledge workers’ has resulted in retraining of employees on higher responsibilities.
  3. Knowledge based training has become very important.
  4. HRIS has become a potent weapon to lower administrative costs increase productivity, speed up response times and improve decision making and customer service.
  5. Information technology has resulted in automating routine activities, alleviating administrative burdens, reducing cost and improving productivity in the HR department.
  6. As HR managers are able to access the employee records themselves, delay and wastage of stationery are reduced.
  7. Apart from the routine activities software’s are being used to recruit, screen and pretest applications online.
  8. Setting up of goals and measuring of performance are also done through online.

Challenge 8. Globalization:

Many companies are seeking business opportunities in global markets to grow and prosper as domestic markets are shrinking. Globalization is the trend towards opening up foreign markets to international business and investment. The impact of globalization on business and HRM is enormous.

Impact of Globalization on Business:

  1. Competition as well cooperation with foreign companies has become an important focal point in the present business context.
  2. For large companies the vision is to offer customers anything, anytime, anywhere.
  3. Well known products are losing their national identities.
  4. There are many free-trade agreements between nations.
  5. Even though there is improvement in the standard of living of people consequent to globalization, there is still the fear of loss of jobs in certain sections of people.
  6. People in developing countries fear that developed countries are exploiting their natural resources resulting in a ‘have/have not’ world economy.
  7. Corporates are discovering that being socially responsible helps the people at the bottom line. Corporate social responsibility is to operate in the best interests of the people and communities affected by its activities.
Management Notes

Human Resources Management Process

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Human Resource Management (HRM) process involves a series of interrelated steps designed to maximize the effectiveness of an organization’s human capital. It encompasses the planning, recruitment, development, and retention of employees, all while ensuring that the organizational objectives align with the needs of the workforce. HRM process is dynamic, evolving with changing organizational goals and external environments, ensuring that the workforce remains motivated, competent, and productive.

1. Human Resource Planning (HRP)

The HRM process begins with Human Resource Planning (HRP), which involves forecasting the future human resource needs of the organization. HRP ensures that the right number of employees with the required skills are available to meet organizational goals. The process includes analyzing current manpower, predicting future workforce requirements, and identifying skill gaps. It involves two key activities: workforce forecasting and job analysis. Workforce forecasting predicts the demand and supply of human resources, while job analysis defines the specific roles, responsibilities, and qualifications required for each position.

2. Recruitment and Selection

Once HRP identifies staffing needs, the next step is recruitment and selection. Recruitment is the process of attracting a pool of qualified candidates, while selection involves choosing the best-fit candidates for the organization. HR professionals design job advertisements, screen applicants, conduct interviews, and assess candidates through various methods, including skill tests and background checks. The recruitment and selection process aims to bring in employees who not only possess the necessary skills but also align with the organization’s culture and values.

3. Training and Development

After hiring, the HRM process focuses on training and development. This phase is crucial for enhancing employees’ skills and ensuring they are equipped to perform their roles effectively. Training programs address current job requirements, while development initiatives focus on future career growth and leadership training. HR departments design induction programs for new employees and continuous learning opportunities for existing staff. Development programs help prepare employees for higher responsibilities, ensuring organizational sustainability and growth.

4. Performance Management

Effective performance management is essential for organizational success. This process involves setting performance standards, monitoring employee performance, providing feedback, and taking corrective actions when necessary. HR managers conduct performance appraisals, which are used to evaluate an employee’s contribution to organizational goals. The process includes providing constructive feedback, setting performance goals, and discussing development needs. A good performance management system motivates employees, improves productivity, and aligns individual performance with organizational objectives.

5. Compensation and Benefits

One of the critical components of the HRM process is the development of an appropriate compensation and benefits strategy. This includes designing salary structures, offering performance-based incentives, and providing benefits such as health insurance, retirement plans, and bonuses. The compensation system must be competitive to attract and retain talent while ensuring internal equity. It should motivate employees to perform at their best and remain committed to the organization.

6. Employee Relations and Engagement

Employee relations involves maintaining positive relationships between management and employees. HR professionals work to resolve conflicts, handle grievances, and ensure fair treatment of employees. Engaging employees through communication, recognition, and involvement in decision-making is critical to fostering a positive work environment. High employee engagement leads to increased job satisfaction, loyalty, and improved performance.

7. Health, Safety, and Welfare

The HRM process also emphasizes health, safety, and welfare programs. HR professionals are responsible for ensuring that the workplace adheres to safety regulations, minimizing risks, and promoting employee well-being. Initiatives such as wellness programs, safety training, and ensuring safe working conditions help reduce workplace accidents and absenteeism, improving overall productivity.

8. Separation

The final phase of the HRM process involves separation—the formal process when an employee leaves the organization. This can happen through resignation, retirement, or termination. HR managers ensure that the separation process is smooth, conducting exit interviews to gather feedback on organizational improvement and ensuring compliance with legal requirements.

Management Notes

Recent Trends in Human Resources Management

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Recent trends in Human Resources Management (HRM) reflect the evolving work environment driven by technology, employee expectations, and global competition. Key trends include remote and hybrid work models, where HR focuses on managing virtual teams and maintaining engagement. Employee experience (EX) has become crucial, along with diversity, equity, and inclusion (DEI) initiatives to create inclusive workplaces. The use of HR analytics for data-driven decisions, continuous learning and upskilling, and AI-driven automation are transforming HR processes. Additionally, wellness programs, agile HR practices, employer branding, and managing the gig workforce are gaining prominence.

Recent Trends in Human Resources Management:

  • Remote and Hybrid Work Models

The rise of technology has enabled remote work, making flexible work arrangements a key trend. HR departments now focus on managing virtual teams, ensuring productivity, and maintaining employee engagement in hybrid settings. Tools for virtual collaboration and regular check-ins are vital in this approach.

  • Employee Experience (EX)

Beyond traditional engagement, HR is prioritizing the holistic employee experience, including work culture, career growth, and wellbeing. Personalized development plans and wellness initiatives play a significant role in enhancing EX.

  • Use of HR Analytics

Data-driven decision-making is transforming HR functions. HR analytics helps organizations predict employee behavior, measure engagement, and enhance talent acquisition strategies. It provides insights into workforce trends, aiding proactive management.

  • Diversity, Equity, and Inclusion (DEI)

Creating diverse and inclusive workplaces is a priority. HR focuses on implementing DEI initiatives through unbiased recruitment, equitable growth opportunities, and fostering an inclusive culture to improve innovation and team dynamics.

  • Continuous Learning and Upskilling

With rapid technological changes, continuous learning is essential. HR emphasizes reskilling and upskilling employees through digital learning platforms, workshops, and mentorship programs to ensure workforce adaptability.

  • Employee Wellness Programs

Organizations are investing in comprehensive wellness programs addressing physical, mental, and emotional wellbeing. Initiatives such as counseling services, fitness challenges, and stress management workshops enhance employee health and productivity.

  • AI and Automation in HR

AI and automation are streamlining HR tasks like recruitment, onboarding, and performance reviews. Automated chatbots, AI-driven candidate screening, and digital onboarding improve efficiency and reduce manual workloads.

  • Agile HR Practices

Adopting agile methodologies in HR promotes flexibility and quick adaptation to changes. This involves iterative processes, cross-functional collaboration, and continuous feedback to enhance employee satisfaction and organizational efficiency.

  • Employer Branding

Strong employer branding helps attract top talent. HR collaborates with marketing teams to create a compelling image of the organization through social media, employee testimonials, and career development stories.

  • Focus on Gig and Freelance Workforce

The gig economy is reshaping workforce management. HR is developing strategies for integrating freelancers and contract workers, ensuring compliance, and fostering a collaborative environment between full-time and gig employees.

Management Notes

Human Resources Manager Duties and Responsibilities

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Duties

Hire Resources

This is where the recruitment strategies are put into action. In the current age, there’s a ton of competition vying for the attention of the best talent in the market. The HR manager needs to run all possible engines to go out there in the market and find that one suitable gem.

This part of the role includes things like finding relevant locations to look in, reach out to maximum potential candidates using mass communication mediums, aggregate all responses, filter out irrelevant applications, judge suitable incumbents and coordinate internally to get them interviewed. Once the finalists are decided, the HR manager turns into a ‘negotiator’ of sorts, working as a mediator between the company and the candidate to find that win-win ground.

Attract Talent

Attracting talent starts with first planning the requirement of manpower in the organization. Gauging needs of the organization’s human resource requirements, and accordingly putting a plan of action to fulfill those needs with the placement of “talented professionals”. That’s followed by creating an “employer brand” which will be representative of the organization’s good image and portray an attractive impression in the minds of potential candidates.

Training

Not all is done once you’ve recruited a suitable candidate for the job. Many organizations perform tasks a tad differently. Training employees is important to help the new hires get acquainted with the organization’s work pattern. It is imperative for the HR department to incorporate a training program for every new employee based on the skill set required for their job. It will further also contribute to employee motivation and retention.

For the training to be effective, every new employee can be subjected to an on-the-job training for the initial days to get him in sync with the work guidelines of the organization. This training will not only be of assistance to the employee but also give the HR team an insight into the employee’s workmanship. On completion of the training, HR plays a significant role in assessing the results of the training program and grading employees on the same.

Appraisals

Since HRM is a body meant for the employees, carrying out timely performance appraisals is a given. Performance appraisals help in employee motivation by encouraging them to work to their fullest potential. It also enables to give them feedback on their work and suggest necessary measures for the same. This helps employees to have a clear view of what is expected of them and what they are delivering. They can thus, work better towards improving their performance and achieving targets.

Resolving Conflicts

Where different people have different views, conflicts are almost inevitable. Whether the dispute is amongst two or more employees or between the employee and the management, an HR manager has the right to intervene and help map out a solution.

The HR should be available at the disposal of the conflicting parties and hear out their issues without being judgmental. Prior investigations are a must before passing any judgment. The HR head is not expected to discriminate or play favorites in this matter and always deliver an unbiased and practical decision. A reimbursement in case of any loss caused and strict actions against the defaulter should be practiced for effective conflict resolution by the HRM.

Rewards and Incentives

Rewarding the employees for a work well done imparts motivation and at the same time induces a desire to excel at tasks in hope of obtaining rewards. It serves as bait for inculcating a healthy competitive environment amongst employees to achieve targets and meet deadlines. A reward need not be materialistic always. It could just be a word of appreciation in front of all coworkers for a menial task done with complete honesty.

However, with globalization and evolving trends, compensations like holiday packages, pay incentives, bonuses, and promotions are taking a backseat. If as an HR manager you are wanting to reward your employees efficiently, it’s time you adopt new ways of awarding benefits such as flexible work times, paternity leave, extended holidays, telecommuting, etc. These non-traditional rewards will prove fruitful not only in engaging the existing workforce but also as an added benefit to attract new talent to your organization.

Employee Relations

Human Resources is called so because its major responsibility is dealing with the human part of the organization and this involves having great interpersonal skills. An HR manager who sits in the office all day will not turn out to be good at building connections with the employees and thus fail to serve the purpose of being an HR head. As an HR person, employees should feel comfortable coming up to you with their problems and for that, it is important that the HR team builds a good public image within the organization.

Responsibilities

  • Managing company staff, including coordinating and supporting the recruitment process
  • Onboarding newcomers to the company
  • Determining suitable salaries and remuneration
  • Providing the necessary support systems for payroll requirements
  • Developing adequate induction and training
  • Supporting employee opportunities for professional development
  • Managing succession planning of staff
  • Assisting with the performance management and review process
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