Tuesday, December 25, 2007

Why organizations prefer internal sources for recruitment

Internal sources include: (a) present permanent employees,(b) present temporary/casual employees, (c) retrenched or retired employees, (d) dependents of deceased, disabled, retired and present employees.

(a)Present Permanent Employees:

Organizations consider the candidates from this source for higher level jobs due to:

1.Availability of most suitable candidates for jobs relatively or equally to the external source,

2.To meet the trade union demands,

3.To the policy of the organization to motivate the present employees.

(b)Present Temporary or Casual Employees:

Organizations find this source to fill the vacancies relatively at the lower level owing to the availability of suitable candidates or trade and pressure or in order to motivate them on the present job.

(c)Retrenched or Retired Employees:

Generally a particular organization retrenches the employee due to lay-off. The organization takes the candidates for employment from the retrenched from the retrenched employees due to obligation, trade union pressure and the like. Sometimes the organizations prefer to re-employ their retired employees as a token of their loyalty to the organization or to postpone some inter-personal conflicts for promotion etc.

(d)Dependents of Deceased, Disabled, Retired and Present Employees:

Some organizations with a view to developing the commitment and loyalty of not only the employee but also his family members and to build up image provide employment to the dependents of deceased, disabled and present employees. Such organizations find this source as an effective source of recruitment.

Why do organizations prefer Internal Sources?

Organizations prefer this source to external source to some extent for the following reasons:

(a)Internal recruitment can be used as a technique of motivation.

(b)Morale of the employees can be improved.

(c)Suitability of the internal candidates can be judged better than the external candidates as “known devils are better than unknown angels"?

(d)Loyalty, commitment, a sense of belongingness, and security of the present employees can be enhanced.

(e)Employees’ psychological needs can be met by providing an opportunity for advancement.

(f)Employees’ economic needs for promotion, higher income can be satisfied.

(g)Cost of selection can be minimized.

(h)Cost of training, induction, orientation, period of adaptability to the organization can be reduced.

(i)Trade unions can be satisfied.

(j)Social responsibility towards employees may be discharged.

(k)Stability of employment can be ensured.

But organizations do not excessively rely on internal source as too much consumption of even sugar tastes bitter. The excessive dependence on this source results in in-breeding, discourages flow of new blood into the organization, organization would become dull and back number without innovations, new ideas, excellence and expertise. Hence, organizations depend on internal source to the extent of motivating and then depend on external sources.

Where are suitable candidates available in required number? How can they be informed about the availability of jobs and about the jobs and organization? Now we deal with first question as the answer to it deals with the sources of recruitment and answer to the second question deals with the techniques of stimulating the prospective candidates (or techniques of recruitment).

Generally, the learners of human resources management may feel that sources and techniques of recruitment are one and the same. But they are different. Sources are those where prospective employees are available like employment exchanges while techniques are those which stimulate the prospective employees to apply for jobs like nomination by employees, advertising, promotion etc. Management has to find out and develop sources of recruitment as early as possible because of high rate of time-lapse.


Personality types

Do you know people who are excessively competitive and always seem to be experiencing a sense of time urgency? If you do, it’s a good bet that those people have a Type A personality. A person with a Type A personality is “aggressively involved in a chronic , incessant struggle to achieve more and more in less and less time, and, if required to do so, against the opposing efforts of other things or other persons.

Type A’s

1.Are always moving, walking, and eating rapidly;
2.Feel impatient with the rate at which most events take place;
3.Strive to think or do two or more things at once;
4.Cannot cope with leisure time;
5.Are obsessed with numbers, measuring their success in terms of how many or how much everything they acquire.

In contrast to the Type A personality is the Type B, who is exactly opposite. Type B’s are rarely harried by the desire to obtain a wildly increasing number of things or participate in an endless growing series of events in an ever-decreasing amount of time.

Type B’s

1.Never suffer from a sense of time urgency with its accompanying impatience;
2.Feel no need to display or discuss either their achievements or accomplishments unless such exposure is demanded by the situation;
3.Play for fun and relaxation, rather than to exhibit their superiority at any cost;
4.Can relax without guilt.

Types A operate under moderate to high levels of stress. They subject themselves to more or less continuous time pressure, creating for themselves a life of deadlines. These characteristics result in some rather specific behavioral outcomes. For example, Type A’s are fast workers, because they emphasize quantity over quality. In managerial positions, Type A’s demonstrate their competitiveness by working long hours and, not infrequently, making poor decisions because they make them too fast. Type A’s are also rarely creative. Because of their concern with quantity and speed, they rely on past experiences when faced with problems. They will not allocate the time necessary to develop unique solutions to new problems. They rarely vary in their responses to specific challenges in their milieu; hence, their behavior is easier to predict than that of Type B’s.

Does type A differ from type B in their ability to get hired?

The answer appears to be “Yes.�? Type A’s do better in job interviews because they are more likely to be judged as having desirable traits such as high drive, competence, aggressiveness, and success motivation.

Proactive Personality

Some people actively take the initiative to improve their current circumstances or create new ones while others sit by passively reacting to situations. The former individuals have been described as having a proactive personality.

Pro actives identify opportunities, show initiative, take action, and persevere until meaningful change occurs. They create positive change in their environment, regardless or even in spite of constraints or obstacles. Not surprisingly, proactive have many desirable behaviors that organizations covet. The evidence indicates that proactive are more likely to be seen as leaders and more likely to act as change agents within the organization. Other actions of pro actives can be positive or negative, depending on the organization and the situation. Pro actives are more likely to challenge the status quo or voice their displeasure when situations aren’t to their liking. If an organization requires people with entrepreneurial initiative, pro actives make good candidates.

These are the people more likely to leave an organization to start their own business. As individuals, pro actives are more likely to achieve career success. This is because they select, create and influence work situations in their favor. Pro actives are more likely to seek out job and organizational information, develop contacts in high places, engage in career planning, and demonstrate persistence in the face of career obstacles.


Operative functions of HRM

The operative functions of personnel management are related to specific activities of personnel management viz., employment, development, compensation and relations. All these functions are interacted by managerial functions. Further these functions are to be performed in conjunction with management functions.


It is the first operative function of HRM. Employment is concerned with securing and employing the people possessing required kind and level of human resources necessary to achieve the organizational objectives. It covers the functions such as job analysis, human resources planning, recruitment, selection, placement, induction and internal mobility.

Job Analysis: It is the process of study and collection of information relating to the operations and responsibilities of a specific job. It includes:

1.Collection of data, information, facts and ideas relating to various aspects of jobs including men, machines and materials.

2.Preparation of job description, job specification, job requirements and employee specification which help in identifying the nature, levels and quantum of human resources.

3.Providing the guides, plans and basis for job design and for all operative functions of HRM.

Human Resources Planning:

It is a process for determination and assuring that the organization will have an adequate number of qualified persons, available at proper times, performing jobs which would meet the needs of the organization and which would provide satisfaction for the individuals involved. It involves

*Estimation of present and future requirement and supply of human resources basing on objectives and long range plans of the organization.

*Calculation of net human resources requirement based on present inventory of human resources.

*Taking steps to mould, change, and develop the strength of existing employees in the organization so as to meet the future human resources requirements.

*Preparation of action programs to get the rest of human resources from outside the organization and to develop the human resources of existing employees.


It is the process of searching for prospective employees and stimulating them to apply for jobs in an organization. It deals with:

(a)Identification of existing sources of applicants and developing them.

(b)Creation / Identification of new sources of applicants.

(c)Stimulating the candidates to apply for jobs in the organization.

(d)Striking a balance between internal and external sources.


It is the process of ascertaining the qualifications, experience, skill, knowledge etc., of an applicant with a view to appraising his / her suitability to a job appraising.

This function includes:

(a)Framing and developing application blanks.
(b)Creating and developing valid and reliable testing techniques.
(c)Formulating interviewing techniques.
(d)Checking of references.
(e)Setting up medical examination policy and procedure.
(f)Line manager’s decision.
(g)Sending letters of appointment and rejection.
(h)Employing the selected candidates who report for duty.

Placement: It is the process of assigning the selected candidate with the most suitable job in terms of job requirements. It is matching of employees specifications with job requirements. This function includes:

(a)Counseling the functional managers regarding placement.

(b)Conducting follow-up study, appraising employee performance in order to determine employee’s adjustment with the job.

(c)Correcting misplacements, if any.

Induction and Orientation: Induction and orientation are the techniques by which a new employee is rehabilitated in the changed surroundings and introduced to the practices, policies, purposes and people etc., of the organization.

(a)Acquaint the employee with the company philosophy, objectives, policies, career planning and development, opportunities, product, market share, social and community standing, company history, culture etc.

(b)Introduce the employee to the people with whom he has to work such as peers, supervisors and subordinates.

(c)Mould the employee attitude by orienting him to the new working and social environment.


Operations management - some interesting points

Factories occupy a unique place in our country. They are temples of modern India, shouldering the stupendous task of lifting our economy from its traditional and agrarian fold to a modern and industrialized one. Next to agriculture, it is the factories which are the largest employers. Thousands of families look up to the plants for support and sustenance.

It is the industrial establishments which produce the various goods and services for our day-to-day consumption. Factories are great institutions which bring about desired changes in our socio-economic outlook. Our incomes, living standards, wants, motives, thoughts, actions, life-styles and patterns are influenced by factories. It is desirable that one should be knowledgeable about factories their nature and scope, and their functions and problems.

A study about factories helps us appreciate the role played by people in producing goods and services. When a product is turned out by a plant, it is the result of fusion of the efforts and services of scientists, engineers, technicians, managers, workers and janitors. Factory is not merely buildings and machines. Factory is people. The best of automation may result in the reduction of number of people working in a plant, but the presence and contribution of human beings cannot be completely dispensed with. Neither factories, nor products should be divested of people. They are the common ingredient of all activities that take place in factories.

The total picture about of the factory becomes clear by a close study of the subject. There were some misconceptions about factories a few decades ago. There is a clarity now dispelling the negative belief. Factory is not a sinner that has annihilated the handicrafts. Factory is not a monster out to disrupt ecology. Not an evil that has destroyed the traditional value we once held dearly. Neither factory is a scourge that resulted in migration of people from village to cities. Nor factory is bad neighbor who disturbs our sleep early mornings by blowing sirens. Systematic study of factory management reveals its interesting psychological, social, political, technical, and artistic phases all of which lend color, character and genuine splendor to the activities which permeate an industrial enterprise.

Factory study helps in selecting a career. As was mentioned earlier, factories are potential employers. They offer attractive positions for effective executives, brilliant scientists, financial wizards, creative artists, skilled technicians and hard-working workmen. First step in selecting a career is to understand the various positions available in a factory and what they demand, in terms of qualification and experience. Next step is to evaluate one’s fitness in relation to the requirements of the job. Submitting applications and attending interviews will follow later.

Taking a close look at the subject by practicing managers helps them in at least two ways. First, it has recognized that, high productivity has been one of the keys to the high standards of living. Productivity is the backbone of a nation’s economic progress. Those countries where productivity is high living standards are also high. Increasingly productivity should be a national challenge, and it motivates all managers to do their utmost to achieve ever increasing levels.

Second, the managing of a manufacturing firm today presents a greater challenge than ever before. Top managers of companies are presented with endless streams of problems that arise from continuing inflation, energy crisis, high taxes, government regulations and intense foreign competition. To get some idea of the magnitude of these problems, one need, but pick up a daily newspaper or news-magazine and read about efforts to offset price increases, to secure plant modernization, to increase productivity, to meet foreign competition and so forth. Knowledge about the ways of managing production and operations management will be strategically useful to the executives.


Objectives of industrial relations

The primary objective of industrial relations is to maintain congenial relations between employees and employer. The other objectives are:

1.To promote and develop congenial labor management relations.

2.To enhance the economic status of the worker by improving wages, benefits and by helping the worker in evolving sound budget.

3.To regulate the production by minimizing industrial conflicts through state control.

4.To socialize industries by making the government as an employer.

5.To provide an opportunity to the workers to have a say in the management and decision-making.

6.To improve workers’ strength with a view to solve their problems through mutual negotiations and consultation with the management.

7.To encourage and develop trade unions in order to improve the workers’ strength,
8.To avoid industrial conflict and their consequences and

9.To extend and maintain industrial democracy.

Functions of Industrial Relations

Functions of Industrial Relations include:

1.Communication is to be established between workers and the management in order to bridge the traditional gulf between the two.

2.To establish a rapport between managers and the managed.

3.To ensure creative contribution of trade unions to avoid industrial conflicts, to safeguard the interest of workers on the one hand and the management on the other hand, to avoid unhealthy, unethical atmosphere in an industry.

4.To lay down considerations which may promote understanding, creativity and co-operation to raise industrial productivity, to ensure better workers’ participation?

The industrial scene is affected by lack of central values, class struggle, competition and unhealthy compromisers. Even in the latter part of the century, the management considers trade unions as a nuisance or a hurdle. The trade unions on the other hand considered the management and managers as exploiters. Workers are misled by their trade union leaders on the one hand and they allow themselves to be exploited by management.

The trade unions are organs of political organizations and they follow the ideologies of those organizations even at the cost of their own interest in the industry. As a result, the collective bargaining ends in either aggressive bargaining or futile waste of time. These and many other considerations led the ILO to formulate certain principles for promoting healthy industrial relations. They are:

(a)Good labor-management relations depend on employer’s and trade union’s capacity to deal with their mutual problems freely, independently and responsibly.

(b)The trade unions and the employers and their organizations should be interested in resolving their problems through collective bargaining and if necessary with the assistance of proper government agency.

(c)Workers and employers’ organizations should be desirous of associating with government agencies taking into consideration the general, social, public and economic measures affecting employers and workers relations.


External sources of recruitment for organizations

External Sources Include: (a) Campus Recruitment, (b) Private Employment Agencies/Consultants, (c) Public Employment Exchanges, (d) Professional Associations, (e) Data Banks, (f) Casual Applicants, (g) Similar Organizations, (h) Trade Union.

Campus Recruitment: Different types of organizations like industries , business firms, service organizations, social or religious organizations can get inexperienced candidates of different types from various educational institutions like Colleges and Universities imparting education in Science, Commerce, Arts, Engineering and Technology, Agriculture, Medicine, Management Studies etc,

Trained candidates are recruited with different specialization in subjects, like engineering, medicine from the training institutes of State Government or National Industrial Training Institutes for Engineers or vocational training centers.

Most of the Universities and Institutes imparting technical education in various disciplines like engineering technology, management studies provide facilities for campus recruitment and selection. They maintain the bio-data and performance required of the candidates. Organizations seeking to recruit the candidates from this source can directly contact the institutes either in person or by post and stimulate the candidates to apply for jobs. Most of the organizations using the source perform the function of selection after completing recruitment in the campus of the Institute itself with a view to minimizing time lapse and to securing the cream before it is attracted by some other organizations.

Campus Recruitment Techniques:
Companies realize that campus recruitment is one of the best sources for recruiting the cream of the new blood. The techniques of cam pus recruitment include:

1.Short listing the institutes based on the quality of students intake, faculty facilities and past track record.
2.Selecting the recruiting team carefully.
3.Offering the smart pay rather than high pay package.
4.Presenting a clear image of the company and the corporate culture.
5.Present the company but do not oversell the company.
6.Getting in early. Make early bird flu.
7.Focusing on career growth opportunities that the company offers to the recruits.
8.Include young line managers and business school (B-school) and engineering School (E-school) alumni in the recruiting team.
9.Build the relationships with the faculty, administrators and students to grab them before the rivals do.

Private Employment Agencies / Consultants: Public employment agencies or consultants like ABC. Consultants in India perform the recruitment functions on behalf of a client company by charging fee. Line managers are relieved from recruitment functions so that they can concentrate on their operational activities and recruitment functions is entrusted to a private agency or consultants. But due to limitations of high cost, ineffectiveness in performance, confidential nature of this function managements sometimes do not depend on this source. However, these agencies function effectively in the recruitment of executives. Hence, they are also called executive search agencies. Most of the organizations depend on this source for highly specialized positions and executive positions.

Public Employment Exchange: The Government set-up Public Employment Exchanges in the country to provide information about vacancies to the candidates and to help the organizations in finding out suitable candidates. The Employment Exchange (Compulsory Notification or Vacancies) Act, 1959 makes it obligatory for public sector and private sector enterprises in India to fill certain types of vacancies through public employment exchanges. These industries have to depend on public employment for the specified vacancies.

Professional Organizations: Professional organizations or associations maintain complete bio-data of their members and provide the same to various organizations on requisition. They also act as an exchange between their members and recruiting firms in exchanging information, clarifying doubts etc. Organizations find this source more useful to recruit the experienced and professional employees like executives, managers, engineers.

Data Banks: The Management can collect the bio-data of the candidates from different sources like Employment Exchange, educational Training Institutes, candidates etc, and feed them in the computer. It will become another source and the company can get the particulars as and when it needs to recruit.

Casual Applicants: Depending upon the image of the organization, its prompt response, participation of the organization in the local activities, level of unemployment, candidates apply casually for jobs through mail or hand over the applications in Personnel Department. This would be a suitable source for temporary and lower level jobs.

Similar Organizations: Generally, experienced candidates are available in organizations producing similar products or engaged in similar business. The management can get most suitable candidates from this source. This would be the most effective source for executive positions and for newly established organization or diversified or expended organizations.

Trade Unions: Generally, unemployed or underemployed persons or employees seeking change in employment put a word to the trade union leaders with a view to getting suitable employment due to latter’s intimacy with management. As such the trade union leaders are aware of the availability of candidates. In view of this fact and in order to satisfy the trade union leaders, management enquires with trade unions for suitable candidates. Management decides about the sources depending upon the type of candidates needed, time lapse period, etc. It has to select the recruitment technique(s) after deciding upon source.

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Cognitive dissonance theory

Mr. Jairam views the company’s pay level as too low. Will a substantial increase in his pay change his behavior to make him work harder? The answer to this question is, unfortunately, more complex than merely a “Yes"? or “No"? Can we also assume from this consistency principle that an individual’s behavior can always be predicted if we know his or her attitude on a subject? In this article we are discussing the theory put forward by Leon Festinger to know the answer to the above poser.

In the late 1950s, Leon Festinger proposed the theory of cognitive dissonance. This theory sought to explain the linkage between attitudes and behavior. Dissonance means an inconsistency. Cognitive dissonance refers to any incompatibility that an individual might perceive between two or more of his or her attitudes, or between his or her behavior and attitudes. In the theory it is argued that any form of inconsistency is uncomfortable and that individuals will attempt to reduce the dissonance and, hence, the discomfort. Therefore, individuals will seek a stable state, in which there is a minimum of dissonance.

No individual, of course, can completely avoid dissonance. You know that cheating on your income tax is wrong, but you “fudge"? the numbers a bit every year, and hope you’re not audited. Or you tell your children to floss their teeth every day, but you don’t. So how do people cope?

The theory would propose that the desire to reduce dissonance would be determined by the importance of the elements creating the dissonance, the degree of influence the individual believes he or she was over the elements, and the rewards that may be involved in dissonance.

If the elements creating the dissonance are relatively unimportant, the pressure to correct this imbalance will be low. A corporate manager, Vakil Jha believes strongly that no company should pollute the air or water. Unfortunately, Jha because of the requirements of his job is placed in the position of having to make decisions. This would trade off his company’s profitability against his attitudes on pollution. He knows that dumping the company’s sewage into the local river (which we shall assume legal) is in the best economic interest of his firm.

Clearly, Jha is experiencing a high degree of cognitive dissonance. Because of the importance of the elements in this example, we cannot expect Jha to ignore the inconsistency. There are several paths he can follow to deal with his dilemma. He can change his behavior or he can reduce dissonance by concluding that the dissonant behavior is not so important. After all “I’ve got to make a living, and in my role as a corporate decision maker, I often have to place the good of my company above of the environment or society"? A third alternative would be for Jha to change his attitude like “There is nothing wrong with polluting the river"? Still another choice would be to seek out more consonant elements to outweigh the dissonant ones like “The benefits to society from manufacturing our products more than offset the cost to society of the resulting water pollution"?

The degree of influence that individuals believe they have over the elements will have an impact on how they will react to the dissonance. If they perceive the dissonance to be due to something over which they have no choice, they are less likely to be receptive to attitude change.

If the dissonance producing behavior is required as a result of the boss’s directive, the pressure to reduce dissonance would be less than if the behavior was performed voluntarily. Although dissonance exists, it can be rationalized and justified.

Rewards also influence the degree to which individuals are motivated to reduce dissonance. High rewards accompanying high dissonance tend to reduce the tension inherent in the dissonance. The rewards act to reduce dissonance by increasing the consistency side of the individual’s balance sheet.

These moderating factors suggest that just because individuals experience dissonance they will not necessarily move directly toward reducing it. If the issues underlying the dissonance are of minimal importance, if an individual perceives that the dissonance is externally imposed and is substantially uncontrollable by him or her. If rewards are significant enough to offset the dissonance, the individual will not be under great tension to reduce the dissonance.

What are the organizational implications of the theory of cognitive dissonance? It can help to predict the propensity to engage in attitude and behavioral change. If individuals are required by the demands of their job to say or do things that contradict their personal attitude, they will tend to modify their attitudes in order to make it compatible with the cognition of what they have said or done. In addition, the greater the dissonance after it has been moderated by importance, choice, and rewards factors the greater is the pressure to reduce it.


Budgetary control

Budgeting is a management tool used for shorter-term planning and control. Traditionally, budgets have been employed as devices to limit expenditure, but a much more useful and constructive view is to treat the budgeting process as a means for obtaining the most productive and profitable use of the Company’s resources via planning and control.

Briefly, the budgeting process consists of establishing objectives for every area of activity, comparing actual results with planned results, and the taking of corrective action on the basis of significant variations from planned results.

In compiling a comprehensive budgetary plan it is vitally important that all dimensions of a company’s operations be considered. Each activity has an impact of raw materials, the quantity of acceptable finished goods, the level of piecework earnings etc. Budgeting can be seen as a major aid to communication, and the process should enable each manager to see how his area of activity fits in and contributes to the whole. In this way management is put into a position whereby it can anticipate change (at least to some extent) and thereby be prepared to meet it.
A production manager’s decision to alter the level of work-in-progress stocks, or a marketing manager’s decision to change the terms under which a particular product is sold, can be traced through the entire budgeting system to show the effects of such decisions on the operations of other departments and on the company’s overall results.

1.Budgetary Planning- The predetermination of a course of action in such detail that every responsible unit can be guided by it.
2.Budgetary control-the converse of planning, by which results are compared with desired standards of performance and any necessary action taken accordingly in relation to significant deviations.

A company will have a Master Budget which will have the following constituents.

Sales budget: This should show sales by item, by region, by channel of distribution, and (on a quota basis) by salesman, in a fully reconciled manner. The physical quantities can be extended in accordance with the proposed price list to show revenue by product line, sales territory, and so forth.

Selling expense budget: Included within this heading will be salesmen’s salaries, commissions, expenses, and related administrative costs.

Distribution budget: Transportation, freight charges, stock control, warehousing, wages, expenses, and related administration costs make up this budget. The level of activity and the level of service must both be specified in advance.

Marketing budget: Apart from details of all advertising, promotional activities, public, relations, marketing research, customer services and so forth, the marketing budget can also include a summary of the sales, selling expenses, and distribution budgets.

R&D budget: This will cover materials, equipment and supplies, salaries, expenses and other costs relating to design, development, and technical research projects.

Production budget: The aim of the production function will presumably be to supply finished goods of a specified quality to meet marketing demands. The distribution budget will specify finished goods stock levels, and this can be related to the sales budget to give detailed production requirement.
Following from the above main budgets, it is necessary to consider a series of subsidiary budgets:

1.Raw materials budget: paying appropriate attention to desired stock levels.

2.Labor budget: ensuring that the plan will make the required number of employees of relevant grades and suitable skills available at the right times.

3.Maintenance budget: involving a decision between preventive or remedial maintenance.

4.Quality control: whilst not a production responsibility, must be budgeted in accordance with production plans to ensure its adequacy.

5.Manufacturing overheads budget: covering items such as consumable materials and waste disposal.

Manpower Budget: This must take an overall view of the organization’s need for manpower for all areas of activity-sales, manufacturing administrative, executive, and so on-for a period of years. It leads to two further budgets:

1.Personnel budget: catering for recruitment costs, canteen facilities, first aid, house journals, etc.

2.Training budget: covering all aspects of personnel development from apprentices on the shop floor to management development programs.

Purchasing budget: Raw materials, consumable items, office supplies and equipment, and the whole range of an organization’s requirement, must be considered, along with the questions when, where, at what price, and how often to buy.

Company secretarial budget: This will include registration expenses, legal fees, pension, fund, insurance, reception facilities etc.

Services budget: Various odd services required inside the plant must not be overlooked. Like boiler house, gate-keeping, night watchmen, security, gardening, and similar activities.

Administration budget: Apart from the administrative items included in the secretary’s budget, others must be covered as well. EDP, executive salaries, typing pool, and any other expenses should be dealt with in this budget.

Financial budget: As we have already seen, this is made up of five individual budgets

1.Cash budget: concerned with liquidity, must reflect changes between opening and closing debtor balances, and between opening and closing creditor balances, as well as focusing attention on other inflows and outflows of cash(such as those stemming from share issues, or the retirement of debt, or the payment of dividends to shareholders).

2.Budget profit and loss account: concerned with profitability. This merely reflects the matching of revenues received during a period with costs incurred during that same period. Nevertheless, it is largely on the basis of this budget that a company forecasts its dividend policy, and determines its ability to obtain debt funding.

3.Budgeted balance sheet concern with the structure of assets and the pattern of liabilities.

4.Budgeted funds statement: concerned with the sources of funds and their implications in the organization’s objectives-striving endeavors.

5.Capital budget: concerned with questions of capacity and strategic direction. This must deal with the evaluation of alternate dispositions of capital funds as well as choice of the best capital structure.

Periodically a Budget and actual comparison statement should be prepared with the objective of finding out the reasons for variance. For example if the actual expenditure on coal exceeds the budget, it may mean an excess of coal (arising from Boiler inefficiency or bad coal) or excess cost of coal or both. Variance can be analyzed in terms of quantity and cost variance.


Classification of financial markets in India

According to the period of maturity of the financial assets with which the markets are dealing, the markets can be classified as
  • Money Market.
  • Capital Market.

These markets are again classified as primary markets and secondary markets.

Money market deals with instruments having a period of maturity of one year or less like treasury bills, bills of exchange etc. Capital market deals with all instruments having a period of maturity of above one year like corporate debentures, government bonds, equity and preference shares etc.

Money Market

Money market deals in short-term debt, and channel the savings into short-term productive investments like working capital, call money, treasury bills etc.

In India, money market is classified into the organized segment and unorganized segment. The organized segment is characterized by fairly rigid and complex rules and is dominated by commercial banks and major financial institutions like UTI. This segment is subjected to tight control by the Reserve Bank of India. Unorganized segment is characterized by informal procedures; flexible terms and attractive rates of interest both depositors and borrowers. The unorganized sector is dominated by money lenders.

The Discount and Finance House of India (DFHI) is a finance house established as a company under the Companies Act, 1956. It is providing liquidity to money market instruments by creating a secondary market and offering buying / selling quotes for various instruments. RBI actually operates in the money market through the DFHI

The position of money market in the Indian system has become important with recent liberalization of monetary policies, such as deregulation of lending rates, permitting mutual funds and banks subsidiaries to enter into money market operations. Money market ensures efficient functioning of the financial system and provides greater flexibility in banks’ operations

Capital Market

Capital market is the market for financial assets having a period of maturity of more than one year or of an indefinite period. Thus, capital market provides long-term resources needed by medium and large scale industries.

The Indian capital market which had been lying dormant in the seventies up to mid eighties has witnessed an unprecedented boom and undergone sea change with a number of financial services and banking companies, merchant bankers, more stock exchanges, ventures capital funds, private sector mutual funds, foreign institutional investors, over-the-counter exchange, national stock exchange, credit rating services, custodial services, portfolio management services, non-resident investment, new regulations etc. emerging on the Indian capital scene.

Before repeal of Capital Issues Control Act 1947, the entire working of the new issue market in India was governed by the Controller of Capital issues Control Act, 1947. The timing of the new issues by private sector companies, the composition of securities to be issued, interest (dividend) rates which can be offered on debentures and preference shares, the premium to be charged on securities were all subject to the regulation of the CCI.

The repeal of Capital Issues Control Act, 1947 and the establishment of Securities Exchange board of India (SEBI) has been a milestone in the history of capital market in India. There is complete metamorphosis of the market system, policies and regulation with the birth of SEBI like allowing companies to fix the price of instruments, making guidelines for various issues involved in primary market and framing guidelines for various intermediaries of both primary and secondary market. The role of SEBI has changed from controlling to regulatory with investor protection as the primary motive.

Risk Management

Introduction and Definition

Risk management is the process of measuring, or assessing risk and then developing strategies to manage the risk. In general, the strategies employed include transferring the risk to another party, avoiding the risk, reducing the negative affect of the risk, and accepting some or all of the consequences of a particular risk. Risk management is essential for many endeavors like statistics, economics, psychology, social sciences, biology, engineering, toxicology, systems analysis, operations research, and decision theory.

Areas of risk management:

1. Traditional Risk Management: Traditional risk management focuses on the risks originating from physical and legal causes.

2. Financial Risk Management: It includes the use of traded financial instruments to manage or avoid potential risk. This focuses on how and when should the financial instruments be used to manage costly exposures to risk.

3. Intangible Risk Management: It includes risks associated with Knowledge (deficient knowledge), relationships (ineffective collaborations) and engagement process (ineffective operations). These risks reduce the productivity. Intangible risk management identifies a new type of risk – a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability.

Risk management includes prioritizing of risks, which include greater risk and greater probability of occurrence.

Process Of Risk Management

The process of risk management essentially follows 5 steps, They are:

1.Designing of framework under which the risks have to be evaluated. And reasons for which the analysis and identification of risk should be undertaken.

2.Identification of potential risks: This includes the identification of source of risk and problems associated with that risk. It also involves the risk identification based on predefined objectives.

3.Analysis of Risk: This includes the analysis of severity and probability of occurrence of the unforeseen risk.
Here the risk is sometimes calculated as follows
Risk = Rate of occurrence X Impact of event.

4.Risk Evaluation: This step is important as evaluation of risk in financial / monetary terms is imperative to be able to present the effect of risk numerically.

5.Treatment of risk: Once the risk is identified and properly assessed and evaluated it treatment of risk becomes important for future. Techniques of treating the risk majorly fall under following categories:

·Transferring the risk to another party
·Avoiding the risk
·Reducing the negative affect of the risk
·Accepting some or all of the consequences of a particular risk

Difficulty in Risk Management:

1.Resource Allocation: This includes the opportunity cost analysis i.e. the resources that are assigned for the purpose of risk management could be used for other and more profitable activities. But ideal risk management includes engaging least amount of resources for the purpose of risk assessment and still reducing the negative effect of risk as much as possible.

2.Difficulty in assessment and prioritization of risk: This process is time consuming so it involves the possibility of wastage of time and resources in dealing with risk.

Because of the above-mentioned problems with the risk management it becomes necessary to clearly define the difference between the Risk and Uncertainty.

Hence we can conclude that even if the Risk management have few loopholes it is important for the smooth running of the organization or business.


Media decisions

Once the firm has researched its target market and developed the message, it has to decide on the appropriate channel of the media. It is important to note that the choice of the right channel or media is important for wider acceptance of the product or diffusion of the product in a market. One has to also consider the noise on different channels—the noise created by competition—and how to overcome it. Basically the choice between personal and non-personal channels of communication.

Personal Channel of Communication:

This refers to a one-to-one communication and involves two persons or a person addressing a group of persons. Here, there are three distinct types of personal channels, viz.


The expert channel consists of acknowledged individuals—i.e. experts—promoting company’s products. Pharmaceutical companies often get leading medical experts to talk about a new product to other doctors in a medical conference. Likewise, a firm manufacturing pollution control equipment may get a leading expert on environment to speak to decision makers on pollution control and how the firm’s equipments can help in controlling pollution. The government’s family planning department has had gynecologist and obstetricians travel in different parts of the country to promote family planning and management among the Indian women.

The advocate channel, a very commonly used channel, is one where a person hired by the company advocates its cause or the product. Personal selling falls in this category. All industrial products, direct marketers, consumer goods and services use this channel to counter competition and sell their products.

Personal channels of communication are effective in the following product market situations.

*Where the product is costly and hence risk associated with its purchase is high or is purchased in frequently—example consumer durables, industrial products, or airline marketing.

*Where the product has a significant social value,—e.g. perfumes and textiles.

Personnel channels therefore have an important role to play in high involvement product marketing.

Non-Personal Channels of Communications:

These channels are mass communication ones and communicate the desired message without a personal interaction with the target customer group. These consist of Print (newspapers, magazines etc.,), Audio in the form of Radio or cassettes, Television and Video. The last three are called electronic media. Now a days the Television is increasingly becoming most sought after as the advertiser selects a popular event like an international cricket match or a show of film stars or award function etc., to display his products which can catch the attention of multiple audience at one stroke. If one were to just open a magazine or a newspaper or switch on a television one will find that there are so many ads that every ad is not noticed. This is referred to as noise in the media.

To overcome this noise and communicate the desired message to the target audience, the market has been exploring new channels. Two such finds are atmospherics and events management. Atmospherics refers to the “packaged environment�? that creates the buyers perception of the firm and its products. A health product company may have a impressive white building surrounded by beautiful garden to give the message of a healthy atmosphere. Likewise a ceramic tiles manufacturer may come out with a structure with all beautiful and attractive tiles.

Events management refers to occurrences or special events created to communicate the desired message to the target customer group. In an events management the communicator gets an undivided attention to his product or brand or the message. Some examples of event management are Miss World contest, a musical concert by a famous singer or special exhibition of the firm’s products etc. Musical concerts, Film Festivals, Youth festivals, Sports etc., are sponsored by several leading consumer product companies like Parle, UB group, Reliance, Sahara, ITC etc.,

It is opined that personal communication channels are more effective than mass communication. The mass media does help to bring about attitudinal change in the target customer group.

In the first place mass media does not have a direct influence on target audience. This is mediated by the opinion leaders. Secondly an average customer will tend to believe a person more whom he or she considers a opinion leader. This person could be a celebrity, an expert or just the man in the street. This challenges the hypothesis that consumption of a product trickles down from higher status classes of groups of consumers.

Thirdly the effectiveness of a message is higher when it is directed a opinion leaders and through them to others. An example of this is Pharmaceutical companies direct their new product communications to doctors who are perceived by their colleagues as opinion leaders. Identification of right opinion leaders for the product then holds the key to effective mass communication.


Marketing strategy for service firms

The main aim of marketing is to create a customer and to convince him to make use of your product / service. Marketing plays a significant role in service sector.

Internal Marketing

This means the service firm must effectively train and motivate its employees to improve customer contacts and to provide the satisfaction to the customer by rendering a consistent and high quality service to improve the customer relations.

Interactive Marketing

It means that perceived service quality depends heavily on the quality of buyer-seller interaction. The quality of the service depends upon both the service, the service deliverer and on the quality of delivery. The customer judges service quality not on the basis of technical aspect but mostly on functional aspect.

Service quality falls due to increase in the competition or cost of increase in providing the service and dropping of productivity. Then the service firm should prove its uniqueness by:

*Increasing its differentiation.

*Giving better quality of service.

*Increasing its productivity

Marketing of Services

The term service is rather a general concept and it includes a wide range of services. They are the business and professional services such as marketing research, advertising, insurance, banking, Computer Applications, legal and medical services. The other services which are meant for leisure activities include—entertainment, and recreational services. The services like education, fine arts etc., are meant for fulfilling psychological and emotional needs.

During the last decade services marketing has increased its importance with the advent of competition In this competitive market, marketing has become a key differentiator between corporate success and failure. In this article we will try to discuss the marketing aspect in each of the services that are given below:
Tourism, Travel and Hotel services marketing

A.Marketing: Tourism

In tourism marketing-Marketing of destination is done. When a destination is sold to a customer or a group of them, all who are involved in providing some service in relation to tourism would get benefited. A destination could be of historical importance or a landscape or a unique monument created.

A creative strategy must be adopted to attract the tourists:

*To convince the tourists, that the place (that is to be marketed), as their travel destination.

*To inform and educate the potential tourists to visit that place.

*To motivate the tourists to visit the targeted destination.

Aimed at the place marketing one must think of creative advertising i.e. apart from the pictures of the place, the significant historic and cultural background of that particular place has to be advertised.

B. Marketing: Travel Services

Inspiring the tourists to a place should certainly include the convenient travel facilities, which a tourist would like to avail. If there is no convenient mode of transport-though the place is attractive, the tourists may hesitate to visit or ignore that place due to lack of transport facilities. Therefore, proper transportation facilities should be arranged and marketed them to tourists.

Reaching the destination is the ultimate goal in travel service. This may include the following aspects:

Other factors related to above

These are the aspects that are considered by a tourist while traveling. Therefore, a travel marketer must consider these prime factors while marketing the travel services.

C. Marketing: Hotel Services

The next aspect considered by the tourist after the travel convenience is food and shelter at the desired place of destination. Hotel services include important components like: accommodation, food and beverages, recreational activities and other services.

Hotel advertising is an effective and generally, a long-term effort to inform the customer about the existence, and also give details about the location and type of facilities available in the hotel. Effective advertising not only attracts prospective hotel customer, but also gives a long lasting impression in prospector’s mind.

*Projecting that they have better accommodation than the others.

*Advertising for food and beverages (showing them the variety and range).

*Advertising for the various recreational activities that are available with them.

*Availability of shops and car rental service and other facilities.

While marketing Hotel services, one should carefully consider the above facts and provide tourists an economical accommodation with the desired combination of traditional food with a suitable price; which can considerably attract the tourists to their hotel.

A feed back from travelers is desirable in all the above outlined services to know the level of satisfaction of the clientele for the services. This will not only ensure improvement in services as per the feed back. The improved quality of services rendered makes more and more regular customers.


Marketing of financial services

Today, one of the most competitive and most lucrative fields is financial services. A change in government regulations, has not only attracted many competitors but also changed the needs and requirements of customers.

The following are the financial services that are rendered

A. Marketing: Banking Services

Bank marketing deals with providing services to satisfy customer’s financial needs and wants. This is the total of all functions, directed to provide services to satisfy customer’s financial and related needs and wants more efficiently and effectively than the competitors. The marketing aspect helps in achieving the organizing objectives of the bank. The ultimate aim of a bank is to keep the customer satisfied. Therefore, marketing of banking services should ultimately take care of customer satisfaction.

B. Marketing: Portfolio Management Services (PMS)

PMS refers to the services provided to the investors wherein the agency takes the responsibility of using the investor’s funds effectively to obtain the maximum profits to the investor. The attraction of a good return in a short period of time is very attractive to the investors. PMS begins with investor’s objectives, preferences and constraints. The basic objective in PMS is satisfying two expectations, i.e. credibility and professional relationship. The marketing should concentrate mainly on these two aspects. The former is built over a period of time whereas the latter is obtained by qualified personnel with considerable skills.

C. Marketing: Factoring Services

Factor services covering the collection of receivables (Bills) and financing them. Basically, this is an arrangement in which receivables on account of sale of goods or services are sold to the factor at a specified discount. In marketing the above service, as the consumer happens to be the focus for developing the business, the need to undertake the study of consumer preferences along with the services has to be taken care off. The marketers of factoring should advertise the importance of the factoring to its customers.

Professional Services Marketing

This would be almost pure service marketing as there is no involvement of the goods when compared to the other services. This is such a vast field to discuss all the areas, thus only a few important services are discussed below:

1.Marketing: Hospital Services

The advent of new technology has changed the fields of medicine. Latest and sophisticated medical equipment along with new medicines have invaded the market. With the growing competition in medical field-the marketing strategy should emphasize on the patient care, various services rendered (i.e. if any special services are provided), various equipments that are available, the specializations and experiences of all Doctor’s should be highlighted while marketing the Hospital Services.

2.Marketing: Consultancy Services

In India Management consultancy is a growing and increasingly professionalized field. This service is client oriented service where the management consultant would find the requirements of the client such as appraising a project, conducting a market survey, advising he options that are available to the clients in the Industry. The marketing strategy should include the experience of the professionals engaged in the services, the type of service they render to the clients etc.


Process for evaluating the internal alignment of HR system

In this article we are giving an interesting case of AW Manufacturing Company and despite the organization identifying strategic drivers and making serious attempt to implement could not achieve the requisite goals.

This case describes a relatively simple diagnostic process for evaluating the internal alignment of the HR system—that is whether elements of the HR system reinforce reach other rather than work at cross-purposes. The AW story also sheds light on the destructive impact of misalignment on an organization’s labor force.

AW is a diversified manufacturer with an international production and distribution system. While the company has been very successful in recent years (it generated $ 2 billion in revenues in 2004), the senior management team has developed a new strategic plan for the business that forecasts double-digit increases in both revenues and cash flow over the next three years. Most members of the organization consider this plan extremely aggressive, especially in light of the fragmented and highly competitive nature of AW’s industry. Moreover, these projections have come at a time when AW has faced considerable difficulty in hiring and retaining the best workers (especially in R&D capacities)

To achieve their two optimistic financial goals, AW’s top management team has identified four strategic drivers they believe should guide the business during the next five years:

*Reduce new-product development times.

*More customer focus and responsiveness.

*Higher productivity.

*Develop and successfully manage several joint ventures.

We can characterize AW’s current organizational structure and HRM system as follows:

*The organizational structure consists of many functional “silos,�? with little cross-functional communication or coordination.

*The HR function has a silo structure as well. Recruiting, selection, performance management, compensation, and HR planning and strategy generally operate autonomously and efficiently.

*Hr managers reliably and properly administer compensation and benefit programs and hire people as requested, but line managers frequently describe them as over focused on compliance and cost reduction at the expenses of business –problem resolution.

*Jobs reflect traditional (i.e. narrow) definitions; for example, machinists tend to work on only machine or type of part. The company has few team-based work structures and decision processes.

*Recruiting and selection efforts center on filling current openings. The company gives little consideration to hiring for potential or “promo ability.�? Managers make hiring decisions on the basis of resume screening and interviews; they use no formally validated selection tests.

*The organization devotes considerable resources to skills development for new and continuing employees. Training systems emphasize general skills and are provided to all employees.

*Performance –appraisal and management –development system have existed for many years at AW. However, many employees describe the performance–management process as “routine�? and not particularly influential on individual, team, or business unit behavior In addition, line managers frequently complain about the time required to complete these evaluations.

*Compensation is generally not contingent on individual, work group or firm performance. Any pay increases go proportionally to all workers. As a rule, the company does not differentiate pay between the lowest-and highest –performing workers in any given job.

What conclusions can we draw about the internal alignment of AW firm’s HR systems?

The company has asked independent experts to conduct a survey whether their HR system can meet the strategy desired. The survey has asked individuals from two focus groups of 100 or so individuals from mid to senior management levels to estimate the degree to which the various HR management sub systems work together. The objective of this is to get a comprehensive picture of the current internal alignment of the company’s HR systems.

Taking a close look at the survey results at AW one could see that several elements in the HR system are internally inconsistent Both the selection and performance appraisal process are outdated and do not generate the kind of competency AW needs now or will require in the future. Similarly AW does not have the level and mix of compensation to attract the requisite talent. Its compensation structure design is not in alignment to reflect the current team structure. While the HR system provides the Vice President of HR with the kind of efficient numbers asked to provide to the CEO. But the HR system is undermining HR ability to contribute to value creation. The survey data reveal a very clear message that the HR system of AW is not currently configured to implement the company’s intended strategy.


Selection process in organization

After identifying the sources of human resources, searching for prospective employees and stimulating them to apply for jobs in an organization. This may be either through advertisements, agencies or direct references from the existing employees of the organization. The next action to be taken shall be the management has to perform the function of selecting the right employees at the right time.

The selection procedure is the system of functions and devices adopted in a given company to ascertain whether the candidates’ specifications are matched with the job specifications and requirements. The selection procedure cannot be effective until and unless,

1.Requirement of the job to be filled, have been clearly specified
2. Employee specifications (physical, mental, social, and behavioral, etc) have been clearly formulated.
3.Candidates for screening have been attracted.

Thus, the development of job analysis, human resources planning and recruitment are necessary prerequisites to the selection process. A breakdown in any of these processes can make even the best selection system ineffective.

Essentials of Selection Procedure

The selection process can be successful if the following requirements are satisfied:

1.Some one should have the authority to select. This authority comes from the employment requisition, as developed by an analysis of the work-load and work-force.
2.There must be some standard of personnel with which a prospective employee may be compared, i.e. a comprehensive job description and job specification should be available beforehand.
3.There must be a sufficient number of applicants from whom the required number of employees may be selected.

Significance of Selection Process

Selection of personnel for an organization is a crucial, complex and continuing function. The ability of an organization to attain its goals effectively and to develop in a dynamic environment largely depends upon the effectiveness of its selection programs. In a situation where the right person is not selected, the remaining functions of personnel management, employee-employer relations will not be effective. If the right person is selected, he/she is a valuable asset to the organization and if faulty selection is made, the employee will become a liability to the organization.

Organizational Relationships

The manner in which tasks and responsibilities for accepting or rejecting candidates must be finalized before designing a selection procedure. This should be shared by line and staff executives. The personnel department should eliminate all unsuccessful candidates, so that the time of the line executives need not be spent on such people. Secondly, candidates who can meet job requirements should be made available promptly. Line executive is ultimately vested with the authority either to accept or to reject a candidate. However, the personnel officer has a duty to see that the right candidates are selected and placement is done wisely. If he is not satisfied in this regard, he should give his views to the superior and should avoid involving himself in argument with departmental head on methods of selection.

Using Selection Agencies/ Consultants

Some private agencies/consultants in India perform the function of recruitment and selection so as to enable the organizations to concentrate on their main functions. They advertise, conduct tests and interview and provide a short list. Some companies have started using the services of these agencies as they provide expertise and reduce work load. The organization has to take these following factors into consideration in selecting an agency or a consultant:

1.Reputation, effectiveness, sincerity and punctuality of the organization.

2.Advertisement copy, design and media plans of various agencies;

3.Amount of fee, payment period and mode;

4.Objectivity, fair and justice in selection;

5.Selection techniques to be adopted, particularly psychological tests, interview methods etc,

6.Competence of the human resources of the agency/consulting firm

The company has to do the following in case of using an agency or a consultant.

(a)Briefing the agency about the requirements, terms and conditions and employment;

(b)Providing job and employee specifications and helping the consultant in modifying them;

(c)Checking and reviewing the draft of the advertisement.

(d)Ensuring that all arrangements are made for conducting test and interview.

Factors Affecting Selection Decisions

The goal of selection is to sort out or eliminate those judged unqualified to meet the job and organizational requirements, whereas the goal of recruitment is to create a large pool of persons available and willing to work. Thus, it is said that recruitment tends to be positive while selection tends to be some what negative.

A number of factors affect the selection decision of candidates. The important among them are:

(a)Profile matching.
(b)Organizational and social environment.
(c)Successive hurdles.
(d)Multiple correlation

Profile Matching: Tentative decision regarding the selection of candidates (who are known) is taken in advance. The scores secured by these known candidates in various tests are taken as a standard to decide the success or failure of other candidates at each stage. Normally, the decision about the known candidates is taken at interview stage. Possible care is also taken to match the candidate’s bio-data with the job specifications.

Organizational and Social Environment:
Some candidates, who are eminently suitable for the job, may fail as successful employees due to varying organizational and social environment. Hence, candidates’ specifications must match with not only job specifications but also with organizational and social environmental requirements.

Successive Hurdles: In this method hurdles are created at every stage of selection process. Therefore, applicants must successfully pass each and every screening device in case of successive hurdles.

Multiple Correlations: Multiple correlations is based on the assumption that a deficiency in one factor can be counter-balanced by an excess amount of another. The composite test score index is taken into accounting the selection tests. Hence, for broader line cases multiple correlation method is useful and for other successive hurdles method is useful.

We summarize, the obvious guiding policy in selection is the intention to choose the best qualified and suitable job candidate for each unfilled job. The objective of the selection decision is to choose the individual who can most successfully perform the job from the pool of qualified candidates. A candidate is routed through all the selection steps before a decision is made. If right personnel are selected, the remaining functions of personnel management become easier. The employees’ contribution and commitment will be at optimum level and employee-employer relations will be congenial.


Role of human resource department in organization

The Human Resources (personnel) department has staff relationship with other department / managers in the total organization. The personnel department is responsible for advising management from Managing Director to the lowest line supervisor on all area relating to the personnel management and industrial relations. Personnel department also performs various functions of employment, training and development. It represents management in many of the relationships that affect the organization as a whole. It is also responsible for representing various workers problems to management.

Personnel department generally acts in an advisory capacity; it provides information, offers suggestions and is not responsible for the end results. The personnel managers must exercise control very tactfully in order to win the confidence and cooperation of all line managers. He has to persuade the line managers to work with staff specialists and not against them. The authority of personnel manager should derive from concrete personnel policies and programs and from the advantage and result of accepted specialized knowledge

As a Source of Help:

In certain situations (when line managers lack skill or knowledge in dealing with employee problems) experienced personnel managers assume line responsibility for personnel matters. But it may be resented by the very managers who ought to seek staff assistance in meeting their personnel responsibilities. Personnel managers should learn the reputation and confidence of line managers of being a source of help rather than a source of threat to line managers. Staff assistance is likely to be effective when it is wanted rather than imposed.

As a Change Agent:

Personnel Manager should work as an enabler and change agent regarding personnel areas and he should be familiar with different disciplines like management, technology, sociology, psychology and organizational behavior as organizational adaptability, viability and development are dependent on the human resources development. So the personnel managers should work as a consultant of an organizational development by providing necessary information and infrastructure to line managers. Thus, the role of personnel managers is more concerned with providing information and offering advice to the decision makers rather than making decisions.

As a Controller:

Nevertheless it is still true that effective personnel executives advise on policies that help managers in implementing their programs and provide service and exercise the monitoring and control function sparingly.

Responsibilities within Personnel Department:

As other managers the manager-personnel is also a line manager in relation to subordinates within the personnel department. Personnel Manager is responsible for the success or failure of his department in contributing to the organizational goals. In most of the organizations the personnel manager is responsible for supervising the activities of his subordinates, like employment manager, wage and salary manager, manager for training and development, manager-industrial relations etc. He is also responsible for the operations of personnel manager at divisional and branch levels

As the Chief of the Personnel Department the Personnel Manager has to get effective results with the co-operation of all the employees working in the department and by showing the validity of the concept of the team work. The success of the personnel department should be measured in terms of its contributions to the personnel programs.

The effectiveness of HR department can be gauged by the fact how smooth they conduct the negotiations with workers’ union without the workers resorting to strikes and how fast the periodic agreement (once in 3 or 5 years) is signed with them.


Job specification

It is a written statement of qualifications, traits, physical and mental characteristics that an individual must possess to perform the job duties and discharge responsibilities effectively.

Job Specification Information

The first step in the program of job specification is to prepare a list of all jobs in the company and where they are located. The second step is to secure and write up information about each of the jobs in a company. Usually, this information includes:

1.Physical specifications
2.Mental specifications,
3.Emotional and social specifications
4.Behavioral specifications

Physical Specifications: Physical specifications include the physical qualifications or physical capacities which vary from job to job. Physical qualifications or capacities include physical features like height, weight, chest, vision, hearing, ability, to lift weight, ability to carry weight, health, age, capacity to use or operate machines, tools, equipment etc.

Mental Specifications: Mental specifications include ability to perform, arithmetical calculation, to interpret data, information blue prints, to read electrical circuits, ability to plan, reading abilities, scientific abilities, judgment, ability to concentrate, ability to handle variable factors, general intelligence, memory etc.

Emotional and Social Specifications: Emotional and social specifications are more important for the post of managers, supervisors, foremen etc. They include emotional stability, flexibility, and social adaptability in human relationship, personal appearance including dress, posture, poise, features and voice required by the job.

Behavioral Specifications: Behavioral specifications play an important role in selecting the candidates for higher level jobs in the organizational hierarchy. This specification seeks to describe the acts of managers rather than the traits that cause the acts. These specifications include judgments, research, creativity, teaching, ability, maturity (capable of accepting responsibility) trial of conciliation, self-reliance (self-starter sticks to own decisions), dominance (giving orders in a personal way) etc.

Employee Specifications

Job specifications information must be converted into employee specification information in order to know what king of person is needed to fill a job. Employee specification is like a brand name which spells that the candidate with a particular employee specification generally possesses the qualities specified under job specification, for example, the employee with the educational qualification of MBA generally knows the concepts, managerial skills like decision-making, inter-personal, leadership etc. However, the validity of this assumption can be tested through selection procedure. Employee specification is useful to find out the suitability of particular class of candidates to a particular job. Thus, employee specification is useful to find out prospective employees (target group) whereas job specification is useful to select the right candidate for a job. Employee specification information includes the following

1.Job Grade: Middle Management
2.Job Title: Credit Manager
3.Physical and Health: Normal health, able to visit factories, fields—able to walk extensively.
4.Energy Level and Temperature: High ability to adjust to increasing temperature
5.Appearance, Dress: Neat—suitable to traveling
6.Mental Abilities: Alertness, ability to read and perceive accurately.
7.Special Abilities: Flexibility, adaptability.
8.Special knowledge or Skills: Must know local language skills of conciliation, appreciation.
9.Skill in Operating Special Equipment: Driving two wheelers and light vehicles
10.Degree of Personal Traits.
11.Maturity: Must be capable of accepting responsibility to recover.
12.Self Reliance: Stick to own appraising decisions.
13.Dominance: Must dominate the field officers and branch managers.
14.Creativeness: Creative thinking in developing new schemes of advances and recovery.
15.Particular Skills: Calculating, analytical, interpretation, appraising etc.

  • Age
  • Sex
  • Educational Qualifications
  • Experience
  • Physical specifications: Height, weight etc
  • Social background
  • Family background
  • Extra-curricular activities
  • Hobbies

Some items of employee specification information are target for criticism. It is criticized that the privacy of the employee may be affected if the information like social background and family background is asked and taken into consideration to judge whether a candidate possess certain traits, behavioral specifications and social specifications. However, the organization may adapt the counseling technique to solicit such information rather than using application blank. And the organizations should give the benefit of doubt to the candidate in judging the behavioral and social specifications basing on sex, family and social background of the candidate. However, job analysis once applied is of great use of performing various functions of HRM.


Recruiting or retaining - Case study

G.K Electronics Ltd., is a pioneering and internationally reputed firm in the Electronics industry. It is one of the largest firms in the country. It attracted employees from internationally reputed institutes and industries by offering high salaries, perks etc. It has advertised for the position of an Electronics Engineer recently. Nearly 150 candidates working in various electronics firms applied for the job. Mr. Sashidhar, an Electronics Engineering Graduate from IIT with 5 years working experience in a small electronics firm was selected from among the 130 candidates who took tests and interview. The interview board recommended an enhancement in his salary by Rs. 500 per month more than his present salary at his request. Mr. Sashidhar was very happy to achieve this and he was congratulated by a number of people including his previous employer for his brilliant interview performance and good luck.

Mr. Sashidhar joined G.K. Electronics Ltd., on 21st January, 1996 with a great enthusiasm. He also found his job to be quite comfortable and challenging one and he felt it was highly prestigious to work with this company during the formative years of his career. He found his superiors as well as subordinates to be friendly and cooperative. But this climate did not live long. After one year of his service, he slowly learnt about a number of unpleasant stories about the company, management, the superior-subordinate relations, rate of employee turnover, especially at higher level. But he decided to stay on as he promised several things to the management in the interview. He wanted to please and change the attitude of management through diligent performance, firm commitment and dedication. He started maximizing his contributions and management got the impression that Mr. Sashidhar has settled down and will remain in the company.

After sometime, the superiors started riding over Mr.Sashidhar. He was overloaded with multifarious jobs. His freedom in deciding and executing was cut down to size. He was ill-treated on a number of occasions before his subordinates. His colleagues also started assigning their responsibilities to Mr. Sashidhar. Consequently there were imbalances in his family life, social life and organization life. But he seemed to be calm and contented. Management felt that Mr. Sashidhar had the potential to hear with many more organization responsibilities.

It was quite surprising to the General Manager to see the resignation letter of Mr. Sashidhar along with a check equivalent to a month’s salary one fine morning on 18th January, 1998. The General Manager failed to convince Mr. Sashidhar to withdraw his resignation. The General Manager relieved him on 25th January, 1998. The General Manager wanted to appoint a committee to go into the matter immediately, but dropped the idea later.

The inference from the above is very clear. The management had no strategy of retaining capable employees by giving them proper treatment and responsibilities. They also have not laid out any HR policy of defining area of responsibility for executives or staff. It appears any body in the firm can pass any work to their colleagues and even management is also not bothered about over loading a capable person willing to undertake challenging tasks with responsibility. If the above defects can be corrected by the management and senior managers they can retain capable managers or executives and the manpower turnover may come down and the company’s reputation with regards to human resources will go up. The firm can attract more and more capable personnel.


Recruitment is distinct from employment and selection

Once the required number and kind of human resources are determined, the management has to find the places where required human resources are or will be available and also find the means of attracting them towards the organization before selecting suitable candidates for jobs. All this process is generally known as recruitment.

Some people use the term ‘recruitment’ for employment. These two are not one and the same. Recruitment is only one of the steps in the entire employment process. Some others use the term recruitment for selection. These two terms are not one and the same either.

Technically speaking the function of recruitment precedes the selection function and it includes only finding, developing the sources of prospective employees and attracting them to apply for jobs in an organization, whereas the selection is the process of finding out the most suitable candidate to the job out of the candidates attracted. Formal definition of recruitment would give clear cut idea about the function of recruitment.

Recruitment is defined as, “a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient workforce.�? Edwin B Flippo defined recruitment as “process of searching for prospective employees and stimulating them to apply for jobs in the organization.�?

Those definitions can be analyzed by discussing the processes of recruitment through systems approach.

Objectives of Recruitment

1.To attract people with multi-dimensional skills and experiences that suits the present and future organizational strategies.
2.To induct outsiders with a new perspective to lead the company.
3.To infuse fresh blood at all levels of the organization.
4.To develop an organizational culture that attracts competent people to the company,
5.To search or head hunt people whose skills fit the company’s values.
6.To devise methodologies for assessing psychological traits,
7.To seek out non-conventional development grounds of talent,
8.To search for talent globally and not just within the company.
9.To design entry pay that competes on quality but not on quantum,
10.To anticipate and find people for positions that does not exist yet.

Sub-systems of Recruitment

The recruitment consists of the following sub-functions

1.Finding out and developing the sources where the required number and kind of employees will be available.
2.Developing suitable techniques to attract the desirable candidates.
3.Employing the techniques to attract candidates.
4.Stimulating as many candidates as possible and asking them to apply for jobs irrespective of number of candidates required.

Management has to attract more candidates in order to increase selection ratio(i.e. number of applications per one job vacancy)in order to select the most suitable candidates out of the total candidates. Recruitment is positive as it aims at increasing the number of applicants and selection is somewhat negative as it selects the suitable candidates in which process the unsuitable are automatically eliminated. Though, the function of recruitment seems to be easy, a number of factors make performance of recruitment a complex one.

Factors Affecting Recruitment

Both internal and external factors affect recruitment. The external factors include supply of and demand for human resources, employment opportunities and/or unemployment rate, labor market conditions, political, legal requirement and government policies, social factors, information systems etc.

The internal factors include the company’s pay package including salary, fringe benefits and incentives, quality of work life, organizational culture, career planning and growth opportunities, size of the company, company’s product/services, geographical spread of the company’s operations viz., local, national or global, company’s growth rate, Role of Trade Unions and cost of recruitment.

Complexity of the Function of Recruitment

Performing the function of recruitment i.e. increasing the selection ratio is not as easy as it seems to be. This is because of the hurdles created by the internal factors and external factors which influence an organization. The first activity of recruitment i.e. searching for prospective employees is affected by many factors like

1.Organizational policy regarding filling up of certain percentage of vacancies by internal candidates.
2.Local candidates (sons of soil).
3.Influence of trade unions;
4.Government regulations regarding reservations of certain number of vacancies to candidates based on community/region/ caste/ sex;
5.Influence of recommendations, nepotism etc. As such, the management is not free to find out or develop the source of desirable candidates and alternatively it has to divert its energies for developing the sources within the limits of those factors though it cannot find suitable candidates for the jobs.

The other activity of recruitment is consequently affected by the internal factors such as:

1.Working conditions ; and
2.Promotional opportunities ;
3.Salary levels, type and extent of benefits;
4.Other personnel policies and practices;
5.Image of the organization;
6.Ability and skill of the management to stimulate the candidates.

It is also affected by external factors like:

1.Personnel policies and practices of various organizations regarding working conditions, salary, benefits, promotional opportunities, employee relations etc.,
2.Career opportunities in other organizations;
3.Government regulations.

The degree of complexity of recruitment function can be minimized by formulating sound policies. A few progressive companies in India like Larsen & Toubro, Hindustan Lever, Procter & Gamble and a few others have exemplary policies of recruitment which even International companies are trying to emulate. Of late Indian BPO’s and multinationals have evolved their unique methodologies in fast recruitment and selection processes.