Acquiring Human Resource 001002

After studying this chapter, yor,r

will be able to:

o appreciate the importanc-e ofhuman resource accltrisition in

the contemporarv businessenvironment

r define and distinguish betweenrecruitment and se lection

. understand the internal andexterna I environmental iactorsconstraining recruitment anci

selection efforis of anorganization

r acquire an overview ofthemethods of recruitment andselection .

r gain an insight into newapproac.hes to recruilment andexecutive seiection

r describe the interrelateci stages

of the sira{fing process

r understand the strategicalignmenl berween busine:sstrategv and the recruitment andselection practices of anorganization

. discuss the different forms ofwork relationships that provideorganizafions with options to thehiring of permanent workforce

r explain the issues that need tobe addressed by organizations so

llrat lhey can hire for diversity

AcquiringHuman Resources

INTRODUCTIOi\I

Human resource planning helps a firrn determine its humanresource requirements and develop action plans to meettirese requirements. \4tren organizaLional demand for certainskills and competencies exceed their current suppll', a firmdevelops sl.rategies to increase hurnan resource slrpply. Oneway to do so is by acquiring or hiring nern' ernployees" Fast-

paced economic grolvth, new emerging sectors, and a fuli-blown 'war for talent' in these sectors have created newchallenges for Indian industry. Organizations are hiring moiefrequently and in larger numbers. As talent becomes a sourceof competitive advantage, organizations have been led toexperiment, bend old rules, and try rlew approaches to caterto their gror.r'ing talent needs.

This chapter begins with an overview of the relevantterminologv and the importance of human resource acqui-sition activities in the contemporary business environment.An insight into the internal and external environmentalfactors that constrain the staffing efforts of a firm is presented.The chapter describes thg internal and external sources ofrecruitment as well as the methods. A general idea of themethods of selection is aiso provided. Effective recruitingcan be a powerful strategic weapon. Developing innovativesources through which to find the best people is as importantas the selection process. The challenge is not only hiring theright people, but also hiring them before the competitor does.

As firms innovate in their search for talent, nerv approachesto recruitment and selection are being adopted. The chapterdiscusses sorne of the new' approaches to recruitment, suchas e-recruitment, contest recruitment, and outsourcing ofrecruitment. New approaches to selection that are explored

Acquiring Human Resources 261

in some detail include computer-aided selection, decision support systems,competency-based approach to selecdon, and hiring for person-culture fit.The chapter also briefly examines the new developments ln campus hiring,the executive placement industry, and the use of personality tests by industryfor selection purposes. The stages of the staffing process and the differentapproaches to making selection decisions are also discussed. The chapterpresents a conceptual framework for integrating recruitment and selection withthe business strategy. The reasons that firms hrre a diverse workforce arehighlighted. A discussion of the issues that HR managers need to manage foradopting diversity initiatives successfully is presented. The chapter ends withan exploration of the special hiring considerations of the BPo industry.

HUMAN RESOURCE ACqUISITION: AN OVERVIEWToday's business environnnent is drastically different from that a few yearsago. The dominant factor for business is no longer economics or technology,it is 'demographics'. Firms and HR managers are faced with the prospect oT ashortfall of qualified managerial talent because there are not likely to be enoughpeople available to replace retiring managers. There are not only fewer p"opi",but aiso fewer people with the skilis in demand. Added to this is the emergenceof a nerv employment relationship. The new relationship has shifted from thelong-term relationship involving loyalty to an econornic contract betw:en theemployer and employee. This whole scenario has caused an increase inemployee turnover;the challenge of retaining skilled/talented employees; andmore difficulty in attracting and hiring from a limited talent pool.

With human resources becoming centrai to business success, it is importantfor firms to ensure that they have the rig"ht talent in place for today as well asfor the future. ThomasJefferson's enduring words, 'No duty the executive hadto perform was so trying as to put the right person in the right place', still holdtrue. Hiring has become tougher with a large number of firms trying to tapinto an increasingly limited talent pool. As firms compete to meet their talentneeds successfully, they wage what is commonly referred to as a'war for talent,.A laboul market characterized by high demand and low supply has ensuredthat talented ernployees command a high price. With firms willing to ,pay theprice for talent', employees have more opportunities and change jobs morefrequently. The cost of replacing an employee can be very high. Skill shortagescoupled with high levels of employee turnover have resulted in firms hiringmore frequently and in larger numbers than ever before. Acquisition of humanresources is a strategic response by firms to gain an advantage in a competitivebusiness environment.

Acquisition of human resources is the process by which a firm hiresemployees to ensure that the required number and types of employees areavailable to perform organizational activities and accomplish organizational

262 Strategic Human Resource Management

objectives successfully. However, before a firm can hire new employees, itmust find people who have the necessary qualifications, and generate enough

interest in them to want to work for the organization. The Process of finding,

attracting, and hiring new employees is called 'staffing'. The staffing functionof HRM is concerned with 'seeking and hiring qualified employees'. Mellode{ined staffing as 'the process of recruiting applicants and selecting ProsPec-tive employees'. Both draw upon the information culled from job analysis

and human resource planning. The staffing process follows certain broadsteps (see Figure 5.1). A detailed depiction and discussion of the staffing/

hiring process comes later in this chapter.

Figure 5.1: The Staffing Process


Recruitment is the process of discovering potential candidates and of gen-erating a pool of qualified applicants by encouraging qualified candidates toapply for actual or anticipated job vacancies within the organization. Theobjectives of recruitment include attracting potential candidates to the jobopportunities in the firm, generating enough interest to encourage potentialcandidates to apply for the job, and also to project a favourable image of thecompany among those who come in contact with recruitment efforts. Recruit-ment is the first contact between a firm and potential employees. Therefore, itis important to manage the recruitment activity to create a positive firstimpression on job applicants. Recruitment functions as a bridge or Iinkingactivity between HRP and selection. Selection follows recruitment. Theselection Process involves gathering information about job applicants andusing this information for making hiring decisions. The selection process is anexercise in prediction. It seeks to discriminate fairly among job applicants topredict which job applicants from the applicant pool will perform the jobsuccessfully and which ones will be unsuccessful if hired. Successful perfor-mance means 'performing well on the criteria established in job analysis forthe job under consideration'. To predict the future job performance of acandidate, the selection process relies on information gathered about each

' candidate from selection methods such as application forms, psychological tests,interviews, etc. Not all the candidates who apply for jobs in a firm are hired orcan be hired, except under extreme circumstances. Candidates who are likelyto be unsuccessful on the job in question are eliminated. Selection may beseen as a negative activity or a process of elimination. Recruitment, on theother hand, is a positive activity, a process of generating an applicant pool.Table 5.1 presents a comparison of the recruitment and selection processes.

Table 5.1: Comparison of Recruitment and Selection Processes

Recruitrnent Selection

Definition Process ofgenerating a qualified poolof applicants for actual or anticipatedjob vacanciesPositive process (increases the poolof available candidates)

Process of gathering information on jobapplicants and making the hiring decisionbased on the informationNegative process (eliminates candidatesfrom the applicant pool)

Objectives . Making large numbers of qualifiedapplicants aware of employmentopportunities available in theorganization

r Attracting the attention of qualifiedcandidates

. Gathering information about jobapplicants by using a combination ofselection methods

r Predicting which job applicants willperform the job successfully, if hired

Contd


Table 5.1 Contd

Recruitment Selection

r Generating enough interest amongqualified candidates so that theyapply for the job and accept thejob if it is offered to them

r Creating a positive image of theorganization among those whocome in contact with the firm toincrease the success rate ofor ganizatio nal s taffi ng activiti e s

To be able to discriminate (fairly)between job applicants likely to besuccessful or unsuccessful on the job

Methods r Company databases. Job posting and biddingr Adverlisements. Referrals, and recommendationsr Executive search agenciesr Campus recruitment

r Application blanksr Interviews. Work samples,. Employment/psychometric tests, andr Assessment centres

In the past several years, both the recf,uitment and selection activities haveincreased in importance. The recruitment and selection process is expensiveand time-consuming. Therefore, firms are giving more attention to the staffingprocess. New methods of attracting and screening target candidates are beingused by firms in order to win the talent war. Firms seek to ensure that thehired employee will perform well and make positive contributions to the firmperformance as well as stay with the firm for a reasonable period of time.Several factors in the external and internal environment constrain the staffingefforts of the firm and often place limitations on a firm's ability to recruit andselect a candidate of its choic'e (see Figure 5.2). These lactors are discussed inthe next section.

Figure 5.2: EnvironmentaI Factors Affecting the Staffing Effort of an 0rganization

. Labour marketcondit;ons

o Governmentregulatjons andlegal considerations

. Organizationalpolicies andpractices

. Qrganizationalrmage

. Job attractiveness


EXTER.NAL INFLUENCES ON STAFFINGThese are factors that are external to the firm and have an impact on theability of the firm to hire employees: labour market considerations; and go.r-ernment regulations and legal considerations.

Labour Market ConditionsLabour market conditions were discussed in chapters 2 and4. when there isa surplus of labour at the time of recruitment, any recruitment effort will resuliin many applications. This is because there are more people looking for jobsthan- there are jobs available. However, in a tight luborri market, drms"willneed to develop their recruitment strategies cirefully to be able to attractapplicants who fulfill the requirements of the firm. Labour markets can beclassified by geographic location of the firm, industry and occupation, andeducational and technical qualifications.

Labour markets based on geography can be local, regional, national, orglobal. Local and regional labour mirkets differ from eaci other in terms ofworkforce availability and quality. For example, most software firms are locatedin Hyderabad and Bangalore because of the availability of software profes-sionals in the local and regional labour market. Labour market conditions donot always remain the same in a particular region. when a number ofemployers looking for similar skills are located in a particular geographicalreg'ion,

ft may lead to local or regional shortage of the skills in question-. As a;:::l;ffil' ff{;f:::ffi:"*:}xx1t1::Til:case of BPO available workforce in metropolitancities, many BPo firms, like Dell International Services, IBM Daksh,

"t.. ur"

setting up operati-ons in Tier II and Tier III cities (non-metropolitan citiessuch asJaipur and Chandigarh). Dell International Services has a centre inChandigarh.

Besides the labour market conditions, other factors such as the type of skillsand the level in the organizational hierarchy for which the firm is recruitilgalso determine whether a firm will recruit iocally, regionally, nationally, oiglobally A manufacturing firm that sets up a plant in J village will do ,*r"ll tohire blue-collar workers from the local labour market. On th"e other hand, thefirm may have to recruit a senior general manager from the national labourmarket. For certain skills that are in short supply, firms may hire from theinternational labour T".5-"t For exampl", .,rrr.ing skills were in short.supplyin Britain until recently. Hence, Britain's National Health Servic" 1NHSylr"^recruiting about 1,000 Indian nurses annually. Now that there is a surplus ofnurses' because of supply from Britain and the European lJnion, the

^British

government announced a clampdown on the recruitment of overseas nurses.


The British government has invested heavily in nurse training since 1997 andis getting results now; there are more than 379,000 qualified nurses working inthe NHS. This figure exceeds the 1997 figure of trained nurses in the NHS by82,000. Moreover, there is a number of nurses undergoing training.

Occupational labour markets are based on the KSAs required for jobs. Forexample, engineers, doctors, accountants, and advertising professionals allbelong to different occupational labour markets. The demand for differentoccupations may fluctuate over time. For instance, the current demand forinformation technology jobs or for accountants is very high. High demand fora particular occupation may lead to shortage of the available occupationalworkforce. Recruitment and hiring strategies will need to be more creative inorder to counter this shortage. Another type of labour market is based oneducational and technical qualifications. Firms may need individuals withcertain qualifications, degrees, certifications, or educational attainment levels.For instance, the call for implementing caste-based reservation in private sectorjobs by the government has raised apprehensions in industry that firms willhave to compromise on acceptable standards related to educational qualifica-tions. The proposal to increase student intake in the elite educational institu-tions of the country by 54olo will require more teaching faculty, resulting in ashortage of professors with PhDs in most universities. Similarly, there are likelyto be shortages of management graduates, design engineers, etc. due to theincrease in demand for these skills.

Apart from labour market conditions, the state of the economy also deter-mines the availability of workforce. In a growing economy, more jobs arecreated and result in higher demand and low supply (shortage) of qualifiedworkforce.

Government Regulations and Legal ConsiderationsGovernment policies and regulations influence the staffing process of firms.For example, they prohibit discrimination in hiring and employment. Noemployer should discriminate between candidates on the basis of nationality,sex, race, caste, etc. Therefore, organizations analyse the composition of itsworkforce in order to ensure that it is representative of the relevant labourmarket.

In addition, there is a statutory obligation to provide opportunity foremployment to the weaker sections of society. For example, governmentinstitutions and public sector firms in India are required by law to reservesome percentage of positions for people belonging to disadvantaged groupslike SC/ST, physically handicapped, and children of war widow's. Morerecently, the Ministry of Human Resource Development has proposed toreserve 27010 of jobs for 'other backward classes' (OBC) over and above the


existing reservations. The Government of India is also trying to persuade theprivate sector to follow a similar reservation policy in the interest of affirma-tive action. Though based on the principle of social justice, such legal require-ments and government regulations directly affect the recruitment and hiringpractices of a firm.

INTERNAL INFLUENCES ON STAFFING

A firm's staffing practices are influenced by internal factors like organizationalpolicies and practices; organizational image; and job attractiveness.

Organizational Policies and PracticesHuman resource management policies and practices of an organization affectthe staffing process as well as who is hired. For example, several firms have a'promote from within' policy. Firms with this policy give priority to currentemployees of the organization, ensuring that all positions are filled internally.These firms hire from outside the organization only at the lowest-level entrypositions. The pros and cons of hiring from internal versus external sourcesare discussed later in this chapter.

Other organizational policies also affect staffing. Certain organizations givepriority to war veterans, disabled individuals, or women, and look to thesesources first when hiring. For example, all recruitment advertisements ofthe United Nations state that 'women candidates are encouraged to apply'.There are other firms that follow the practice of hiring the relatives of currentemployees.

Organizational ImageThe image of an organization held by potential candidates as well as societyalso affects recruitment. When the reputation of a firm is poor, it is not seen asan attractive organization to work for and potential candidates may not beinterested in working for a particular firm. It is logical to conclude that Allelse being equal, firms that enjoy a positive corporate image and reputationfind it easier to attract, hire, and retain employees than a firm with a negativeimage'. Firms that are on the top of Fortunds 'Most Admired Companies' list,such as Microsoft, do not have to exert as much time and effort in recruitinghigh-quality employees when compared to firms that rank poorly. The sameis the case for yearly corporate ratings released by Business Today or Businessworld-

If we look at campus placements, there are several students who want toget a job with firms ,rr.L ", Microsoft or McKinsey. These firms gain theadvantage of hiring the best candidates. There are other firms that do notenjoy the same reputation on campus. For example, there are few takers for


public sector jobs in the best management schools in India. This is due to thehigher salaries, faster career growth, and exposure offered by multinationalfirms.

Job Attractiveness

Jobs that are viewed as boring, hazardous, low-paying, or lacking in careergrowth opportunities also find it dfficult to attract a qualified pool of applicants.

Jobs seen as uninteresting are not likely to attract the suitably qualified or highquality employees. For example, call centres, whose jobs are considered routineand monotonous, have had to relax employee requirements considerably since

suitably qualified individuals do not prefer these jobs. Candidates who wouldnot have been hired by these firms are now being hired after receiving pre-hiring training from the firm.

Another factor that determines the attractiveness of a job and organizationis the personal preference of prospective candidates. Even though a firm mayenjoy a good image and offer interesting jobs, there may be individuals whowould not seek employment with the firm. Such a situation may result when,

' for example,

o the job is transferable and the individual does not want to be transferred(jobs in the army and the State Bank of India); or

o the candidate does not want to move to the region where the firm islocated (Oil and Natural Gas Corporation in Assam); or

o the candidate wants to work for a particular sector or industry (IT orfinancial services and not infrastructure or heavy engineering).

The above external and internal factors place limitations on the ability ofthe firm to hire the candidates they prefer. Organizations must take decisionsabout how to generate the necessary applications as well as how to select the

'best' candidates from the application pool. Given these constraints, even ifthe applicant pool that results is large enough, it may not include the 'best'candidates, or the 'best' candidates may not want to work for the organiza-tion. All firms, nevertheless, must hire additional employees to increase theirexisting workforce, or replace employees who have retired, been promoted,or left the organization for other reasons. Let us first look at the sources of and

methods of recruitment and at innovative approaches to recruitment. This, will be followed by a discussion of selection methods and the selection process.

RECRUITMENT SOURCES : INTERNAL VERSUS EXTERNAL

Recruitment sources are 'the locations where qualified individuals can be

found'. One of the critical questions that a firm needs to address at the outset is

whether to recruit internally or externally. As mentioned earlier in this chapter,


Table 5.2: sources of Recruitment: Advantages and Disadvantages

Internal . Performance data of candidates isreadily available

r Motivational. Builds morale of employees. Speed of hiringr Less expensiver Less time to socialize and adjust. Selected individual reaches

performance standards soonerr Results in succession of promotions. Need to hire only at the entry-level

. May give rise to internal politickingr Morale problems for those not proirotedr Inbreedingr Leads to a chain of promotionsr Perpetuates organizational culture

even ifit needs io change

External r New people bring in newperspectives

r Facilitate organizational changer Not aligned with any group within

the firm

r May cause morale problems for thoseemployees of the firm not promoted

r Not familiar with the cultuie of the firmr Socialization time is higher. May not get acceptability from

employees of the firmr Time consuming. Can be expensive

METHODS

certain firms prefer to recruit internalry as a matter of policy. It is only whenthe internal search does not prove fruitful that the nr' gol, in for externalrecruitment. Internal recruitment refers to the process of"recruiting from thecurrent employee pool of the organization. External recruitment involvessearching for potential employe", fro- the external labour market. Firmsnêcessarily have to recruit externaily when they (l) expand their workforce;(2) need to fill entry-level positiotrr;la; need skills that are not available withcurrent employees; and (4) need to infuse fresh ideas in the firm. Both internaland external sources of recruitment have advantages and disadvantages (seeTable 5.2).

OF RECRUITMENT\Arhether recruiting internally or externally, the HR manag er may rery oncertain methods of recruitment. Recruitment methods are th! ,specific *"ur*by which potential employees can be attracted to the firm,.

Internal Methods of RecruibnentThe internal recruitment methods are organizational databases;job postingand bidding; inside moonlighting; an iniormal methods.

27O Strategic Human Resource Management

Organiz ation al D atab as es

Databases are records of employee-related information that all firms maintainroutinely. Now, employee information is usually stored in computers in theform of human resource information systems (HRIS). These databases arecommonly referred to as skills inventories or management inventories. Theemployee profiles available on the databases include information related tothe employees'background, skills, knowledge, work histor/, work experience,training received, performance appraisal records, and the like. In the event ofa job opening in the firm, the HR manager can access the database, key in thejob requirements, and select the 'best' candidate from the list of currentemployees that the database provides. Databases can be used for fillingvacancies through promotions or transfers from within the firm.

This is a top-down approach, which considers only those employees for ajob opening who are listed by the database as meeting the requirements of thejob in question. Employees not identified by the database search, but whowould like to be considered for the vacancy, are not given a chance to competefor the job opening.

Job Posting and BiddingThis method requires the management to publicize and notify (post) the currentor anticipated job openings in the firm and allows the current employees tobid (compete) for jobs they might be interested in. It is a bottom-upapproachand provides employees with greater control over their own career. A firmmay notify job openings in a number of ways, for example, by posting noticeson bulletin boards, through company newsletters, or by e-mailing managersand employees. Recently, firms have been using company websites andintranets for posting job openings. Some company websites are designed tobe interactive and allow an employee to match his/her skills, education, expe-rience, etc. with the skills and other demands of the job. Computer softwarethen highlights the gaps, if any, and also outlines the steps the employee needsto take if helshe wishes to apply for the job later.

Job posting is a legal requirement in unionized firms. However, managerialjobs are not covered under the law. Therefore, posting managerial vacanciesreflects the company policy of providing opportunities to current employeesbefore hiring from external sources. It is one of the most common methods ofrecruiting employees from within the organization.

Inside Moonlighting /Sometimes, firms have a temporary shortage of workforce, and at other times,there is some additional work to be done. At these times, instead of hiringnew employees, a firm may encourage the curreqt non-salaried employees of


the firm to accept additional work in return for a bonus. When currentemployees of the firm are used to take care of additional work that arisesoccasionall/, it is called inside moonlighting.

Informal MethodsA firm may use informal communication channels to 'spread the word' aboutcurrent or anticipatedjob vacancies within the firm. One such informal methodis the grapevine, or the process of communicating information within the firmthrough informal interactions between employees. Employees who indicatetheir willingness or interest to be considered for the jobln question may thenbe screened for their suitability for the job.

External Methods of Recruitmentwhile recruiting from internal sources has its own advantages, no firm can orshould meet all its HR requirements from internal sources

"lott". A firm may

use one or a combination of external methods of recruitment: direct applicants; employee referrals and recommendations; professional associati&s;employment agencies; executive search firms; advertisements; and campusrecruitment.

Direct ApplicantsPotential candidates who apply to a firm although it has not solicited applica-tions are called direct applicants or 'write-ins'. Their applications are-calledunsolicited applications, and may reach the employer by letter, telephone, orin person. Direct applicants who visit a firm to apply for a job are referred toas 'walk-ins'. Since the firm is not actively recruiting, and since there are nojob openings currently available, these applications may not be immediatelyuseful for the firm. Yet, unsolicited applications constitute a relativelyinexpensive source of good job applicants. These applications become part ofthe database for future reference. The numb"t u.td quality of unsolicitedapplications that are received by a firm depends on faitors iike size, image,reputation and location of the firm, as well as economic conditions.

Attrition and talent shortage in BPo firms has led to recruitment throughan innovatively styled 'walk-in' method. Some call centres have set up groupsdedicated to calling potential candidates and trying to hire them. Genpact hasset up what it calls the 'Genpact Store Front' where a potential employee'walks in' with 'qualifications' and walks out u'ith a Job offer letter' along withthe promise of a lucrative salary. Genpact has set up six such store fronts orhiring offices, in Yizag, Kochi, Kolkata, New Delhi, Indore, and Lucknow.The firm conducts job interviews at these offices daily and hires about 40 peopleper week per office. ICICI OneSource also has a dedicated call centie tiratcalls prospective candidates and offer them a job.


Organ izational databases

Job posting and bidding

lnside moonlighting

lnformal methods

Direct applications

Employee referrals and recommendations

Professional association

Employment agencies

Executive search firms

Advertisements

Campus recruitment

Figure 5.3: Recruitment Sources and Methods

Employ ee Referr ak and Re contmendations

New employees are often located and hired by firms with the assistance ofcurrent employees. Before recruiting through other methods, some orgar:iza-

tions prefei to ask present employees to recommend names of friends, rela-

tives, tr professionil colleagues for a particular job opening within the firm' Itis an excellent means of locating potential employees for difficult-to-fill positions

or hard-to-find skills. Referrals constitute a quick, relatively inexpensive, and

a powerful means of recruitment. Recommendations can be used for almost

ati;obs (skilled, technical, professional, and managerial). Through referrals

the new employee forms realistic expectations and receives accurate and

relevant information about the job. Usually, cuffent emPloyees recommend

people only if they are sure that the person is suitable for the job. An indi

"iauut whose referral results in successful hiring assumes a mentoring role to

the newcomer and facilitates his/her faster adjustment to the culture of the

firm. It also provides an effective screening process in terms of employee

background checking.Several firms have formalized this method of recruitment by offering re-

wards, either monetary or otherwise, or by recognition for employees whose

recommendations result in a successful referral. The monetary reward is often

in the form of a one-time bonus also called the 'finder's fee'. At Flextronics,

the referral programme is called 'Head U Win'. The firm employs a Persondedicated to keeping a tab on the recommended candidates. Any employee

who refers at least t*o people becomes entitled to a lucky draw where gifts

like plasma TVs, iPods, ande,ren a Santro cal are glven. Cisco pap US$20O0

to an employee each time it hires someone referred by the employee"Thisreward is not applicable for hiring managers and senior executives' IBM


also has a referral system that rewards employees in cash and other wayswhen the company hires candidates they have referred.

_ Due to high employee turnover, some firms have instituted a ,deferredbonus' for the referring employee. In the deferred rewards scheme, therecommender gets paid only part of the total bonus when the recommendedemployee joins the firm. The remaining bonus may be given in two or threeinstalments, and only if the recom-"rrj"d

"-ploy6" ,t"]r, -itf, the firm for acertain pre-decided time. If the recommended employee leaves before thatperiod, the recommender forgoes the remainaer of th" bonus. Deferring thebonus ensures that the recommender tries to persuade the employee hjsherecommended to remain with the firm. Some firms poach a senior executivefrom a competitor andwell by promising a bo

While the traditionalsome innovations are happeninginof Juniper, a networking and secelebration for its employees at a fancy restaurant. They were encouraged tobring along friends and acquaintances the company could hire. The eventwas successful-the company won the attention of skilled talent in an infor-mal environment. Intel, the microprocessor companr, has created a websitefor referrals and pays employees Rs 40,000 in cash *h".r it hires a referredcandidate.

sometimes, employee referrals take on negative connotations, such as whenemployees are 'pirated'from other firms o, *h"n employees resort to nepotismand recommend relatives or friends from their own alma mater. How&er, inthe _competitive business environment, the ,old boys' network' has beengradually replaced by 'professional networking,. A professional network isthe informal interpersonal network of professestablishes during the course of his br herpotential employee from one's professionalby the skills and competence of the person rather than by family ties orfriendship.

Pr ofe s sion al As s o ciationsseveral occupational groups, such as eng'ineers, accountants, and medicalprofessio-nals, form professional associations to share new knowledge in thefield and disseminate news about different aspects of the profession. Suchassocjations publish regular newsletters, trade journals, or magazines that arecirculated among members of the association. These publications also advertisejob vacancies. The resulting applicant pool consists of candidates who havethe necessary skills for the job.

274 Strategic Human Resource Managemenl

Employrnmt Agencies

Job seekers register themselv_es at employment agencies; the agencies main-tain a database ofjobseekers. Organizations s s can accessthese databases for a fee and obtain a list o or they can

ts andrequestas candidates.be public or private. public employment agenciesgovernment. In India these exist in the form of

employment exchanges. Under the Compulsory Notification of Vacancies Act1959, firms have to notify certain vacancies with these exchanges. Theemployment exchange then forwards a shortlist of eligible candidates to theorganization when it has vacancies. The organization is required to consider the

,'H'ff :;ill::ff"i;l"il,Ll;iln4.5 million registered job_seekers. yet

these exchanges manage to place onry 170,000 peoile "rr.rrr"lly.

Ma Foi, anHR consultancy firm, hopes that the government will let the private sector

infrastructure. Opening up this infra-s likely to throw up new opportunities

-private partnership model is followed

^ Private employment agencies specialize in the skill level or the profession

of the applicants that they provide, such as software professionals or nurses.An organization can access and use the database of private employment agen-cies for a fixed period for a fee. These agencies charge either the applicanis or

fixe

x?;

method of emproyee sourcing wiil be .'";tT,,fili""Jili#:i#,Tices' rhis

e the same objective. However, theyity of candidates, and the nature ofs enjoy a better image, provide candi_

source or mid-level or highJe"", -"""!J,1"",T[Xn:'rtt'flT';,lli";,::"r: * "

Execatiae Search FirmsThese are also private employment agencies. However, the search firmsdirect their efforts to very senior or topJevel manageriri urrd professionaltalent. They provide a complete range of services to the client organ izationbya systematic process of identifying the person who will best meei the require_ments of the firm. Search firms begin by unravelling the underlying .o-p"rryculture' clearly articulating the company's goals,

"'nirio' and st.aiegy. ftr"y


also clarify the exact role that the hiring company wants a potential employeeto play. \Atrhile most candidates will have the technical skills required, the partdifficult to assess is whether the person truly fits in with the company culiureand shares its vision and philosophy. Thus, executive search firms provide amore complete line of service to the client firrns.

These firms charge a very high fee; it may be as high as 300/o of theemployee's annual salary. Unlike private agencies, search fiims often work ona retainer basis and get paid whether or not their efforts are successful. Theclient of a search firm is always the organization and never the potentialemployee. Sometimes, these firms are accused of poaching employees fromcompeting firms, often on the request of the client organization. This has onoccasions compromised the image of search firms, earning for them the titleof 'headhunters'. Headhunters were tribes that beheaded its enemies and kepttheir heads as trophies. In the organizational contex! the term ,headhunteis'refers to executive search firms who recruit for top positions through informalchannels. The search industry is presently going through its best phase sincetalent is at a premium.

With India and China on a growth path, there is huge demand for executivetalent. This has resulted in new and big business opportunities for executivesearch firrns in India. Global executive search firms are setting up base inIndia. Part of the interest that India is generating from global searchmajors isbecause more Indian companies-both family-owned and entrepreneur-man-aged-have begun demanding professionat help for hiring managerial talent.See Exhibit 5.1 for new developments in the placement industry

Aduertisements

Tiaditionally, the most widely-used method of recruitment has been adver-tisements in the print media, the most common being daily newspapers. Sinceall households subscribe to newspapers, recruitment advertisements find abig readership and reach a large audience in a short time. Newspapers routinelyadvertise skilled, semi-skilled, clerical, administrative, ind entry-levelmanagerialjob openings. Now there is a trend towards special recruitmenteditions of newspapers, for example, Ascent in the Times of India. Businessnewspapers such as Financial Times, The Economic Times, etc. also carry jobadvertisements. These advertisements, however, axe targetted to the audiencethat reads these newspapers. The target audience includes professionals andexecutives from the national and global labour market. For employees withspecialized skills, Iirms can advertise in trade and professionai iournals orbusiness magazines such as Business Taday, Businessworld, Human Capital etc.Though radio and television are also used to advertise vacancies, an increasingtrend is to use the company website to post job openings. Exhibit 5.idescribes new trends in recruitment advertising.


New Developments

The dynamics of the lndian recruitment industryis changing. Until very recently, the recruitmentservices industry had low entry barriers and justabout anyone could set up a 'placement service'.Now, the market has matured, and one needsscale and size in order to survive. Margins havebeen falling for some time and recruitments havemoved beyond submitting a list of potential can-didates to the client. Higher attrition rates andthe war for talent are forcing MNCs to demandvalue-added services, globally validated recruit-ment tools, and best practices from placementservice providers. Placement firms are expectedto build end-to-end HR solutions for clients. ln-dian placement firms therefore have started topartner with global search firms. For example,Ma Foi Management Consultants have given 76%stake to the Dutch global search major Vedior.

Most firms in placement industry have grownby aO-6O% since 2004. Business at placementfirms has grown by almost 50%. All sectors arehunting for good talent. However, three broadsectors that generate the greatest demand forexecutive talent are (1) the entire cluster ofservice-oriented growth firms, which includes

Source: Mahanta 2005; Baishya 2005

in Plocement Industry

retail, media, and finance; (2) afew second-rungtechnology iirms; and (3) back-office players start-ing their operations in lndia, demand for replace-ments from the brick and mortar companies thatare poaching grounds for new sector industry.

Another area that is generating business forsearch firms is the demand for independent di-rectors at the board level and various committeechairs (audit, best practices) that companies needto fulfill corporate governance norms. Anotherrecent development is the demand for new ex-ecutives for foreign acquisitions. Search f irms arealso approached by industries such as airlinesand hospitality for globally-experienced person-nel since there is a shortage of trained execu-tives with global exposure in the country. Therules of engagement for executive search firmshave changed in recent times. For one, the ten-ure of these firms has gone up as companies arewi I I ing to wait for the right cand idate. Second ly,the remuneration model is changing. While thepremier search firms such as Stanton Chase con-tinue to adhere to a retainer model, there aresome that use performance-based I'ees.

Campus RemtitmmtThis is one of the most popular but also one of the most expensive methods ofrecruiting for entryJevel professional and managerial jobs. Firms also offerlateral placements on campuses to recent graduates with previous job experi-ence. Campus recruitments require continuous interaction and informationexchange between the campus and the firm during the 12-month period pre-ceding the final selections. The college gives the firm information about theprofile of students available on campus, their functional specializations, andthe type of courses offered on campus. The recruiting firm on its part gives thecollege information about the firm, its vision, business, future plans, workculture, nature ofjob, career growth opportunities, reputation of the firm, etc.


New Age Recruitment Advertising

Recruitment advertising today is a booming busi-ness with an estimated annual growth rate of over22"/". Recruitment advertisements are often seenby analysts as an indicator of growth in theeconomy. The biggest spenders on recruitmentadvertisements are companies like lnfosys, TCS,and Wipro. Earlier, recruitment advertisementsused to be like statutory notice advertisements,in black and white text, plainly stating the va-cant positions, payt perks, responsibilities, andsometimes the company logo. Most jobs were inmanufacturing, the numbers wanted were few,and job mobility was low. Hence, there was noneed for creative recruitment advertisements.Even the simplest advertisement drew many re-sponses. All this changed in the 1990s. This waswhen there was a boom in the infotech sector inparticular, and the services sector in general. Eventhen companies like TCS and lnfosys riding ontheir high reputation could place a plain text re-cruitment advertisement with a company logoand still be flooded with applications. The sce-nario changed with new lndian start-ups like PatniComputers. These new firms had to be creativebecause no one knew about them and hencethese firms had to sell themselves. They had topersuade potential employees that they werestable employers offering good careers. The lesserknown MNCs like IBM also faced the same rec-ognition problem. The days when the name ofan American company would result in peoplewanting to work for the company were long gone.Even though advertisement of such a firm mayget responses because many peopie are out therelooking for jobs, but these ads would not resultin closures, that is, actual hiring.Now, even the larger players like lnfosys and TCSpay more attention to recruitment advertising tobe more strategic and creative. As firms like

Source: Doctor 2004

lnfosys are hiring in large rrumbers, the companycannot afford to wait for people to walk in. More-over, the firm also needs to differentiate itself fromothers. People read recruitment advertisements.Even a person who is gainfully employed, suc-cessful, and not actively considering a change ofjob, is likely to leaf through the recruirmentsupplements just to check the market. When firmsadvertise a job, they are actually interested inthe people who are not looking for jobs but whomight be attracted by the company or its offerand apply. These candidates do not apply as soonas the advertisement appears; they consider theopportunity, discuss it with family and friends,and then apply after about a week. peoplewho apply within the first three days of theadvertisement's appearance are desperate; theyare not who the firm is looking for. Thus, a firmthat is recruiting is hoping to catch the eye ofthose people who are not really interested in thefirm. Therefore, it is important to be creative indesigning a recruitment advertisement. As busi-ness develops, new types of recruitment adver-tisements are being developed. One challengethat recruitment advertising firms are facing is tolure skilled employees to smaller markets suchas Mangalore or Kerala. ln such cases, recruit-ment advertisements are designed more like ad-vertisements promoti ng tou rism. Another fu nctionthat recruitment advertisements must serve is tocreate a positive image of the company for allthose who come in contact with recruitment ef-forts. The firm must communicate the right cor-porate image to potential employees, since thisis critical to recruitment. Recruitment advertis-ing is one area where corporate image is linkedto very measurable results. The evolution of re-cruitment advertisements has been from 'situa-tions vacant'to 'employer branding'. .


in its pre-placement talk (PPT) on campus as well as through brochures.Microsoft and IBM are among the most preferred companies on top campusesin the country. IBM is known for its high-performance culture, and encouragesa healthy work-life balance through flexi-timing, mobility programmes, andworking from home. IBM also offers career opportunities at both local as wellas global level. Since campus recruitment is a high-cost method, many firmsare carefully analysing the success of their recruitment efforts on various cam-puses. Campuses with successful recruiting experiences for a firm in the pastare selected for future recruitments. 'Successful recruiting experience' refersto criteria such as the number of job offers made versus the number of joboffers accepted, the cost per hire, and the turnover of recently appointed gradu-ates. Based on these criteria, firms are identifying campuses that have beenproductive for them in the past, Firms seek to establish long-term ongoingrelationships with these campuses to ensure a continued availability of talent(see Exhibit 5.3). Apart from recruiting from management and engineeringcolleges, there is a trend towards recruiting graduates from undergraduatecolleges. This is especially true of call centres and BPO firms which arerecruiting in large numbers.

Innovotions in Compus Recruitment

Firms are undertaking 'branding on campus'exercises by establishing long-term ongoingrelationships with selected educational institu-tions because this is a good strategy to attractfresh graduates and to have a pool of talent tohire from.

I ndustry-Academia PartnershipSo far, industry-academia partnerships have beenminimal and limited to big cities and premiercolleges like the llTs and llMs. High economicgrowth has caused firms of all sizes to establishpartnerships with academic institutiorrs across thecountry, even with lesser known institutions.Companies like Xansa, Wipro, lnfosys, and lntelare tying up with a range of institutes in lndia topartner in imparting education and also to gainaccess to graduating classes for the purpose ofhiring. lClCl, the retail banking leader is settingbenchmarks. ln 2005, lClCl invited 60 deans and

professors to Mumbai and spent nine days dis-cussing the change the course curriculum needs.They offered help in creating course content, andalso offered to have their executives teach, as

visiting faculty. lClCl Bank is also planning toprovide internships for teachers for 6-8 weeks tohelp them understand what happens in a bank.

Visvesvaraya Technological U niversity (VTU)in Bangalore has established a small studio fromwhere it has been beaming live classes to 120engineering colleges in Karnataka since 2002.This ensures that engineering education reachesremote villages as wel l. U nder a novel programmecalled 'VtracU', final year students of VTU willbe put through a test to determine how employ-able they are and their scores will be made avail-able to companies like lntel, TELCO, and lnfosyswho have tied up with the university. Compa-nies will then conduct pre-placement interviews

Contd

Exhibil 5.3 Contd

and make a final selection, allthrough the'edusat'(educational satellite) network of VTU. This way,colleges even in the remotest areas with no ac-cess to campus placements become immediatelyaccessible to the corporate world. Firms can con-duct campus placements in a large number ofcampuses without having to physically travel tothese campuses. lntel, Tesco, and Convergys havealready signed up for'VtracU'.

To address the growing requirement of lT skills,lT MNCs are entering top technology campuseswith their own educational initiatives. Softwaredesign firm Autodesk has partnered with Sir J.J.

College of Architecture in Mumbai and theSchool of Planning and Architecture in Delhi.Cadence Design has also developed educationaltie-ups since 1998 with over 100 universitiesaffiliated to their programme. While there hasbeen a growth in the number of lT professionalsin lndia in absolute terms, there is a hugeshortfallof network professionals. As a responseto this challenge, Cisco Systems has institutedCisco's Networking Academy Programme. Thisprogramme is an alliance between Cisco Systems,educational institutions, businesses, governments,and communities. lt is a worldwide initiativeaimed at creating a pool of trained workers thatcan address the growing need of networking pro-fessionals across the world and in lndia. Ciscohas signed a memorandum of understanding(MOU) with Jawaharlal Nehru TechnologicalUniversity in Andhra Pradesh to offer theprogramme at 250 educational institutions acrossthe state within a year.

The dearth of trained workers is forcing majorplayers in the organized retail industry to teamup with educational institutions to formulatecourses specific to the sector. For example,Hindustan Lever Limited (HLL) has formed a stra-tegic alliance with llM Ahmedabad to open acentre for grooming retail professionals that willdevelop teaching and training materials andoffer retail management as an elective. Pantaloon


Retail (lndia) and the Mumbai-based K.J. Somaiyalnstitute of Management Studies and Researchhave collaborated to start a diploma course inretail management. Pantaloon proposes to hireallthe students who get a particular grade in theCOUTSC,

A new trend in lndia is being witnessed. Or-ganizations are hiring fresh BA and BCom gradu-ates from top undergraduate colleges. Firms arefinding that MBA graduates turn out to be veryexpensive since they command very high paypackets. Moreover, they also change jobs morefrequently. Top performers at the best collegesare talented, can be groomed easily, come forlower salaries/ are more loyal, and are good atthinking 'out of the box'. Though these freshgraduates may leave for higher studies after work-ing a few years, companies are willing to experi-ment.

Firms prefer employees with high emotionalquotient (EQ), and not only intelligence quotient(lQ), to compete in the fiercely competitive glo-bal marketplace. Hence, firms are not restrictingtheir campus recruitments to top-rung businessschools, but are hiring from second-rung andthird-rung institutes as well. Some companiesbelieve that students who come from humblebackgrounds and who have had exposure totougher living conditions fare better at decision-making and risk+aking capabilities in a global-ized market when compared to students fromaffluent backgrounds (the typical llM graduate).Firms are also favouring students with better Eeover the toppers. The selection process on cam-pus is dominated by group discussions and inter-views. Some companies are now trying to bedifferent. For example, Pepsi plans to introducepsychometric testing in placements. Tata Admin-istrative Services, lClCl Bank, and HSBC followan assessment centre approach to recruitment,involving a combination of exercises like groupdiscussions, case presentations, aptitude tests,interviews, and personality profiling tools.

Contd


Exhibit 5.3 Contd

Recruitment StrategyThe software industry, faced with a huge hike inthe wages of lT professionals, has also changedits recruitment strategy. Executives with threeyears' experience cost double or even more com-pared to an entry-level professional. Hence, as

part of the hiring strategy, these firms have anincreased focus on campus recruitment, recruit-ing as many as 50% of its workforce from entry-level professionals. Because of this strategy ofrecruiting at entry-levei, it is noticed that even as

wage bills of lT professionals have gone up byaboul 20"h, the average employee costs of firmsare not shooting up with salary hikes. Wipro,Satyam, and lnfosys continue to add aboutB-10% of its workforce every quarter. However,their average employee costs have started

Source: The Economic limes, New Delhi

staying constant since they are hiring more freshgraduates.

Summer lnternshipsDue to the high cost of the campus placementmethod, several firms are using summer intern-ships for hiring entry-level engineering and man-agement students. Since sunrmer interns work onan assigned company project, it provides the firmwith an opportunity to appraise the performanceand potential of the intern. Firms are viewingsummer internships as a means to provide trialemployment to students to determine if theywould want to hire these students full-time oncompletion of their professional degree. Summerinternships are resulting in a number of pre-place-ment offers (PPO) to interns during campus re-cruiting.

Organizations can no longer be sure about the success of their recruitingefforts. As competition for talent becomes intense, both within and acrossindustry, firms are not only introducing innovations in traditional recruitmentmethods (see Exhibits 5.1, 5.2, and 5.3), they are developing new ways ofattracting the attention of potential employees.

NEW APPROACHES TO RECRUITMENT

The new approaches to recruitment are employer branding; special eventsrecruiting; contest recruitment; and e-recruitment.

Employer BrandingIn this age of employee consumerism, the best talent is not available to a firmon demand. There are several firms vying for the best individuals, and insteadof the firm choosing an employee, it is the other way round today. The besttalent chooses or rejects the firm. Therefore, organizations have to makethemselves attractive to likely candidates. This has led to employer brandirg-the intersection of the principles of marketing and brand-building and therigour of HR practices. Companies today have to pay more attention to their'employer brand' and how it is perceived by prospective and existing


employees. Top-rated companies with strong brands have one characteristicin common-they give clear and consistent messages about themselves andthat translates into a strong pull on talents. For example, Cognizant is onecompany that has a clearly defined employer brand called 'Celebrating Work';the message is 'enjoyment in work, not out of work'. The company brand isbuilt around this philosophy of making work fun. For some other firm, themain ingredient of a strong employer brand could be 'great jobs' or 'freedomand autonomy', and so on. Further, great companies send a clear and consis-tent message that talent is valued both before and after hiring.

Marico views former employees as brand ambassadors of the firm. Thefirm invited around 100 former employees from across the world to join cur-rent employees in celebrating its Rs 10 billion turnover mark. The companycan hope to tap this 'alumni network' to help its recruitment efforts.A.T. Kearney threw a Valentine's Day party for students at a business schoolcampus. Through this event the company hoped to convey to the studentswhat it would be like working for this firm. The Valentine's Day party conveyedthe firm's culture of an intellectually stimulating yet fun and down-to-earthplace to work, and it stood out in the huge m€l6e of pre-placement talks thatare part of the placement season.

Even the biggest firms are revisiting their employer brand promise andensuring that it is relevant to their target Soup of potential candidates. Forexample, HLL is a firm that puts in a lot of effort in building its employerbrand. Several firms that are tying up with campuses for creating curricula forspecific subject areas, like ICICI, Pantaloon, Infosys, etc. also serve to buildtheir company brands on campuses.

Building a powerful employer brand requires more than aggressive hiringpractices. Employer branding, rather than a conscious systematic effort, is stillan unexplored and more of a default process in organizations. It is importantfor the brand message to be consistently woven through the company andcommunicated externally as well. This may be done by sharing best practicesthrough media and ensuring that the senior management are highly visible atpublic fora. The responsibility for brand positioning is primarily that of topmanagement. For example, the top management of Marico Industriesregularly participate in speaker opportunities hosted by the Confederation ofIndian Industry (CII) and the All India Management Association (AIMA). AtInfosys and at Wipro, chairmen Narayana Murthy and Azim Premji havecome to epitomize the progressive face of the companies and their values.

Special Events RecruitingWhen a firm is new and hence is not likely to attract candidates, or whenthere is a skills shortage, firms may resort to using special events for recruiting.These include scheduling open houses or organizing career fairs to attract


potential employees and to generate an applicant pool. when a firm stages anopen house, potential employees are invited to the headquarters on a weekendand shown around the facility to give them an idea about the work environmentof the firm. open houses are generally arranged on a weekend since thepotential candidates are usually working and rnay not have time to visit therecruiting firm during-a weekday. career fairs have become very popular inrecent years. A career fair is conducted by a group of firms; each firm'prrbli.ir",its available jobs from its own booth. In India, one of the leading national dailiesregularly sponsors a career fair that g'ives an opportunity to hrindreds of youth!o exp_lo1e employment opportunities. Geneiully, iob fairs target entry-levelhires.Job fairs reduce the cost of hiring since seveial firms ur" pr"."rrt in thesame es. Some colleges arealso o staff entry-le.,Jl positions,

Contest Recruitmentcertain firms announce contests for recruiting employees. Through these thefirms combine their HR strategy with a p,rbli. relaiions (pR) jrategy. Forexample, Google has used contest recruitment with good results. In 2104, ltstarted the contest in september and held it worldwide. A qualification round,with participants from 17 countries, narrowed the final list of contestants to5,000. Successive competitions narrowed the contestants to 50. These 50 con_testlltl received expense-paid trips to participate at Google's headquarters inthe USA. The contest is named 'Google code;am' ,"ii.h is structured toselect the winner as one who can solve a series 6f progressively harder pro-gramming pluzzles.In the 2004 contest, held in mid-oc1ober. the contestantshad to solve three puzzles within an hour. The third puzzle was the mostdifficult. The conteslants were judged both on their speJd and accuracy. Thewinner walked offwith apfize of us$10,000 as well as a job offer. The ThtaGroup also launched contest recruitment for their agribusiiess as part of theircampus recruitment strateg'y. Teams of students from management schoolsacross the country could enter the contest. Each team had to prepare a practicalagribusiness plan and present it to top executives of the-Taia Group. Thewinners got a cash reward.and a job offer.

E-recruitmentThe internet has dramatically altered the ways in which both job seekers and

bout the recruitinthe recruitmentin the use of the

searching) and recruiting candidates (


the economy. The e-recruitment industry is estimated to be worth aboveRs 2 billion. Key players such as monster.com, timesjobs.com, naukri.com,and jobstreet.com have shown a growth rate of 70-l00olo. Thanks to internetrecruiting, newspaper advertisements and employment agencies may be ontheir exit path as the primary source of information abouliob openings andfinding job candidates. The method is cheaper than traditional methods andprovides companies with easy availability of an increasing skill-set. Employ-ees find it easy to apply for jobs online;this gives online recruiting

".r uda"d

edge. Todar, the print medium is being seen more as a branding medium,while the online medium is where the action is for searchingjobs. Most peopleprefer to send resumes online even if the job advertisement appeared in print.Falling cost of broadband, rising demand for e-commerce, a record growth inthe number of internet users) and affordable computers have also iacilitatede-recruitment. A booming job market, the large number of internet users, andsignificant saving in costs are adding to the charm of online recruitment. Onestudy estimated that 900/o of the Fortune 500 companies use some on-linerecruiting and that more than 18 million people post their resumes onmonster.com. web recruiting and searching are not limited to high-techindustries. Companies in emerging sectors such as FMCG, pharmaceuticals,and automotive and spare parts are also going in for e-recruitment. Many newcollege graduates view the internet as a major source for locating job opportu-

ftie,s. Until just three years ago, this medium was looked at only forlunior-level employees, fresh graduates, and middle-level managers. Now, evencompany vice-presidents are being hired through this route, though not veryoften. The three most common methods used for internet recruiting are jotboards or job placement websites, professional /career websites, and companywebsites (see T[ble 5.3).

Job boards provide a place for employers to post jobs as well as search forcandidates. Popularjob boards include wwwjobsonline.com, wurv.naukri.com,and www.monster.com. People looking for jobs can also post their resumes onthese websites as well as search and apply for jobs online. Large job place-ment websites report a huge increase in the number of resumes posted overthe years. For example, naukri.com has over 6.5 million searchable resumeslisted on the site, over 200,000 jobs attracting traffic, and over 120 millionpage views a month as on 24June 2006.

Many professional associations such as the Society for Human ResourceManagement (www.shrm.org) or the American society for Training andDevelopment (www.astd.org) have employment sections at their websites.Some private corporations also maintain specialized career or industry websites.For example, the website of a private employment agency that specializes inproviding IT and software professionals will focus only on jobs in this sector.Access to these websites requires candidates or recruiters to pay a fee and register.


Table 5.3: Internet Recruiting Methods

Job Boards{obPlacementWebsites

. Useful for generating applicantresponses

r Many individuals accessing sitesare only Job lookers', not seriousapplicants

Professional/Career Websites

r Thrgets applicants interested ina specific industry or profession

r Reduces number of less

qualified applicantsr Saves recruiters' time and efforts

r Since professionals other than thetarget applicants do not normallyaccess the website. they remainunaware of the employmentdevelopments in these professions

CompanyWebsites

r More effective and efficient. Can be put up inexpensively

compared to printr Firm may be able to attract

individuals otherwise inaccessibler Attracts the attention of candidates

worldwide

. Many employer websites aredifficult to navigate since theydo not present career andemployment information

r May lead to negative image of thethe organization if not updatedregularly

Adaptedfom: Mathis andJackson 2003; Mondy, Noe, and Premeau.r 1999

Most organizations today have their own websites. These company websitesusually have a recruitment section. A typical organizational homepage pro-vides information about the company, its products and services, career andemployment information, application procedures, qualifications sought,experience required, and benefits provided. Availability of all this informationincreases the quality of applicants since potential candidates tend to matchtheir own values and qualifications with those of the firm. If the candidatesfind a mismatch, they self-select themselves out. Many firms have made theirrecruitment webpages interactive.

Many company websites also include online resume templates that can becompleted and submitted through the internet, obviating the need for applicantsto post, e-mail, or fax their resumes. Cisco receives a large number of resumesonline through its website. IBM hires approximately 1,500 college graduatesevery year through its website, called 'Club Cyberblue'. The page targettingcollege graduates has general company information rather than job postings.Candidates who are interested can find out when IBM will recruit frorn theircollege campuses. The page also helps students prepare resumes by providingthem a form that includes all the information that is important to the company.

The recruiting portion of company webpage is part of the overall recruit-ment strategy of the firm. Therefore, it is important that the website is designedto market the jobs available in the firm effectively. Some firms go a step aheadto include pre-screening tests as part of their online recruitment process.

Acquiring Human Resources 2gs

On theil part' job seekers have also become aggressive users of the iirternet,using it to their advantage in their search for jobs by setting up their ownwebpages or blogs, called 'websumes'. Candidaie..rr" th"ir *"brrrrn", to ,sell'theii candidacy fo, a job. In the course of their online job search, these candi-dates often encourage the firms to 'check out my website'. There, the candidatesmay post standard resume information about themselves, supporting infor-mation, and sometimes a video where they introduce themselves to prospectiveemployers.

The popularity of the internet as a method of recruitment has certainlyskyrocketed. This trend will further expand in future. Since web-based joLadvertisements produce so many applicants, many firms are installing applicanttracking^systems (ATS) to support their online and offline tecruiting ifforts.The ATS [elps employers monitor applicants, collect and report applicantdata, and cleate various recruiting-related reports such as .o.t-p"t-hi.e andhire-by-source.

A well-known ATS is recruitsoff.com. It is an e-recruiting applications serviceprovider (ASP) that hosts the job sites of firms that are toot i"g for employeesand are its clients. As an ASP, recruitsoff.com posts the job opening. of it"client firms, collects the applications received, ind pto.rid", an automatedsystem to evaluate, rank, and match job candidates with specific job openings.In other words, it screens the resumes, compares them with thl job-requiie-ments of the client firm, and identifies high-priority applicants. Thus, ,qSp isthe electronic version of a placer ent agency. However, no method is foolproof.See Table 5.4 for the advantages and disadvantages of internet recruiting.

Table 5.4: Advantages and Disadvantages of Internet Recruiting

fnternet Recruiting

Advantages Disadvantages

OrganizationalPerspective

r Cost-effective compared to newspaperadvertising, search firms, etc.

r Generates more applicant resumescompared to newspaperadvertisements

r More timely; responses start comingin the day the advertisement isposted on the internet

. Saves time, as recruiters canrespond to qualified candidatesmore quickly

r May get applications from moreunqualified candidates

r May create additional work forHR recruiters requiring them toreview more resumes and answermore e-mail

. Many individuals accessingwebsitesare just browsing and are not lookingfor new jobs seriously

r May need specialized applicanttracking software to handle increasein applicants

Contd


Table 5.4 Contd

Internet Recruiting


r Recruiters can request additionalcandidate information

r Job postings may be viewedworldwide; hence, the firm gets access

to potential employees worldwide

EmployeePerspective

r Allows individuals quick access toinformation on various job possibilitiesround the clock

r Lets candidates look for jobs withouttaking any public or visible action

. Helps lessen the amount ofinterpersonal awkwardness associatedwith soliciting job offers in person

r Potential applicants from othergeographic areas and countries canview job openings posted on theinternet

r Saves applicants time as they canrespond quickly to job postingsby e-mail

r Individuals from disadvantagedsections of society such as lowersocio-economic groups may havelimited internet access; resultingin under representation ofthese sections

r Internet recruiters may not bereaching a diverse workforce

Adaptedfrom: Mathis andJackson 2003; DeCenzo and Robbins 2005; Dessler 2005; Feldman and Klaas 2002

Outsourcing the Recruitment FunctionAs part of outsourcing HR activities, many firms have outsourced theirrecruitment function. For example, firms in the retail industry, realizing thecomplexity of recruitingin large numbers, have increasingly begun to outsourceits recruitment process to consultants. The industry is growing at 25-30010annually and is estimated to generate over 50,000 jobs per year for the nextfive years. Until recently, HR managers relied heavily on employee referralsand walk-ins. Since the sector has been facing the problem of getting the rightpeople, it has begun to use skills assessment and psychometric tests. Theassessment process based on these tests is largely outsourced to consultants. Itis estimated that over 800/o of all recruitment will shift to consultants by 2007.Company HR managers will conduct final interviews only. Consultants usetests to evaluate candidates on qualities such as confidence, communication,and personality. Role-plays in sir,nulated sales situations are used to assess, forexample, customer orientation of sales personnel. Scores on these parameters


are matched with the job profile and benchmark scores to find the rightcandidates. Outsourcing is also cost-effective, which is one of the ."uro.r, *:hyHR managers in retail firms are using the services of expert consultants.

Recruitment methods help a firm generate an applicant pool. The organi-zation must then select the best candidate from those available. In making theselection decision, one or more of the following methods of employee seleitionmay be used to obtain information about applicants.

METHODS OF EMPLOYEE SELECTION

The methods of employee selection are application blanks; employmentinterviews; employment tests; work sampling; reference checks and recom-mendations; assessment centres; and physical examinations.

Application BlanksDuring recruitment, candidates are required to submit application forms, orblanks, to express their interest in the vacant position. Appiication forms helpthe organization pre-screen the candidates before u -ore extensive selectionprocess can begin. Pre-screening helps in scaling down the size of the appli-cant pool. Some firms conduct a pre-screening interview before asking ihecandidates to fill a detailed application form. Application forms of differentfirms vary in length and sophistication. All application blanks ask for infor-mation such as applicant's name, educational qualifications, age, experience,etc. The application blanks identify the applicants who fulfill the minimumnecessary conditions of the job and predict the candidates who will succeedon the job. For example, if a doctoral degree is considered essential for alecturer's position in a university, a candidate without a doctoral degree willbe eliminated from further consideration. To predict the candidates who willsucceed, the weighted application blank (wAB), a variation of the traditionalapplication blank, is used. The WAB is designed to systematically assign a scoreto each candidate based on the data provided in the blank. These forms helpin differentiating between potentially successful and potentially unsuccessfulcandidates. The scoring system for the WAB is developed by comparing thehigh and low performers who are currently employed by the organization ona variety of characteristics (education, experience, etc.). Each item in the blankis assigned a weight based on the degree to which it differentiates between thecurrently high and low performing employees on some criterion of perfor-mance, such as turnover or job performance. For example, assume that theHR department of a firm is interested in developing a wAB that will predictwhich applicants for the job of computer operator would stay with the firm, ifhired. The HR personnel would scan the application forms of those computeroperators that stayed less than a year with the firm and of those that stayed at


Application blanks

Employment interviews

Employment tests

Work sampling

Reference checks and recommendations

Assessment centres

Physical examination

Figure 5.4: Methods of Emptoyee Selection

least five years item by item to find out how each type of employee hadresponded to identify those items that differentiate the two groups on the per-formance criteria of interest, that is, tenure with the firm. Weights are assignedrelative to the degree to which each item differentiates between the two groups.When there is 'no difference'between the long-tenure and short-tenure groups,that item is assigned a weight of zero. When there is just a srnall differencebetween the groups, a weight of one is assigned, and so on, with the highestweightage to the item or characteristic on which there is the biggest differencebetween the two groups of employees. Each applicant is assigned the finalscore on the application blank by totalling the weights of each item. Thosewho meet the minimum requirements proceed further in the selection process.

Different WABs have to be developed for different jobs. Each organizationwill also have different application blanks for say, technical personnel, mana-gerial personnel, or for hourly workers. The firm should be careful to ensurethat no discrimination is made on the basis of colour, caste, religion, etc., theonly exceptiorr being if these are bona fide occupational qualifications (BFOQ.For example, until very recentl/, gender was the BFOQfor defence services,where only men were considered, exceptin the medical corps. The firm shouldalso take care to ask only for information that will help the organization makea better job-related evaluation of the applicant.

Employment InterviewsInterviews are the most widely used method of selection. They let the organi-zation meet the potential employee face to face and obtain information onvarious aspects such as knowledge, attitudes, communication ability, etc.Often, however, one or two attractive qualities of the candidate lead theinterviewer(s) to make a decision in the candidate's favour in an interview.Interviewers often are biased toward people who are like them or who havehad similar experiences. The interviewers also take the opportunity to lookgood rather than to know the candidate. They tend to boast that their firm hasa particular culture when, in fact, it is actually the aspiration. Yet, interviews


are indispensable to selection. Most firms or managers would feel extrernelyuncomfortable hiring an employee without interviewing him or her. Microsoftis known for asking'not so typical' questions in a typical interview. Some ofthese abstract questions have no right or wrong answers but test the ability tothink on the spot. Microsoft-style interviews have been adopted by severalorganizations across the world.

Selection interviews may be strucfured or unstructured. An unstructured ornon-directive interview does not have any format or sequence in which ques-tions are asked. Interviewees for the same job may not be asked the samequestions. Structured or directive interviews, on the other hand, provide theinterviewer with a standard list of questions to be asked of all applicants.

Interviews may aiso differ from each other based on their 'content' or the'focus of questions'. Situational intemiews present the candidate with a hypo-thetical or a real situation helshe might encounter on the job in question. Thecandidate is asked to describe how he/she would respond in such a situation.Behauioural interuiews ask the candidate to relate an actual situation that theyhad encountered in the past and describe how they had reacted to that situation.For instance, a candidate may be asked to describe a situation in his/herprevious job where the candidate resolved a conflict with a custorner. In job-related interaiews, queqtions relate to past experiences but not to a hypotheticalor real situation. These are designed to assess an applicant's job performance.Stress interuieu)s are designed to make the candidate uncomfortable during thecourse of the interview. This type of interview is used to assess the applicant'sstress tolerance. There is no 'pure' form of interview. Interviewers may shiftthe focus of a single interview session from job-related to stress to situational.

Another point of difference between interviews is the manner in whichthese are conducted or administered. Personal interuiews are one-to-one wherethe interviewer and interviewee are the only two participants. In a sequentialinteraiew, several persons interview each candidate in sequence before adecision is made. A common form of interview these days isthe panel or boardinteruiew, in which a single candidate is interviewed by a panel or board ofinterviewers. The final decision is arrived at by combining the ratings of thepanellists. The different types of interviews are depicted in Figure 5.5.

Employment Tests

Companies are increasingly depending on 'psychometric tools' to get the rightperson with the right attitude for the right job (see ExhibitS.4). These testssupplement the findings of conventional interviews and help indicate thecandidate that fits best. The tests also seek to determine certainiharacteristicsof applicants which may not be obtainable from the resume. The characteristicsassessed through tests range from personality to ability, interests, intelligence,


Figure 5.5: Classification of Types of Employment Interviews

1. Degree ofstructure

2. Content or-focus ofquestions

3. Conductionof interview

o Situationalr Behavioural. Job-related

r Stress

Use of Testing

The present business scenario in which compa-nies operate, and the high rate of attrition, makeit crucial for companies to recruit candidates withthe right technical skills. Along with technicalskills, however, it is important that candidatesdemonstrate the attittrde and the behaviouralpattern that fits into the company culture. Firms

require employees who fit job requirements veryprecisely, not just in terms of knowledge, skills,and background, but also in terms of personalattri butes.

Psychometric tests are designed to measure

one or more psychological attributes of individu-als, like interests, aptitude, ability, personality,etc. These tools help employers understand howthe candidate shall behave in a particular teamor situation, relate to others, and approach and

solve problems. The usage of psychometric tests

may differ from company to company. However,the basic purpose of these tests, when applied byan organization, is to help screen candidates at

the initial stage of recruitment and to understand

in Industry

the personality of a prospective employee at theselection stage. lnformation obtained from psy-

chometric tests provides additional informationthat helps in recruiting the best person availablefor the job. Personality tests can help predict theprobable success of an individual who intendsto join the firm. There has been an upsurge in

the use of testing in occupational selection, es-

pecial ly the use of personal ity tests, si nce the late

I 980s and early I 990s.Using tests reduce time and cost of hiring by

screening out candidates who do not have thequal ities requ i red for organ izational membersh ip.

A description or profile of the candidate is pre-pared on the basis of his or her answers to thepsychometric test and is used to infer whetherthe individual is, for example, a team worker,observer, or analyst. The typical features of each

description are assessed and an immediate feed-back is available to the selection committee.

Personality tests are the most common formof psychometric tests employed by organizations.

Contd


Exhibit 5.4 Contd

Results of personality tests are especially usefulwhen used during the interview. The candidatemay be given the opportunity to discuss poten-tial strengths and weaknesses during the inter-view and also to respond to concerns of thepanelists. The National Thermal power Corpora-tion provides the Thomas personality profiles ofeach candidate to the panelists, who may dis-cuss certain aspects of the profile with the candi-date. However, the decision to recruit or not torecruit must not be based solely on the results ofthese tests.

When psychometric testing was introduced inlndia, it was hailed as an important tool in therecruitment process of firms. Several pharmaceu-tical firms (such as Eli Lilly, Lupin, Sun pharma,Dr. Reddy's Laboratories, Glenmark pharmaceu-ticals) use psychometric instruments in hiring.Clenmark uses tests also to make decisions aboutpromotions and to provide career growth oppor-tunities. However, it is still the big firms, theMNCs, and some lTeS firms that use tests tor theirrecruitment process. Tata Consultancy Services,the UB Group, Bharti Airtel, LG, HCL lnfosystemsare some such firms.

Some tools that are popular among lndianfirms are the Myers-Briggs Type lndicator (MBTI),

source: hxp://business.timesonline.co.uk/printfriendty/O,,2020-83lo-g7723g-B3l0,0o.htmi , accessed on1B July 2006; http://www.expresspharmaonline.com/20060630/pharmalifeTl .shtml , accessed on 1B July 2006;Jasrotia 2003

the Sixteen Personality Factor euestionnaire(16PF), the FIRO-B Assessment, Thomas profil-ing, Picture Test, and lnkblot Test. While MBTIand l6PF are longer, Thomas profiling tools likehuman job analysis, personnel profile analysis,and team analysis are quicker. Usually, firms usetesting for middle- and senior-level managementrecruitments. However, some firms are alsousing these tests for entry-level selection. lt isimportantthat a trained person conducts andanalyses the test results and judges the candi-dates.

When a person is being considered for pro-motion, the test can evaluate his or her readinessfor the next level by identifying skill gaps andproviding learning opportunities. The need forpersonality tests is being increasingly felt as ev_ery organization has its own culture and an indi_vidual joining the organization needs to adapt tothe culture. The tests can be used to assess person-organization fit to supplement person-job fit.

Psychometric tests also help manage culturalissues in a firm. Each organization has its o-wnunique culture and the HR department wants tomake sure that only those people are hired whocan adjust well. Tests help assess the culture fitof the candidate.

etc' Hence, there are personality tests, achievement tests, interest inventories,and so on. Nlany firms irrespective of size or the type ofjob obtain informationabout candidates through the use of employment tests. Tests are not consideredthe sole basis for appointments. However, they provide key information abouta candidate's personality, emotional intelligence, ability to work in a team,and propensity to stay with the firm. Experts believe that use of tests duringselection process helps bring down attrition. Wipro uses psychometric tests totest communication skills and analytical capabilities to hire senior staff forjobs involving people management. Some of the firms that use psychometrictests are the Tata Group, the Aditya Birla Group, Godrej, and Coca-Cola India


Ltd. The Directorate General of Shipping has introduced a psychometric testcalled the Merchant Marine Personality Evaluation (MMPE) with effect from1 April2006. All candidates for the merchant navy have to take this test. Thetest evaluates adaptability, emotional strength, tendency towards anger andaggression, and tolerance of frustration, anxiety, depression, and loneliness,because those applying for a sea-faring career rnust have the right mentalmake-up and attitude to withstand the vagaries of life at sea. Increasing incidentsof suicides, stabbings, and of seamen reported missing or thrown overboardled the Directorate General of Shipping to introduce this test.

The process of developing a test that measures such characteristics as

attitudes, for example, is difficult, time-consuming, and costly. Therefore, manyfirms purchase ready-made tests. Administering and scoring these tests alsorequires expertise. There are 'testing firms'which specialize in administeringparticular tests. These testing firms administer, score, and prepare a profile ofeach candidate for a fee. Several organizations hire testing firms to administertests as part of their selection procedure. For example, National Thermal PowerCorporation (NTPC) has a testing firm develop Thomas Profiles of candidatesbefore it interviews them. The candidate's profile is given to the interviewpanel as information about the candidate.

For certain jobs, it is important to assess a candidate's honesty or his or herproneness to dishonesty. These tests may be classified as attitude tests sincethese seek to assess whether the candidate approves of certain behaviours likestealing, bribery, etc. Individuals seeking jobs in treasury, security services,and defence services, etc. are tested for their integrity and tolerance fordishonesty. After recent incidents of fraud involving classified data in a fewBPO firms, a lot of importance is being given to the assessment of candidates'honesty. Firms are hiring professionals to check the credentials and criminalrecords of prospective employees.

Some recruiters pay attention to the extra-curricular activities in which a

candidate is interested. Although extra-curricular talents such as qtizzing,classical dancing, singing, painting, sports, etc. do not mean performance willbe high, they provide clues to the personalities of candidates. For example,creative pursuits like painting may signal that the candidate may bring some

of that creativity to work, and intellectual pursuits like astronomy usually makefor an ability to grasp complex problems. Competitive team spirit is a person-ality trait that is valued by the corporate world and is reflected in a passion forcompetitive team sports like football, cricket, etc. At Walt Disney.India, extra-curricular interests often dovetail with the job, especially if the individual is

given an assignment dealing with sports, music, art etc. The firm prefers well-rounded individuals who also have an inclination for non-curricular activities.

Acquiring Human Resources 2gJ

Work SamplingIt requires the candidates to actually perform a part (sample) of the job tomeasure how well.the candidate performs the job. work samples -!urrrr"actual on-thejob behaviour and can be used successfully to predicla candidate,sactualjob performance, if hired.

Reference Checks and RecommendationsMost application forms require the candidate to provide names of one or tworeferees whom the organization can contact to get information about thecandidate. The referelles may be work-relateJ (former employers andcolleagues) or personal (friends and family). The purpose of refeience checksis to verify the factual information provided by the applicant as well as to findout if the applicant has hidden potentially damaging- information, such as acriminal,record. organizations may or may not

".1nu1ly check the credentials

provided !r ttt. applicants. when they do, it may tale many forms. Somefirms prefer to verify the current position and salary of an individuai bycontacting the current employer of th r candidate overthe telephone.

As most industrieshile on a large scale, companies are faced wlth the grow-ing_menace of fudged cvs. The problem affects the IT, Bpo, retail, bariking,and insurance sectors, among others. According to recent industry estimatei,70-I20lo of recruits submit fake CVs, fake reference letters, fake ceitificates, oroverstate their skills and experience. Most cases of such fudging in the ITindustry occur among those with one-to-three years of experience. Firmsspecializing in checking the background of potential employees have comeup. Most of the requests received by such firms are from tire IT and Bpoindustries; the rest are flom banking, retail, and insurance. The backgroundscreening business, which did not exist a few years ago, is now estimat"d to b"worth about Rs 750-1000 million a vear.

More recently, firms have treen glning serious attention to verify the ante-cedents of those *hgT they hire. Ernployee frauds of the kind wiinessed byHSBC and other BPo firms such as wipro spectramind (April 2004) andMsourcE (April 2005) are the most immediale reasons for this increasedemphasis on employee verification. In the HSBC case, the employee had

experts recommend going beyond verification to analysing all the data aboutthe candidate to minimize risk. For example, if a candid-ate has worked incompany A in a particular function, then the company B he or she is now


joining can understand the risks posed by the candidate better because of theinformation the candidate may have gained in company A. More firms are

utilizing the services of pre-employment screening firms as instances of false

credentials provided by applicants increase.

Assessment Centres

These require managerial candidates to attend two-to-three day simulationsin which l0-I2 candidates perform realistic management tasks under theobservation of experts. Each participant in the assessment centre is appraisedon various characteristics such as leadership potential, problem-solving ability,and decision-making skills. Typical exercises in assessment centres include in-basket exercises, paper-and-pencil tests, presentations, interviews, grouPdiscussions, etc. An assessment centre is an effective tool for hiring employeesat managerial and high{evel positions. Several firms use an assessment centreas a tool for selection as well as development.

Physical ExaminationMost firms require the candidate to undergo a medical fitness test once anemployment offer is given. The potential employee is required to submit themedical certificate when helshe starts work or within a specified period ofstarting work. The job offer is conditional till the medical certificate is submit-ted. One objective of pre-employment medical examinations is to ensure thatthe applicant does not have any medical limitations (such as a heartcondition) that may affect performance on the job. A medical examinationalso helps establish a record of the applicant's health for future insurance orcompensation claims (for example, an individual whose medical reportestablishes that the person suffers from some lung disorder can not claimcompensation from the firm for this condition).

For certain jobs, physical standards are considered bona fide occupationalqualifications. For example, those wanting to join the police services or thearmy must meet the criteria of minimum height. In such cases, a medicalexamination is conducted to screen out those who do not fulfill the minimumrequirement of physical standards. Only those who clear this stage go throughthe rest of the stages in the selection Process.

Firms use a combination of selection methods in making a hiring decision.The choice of methods depends on several factors such as cost of the method,job in question, skills on which candidate is to be assessed, time, and availableexpertise. These methods may be used in sequence or simultaneously. Theways in which the information obtained from different selection methods maybe combined to arrive at a hiring decision is discussed later. Before that, let us

look at some innovative selection tools gaining popularity.

NEW

Acquiring Human Resources 2gs

APPROACHES TO EXECUTIVE SELECTIONThe quality of leadership of an organization is a critical determinant of orga-nizational success. The selection of top management, especially that of thechief executive officer (CEO), is closely observed by shareholders, competi-tors, media, and business scholars. We regularly come across news items inThe Economic Times and other business newspapers informing of top-levelmanagement exits as well as entry into new firms. The exit of a top-levelexecutive or a succession event can influence the stock price also.

Executive recruitment and selection is a costly exercise for any firm. Alarge proportion of executive placements result in failure, measured in termsof either performance or turnover. Though it is difficult to estimate the totalcost of selection failures, it is reasonable to believe that it may run into severalhundreds of thousands in a single year. Selection failures represent selectionerrors. The selection errors include the cost related to the fees of the executivesearch firm, compensation packages, and also the high severance pay thatfirms sometimes have to pay to a new executive who has failed and has beenasked to leave the organization. In addition to these tangible costs, there areinfangible costs associated with selection errors. These include the cost of thenegative impact on organizational image as well as on motivation and moraleof the key people of the firm. Since the failure rate of executive selection isquite high, many firms are forced to retain under-performing executives merelybecause replacing this executive may be too difficult or too risky. The intensecompetition between firms to grow and succeed has led to an increased per-formance pressure on executive selectors. One factor that has contributed tothe problem of finding executives who will be successful is the labour marketcondition. The high rate of economic growth along with demographic realitieshas resulted in a short supply of quality leaders. Moreover, the new economyhas created a huge variety of new business sectors. Therefore, even if thenumbers are available it is difficult to find leaders who have the experience ofworking with a particular sector for any reasonable period of time. Therefore,firms are considering alternative sources of leadership potential, such as

candidates from competitors or from firms in unrelated industries. We can nolonger look at executive staffing process as a 'rational' decision. More oftenthan not, executive selections rely on organizational values and ideologies,formal and informal institutional rules, historical precedents, etc. The selec-tion, therefore, is not necessarily linked to the strategic needs of the firm.Executive selection, like selection for other jobs, may be seen as a two-phase

Process. In phase l, talented candidates are shortlisted from either the inter-nal or the external labour market, and in phase 2, the final selection is madefrom the shortlist.

Organizations vary in their preferences and practices with regard to the useof formal selection tools. Given the importance as well as cost of executive


lools for Executive Selection Decisions

Swiercz and Ezzedeen (2001 ) of Ceorge Wash-ington University proposed the use of decisionsupport systems (DSS). lt is believed that usingan advanced tool such as DSS helps the process

of executive selection. ln earlier times, manage-rial decision-making was considered more artthan science. However, in contemporary man-agement, decisions have become more complexand demanding. New decision tools are requiredto address the complex nature of decisions. Thepioneering work in the field of decision sciencewas done by Herbert Simon. With increasingcomplexity and a need to rationalize decision-making, ncw tools such as Statistical DecisionTheory and Operations Research developed in

the 1960s, also called the 'age of rationalism'.Management science provided a scientific and

tech nology-supported approach to decision-ma k-

ing. This was far removed from the earlier ap-proach to decision-making that was based on

Source: Swiercz and Ezzedeen 2001

intuition and experierrce. Management science-the new approach to decision-making-beginswith the formulation of a problem. Different vari-ables related to the problem are assigned values.A mathematical model is designed that representsthe decision situation in all its implications. So-

lutions are derived from these mathematicalmodels. These modelling procedures have theability to allow a better understanding of the im-portant and relative impact of environmentalvariables.For several years, the only decision tools avail-able were of a statistical or operations research

nature. lt was in the 1970s that Thomas Saaty ofthe University of Pittsburgh began work on themathematical foundations of a process he calledthe Analytic Hierarchy Process (AHP). ln con-junction with computers, the AHP has proven tobe a very useful executive selection decision sup-port tool.

selection, efforts should be made to minimize selection errors or the failure rateof selection. New approaches for making selection decisions are designed toachieve the goal of making effective selection decisions. Letus now discuss foursuch approac,hes: (1) computer-aided decision support systems; (2) competency-based approach to selection; (3) virtual hiring; and (4) person-culture fit.

Computer-aided Decision Support Systems

From our knowledge of organizational behaviour, we know that decisions can

be structured or unstructured. Structured decisions are possible in situationsin which one can determine all the variables involved and solve the problemby using a mathematical formula Unstructured decisions have to be taken insituations filled with uncertainties and conflicting goals. The decision to select

an executive is an example of an unstructured decision. These decisions cannotbe made with the help of a mathematical formula. Most decisions that a

manager has to make are a mixture of structured and unstructured factors.


The statistical decision tools available lend themselves well to an analysisof structured decisions, but not to semi-structured or unstructured decisions.A useful executive selection decision tool is the Analytic Hierarchy Process(AHP). One of the applications of the AHP theory is Expert Choice (EC), acomputer-aided decision support system (DSS), which is used regularly byorganizations such as IBM, GM, NASA, and World Bank. The AHp requiresthat the various fa,ctors or criteria important for making a decision are arrangedin a hierarchical'form. Expert Choice helps provide an overall view of thecomplex relationships in a decision situation and allows the relative importanceof factors at each level of the hierarchy to be compared and assessed. Thesteps followed in the AHP are presented in Exhibit 5.6.

The advantage of AHP is that through the mathematical process, ExpertChoice clearly showcases the differences between the candidates based onthe scores attained by each candidate with respect to different criteria. Themain Iimitation of the AHP is that the pair-wise comparison process can bevery tedious. However, a good facilitator can manage it well through ExpertChoice. The process has the advantage of increasing the probability of decision-making by consensus.

Organizations vary in their preferences and practices with regard to the useof forrnal selection tools. Given the importance and cost of executive selec-tion, efforts should be made to minimize selection errors or the failure rate ofselection. The AHP tool proposes to provide a tooi to improve the successrate of executive selection.

Competency-based Approach to SelectionThe most common indicator of executive talent is an individual's past recordof success. A firm hires an executive from another firm because of his or herperformance and reputation. However, the past is not a perfectly accuratemeasure of future performance. Hiring experienced executives from outsidethe organization to fill key positions does not always result in a positive out-come. often, new hires fail to excel in the firm. Several firms such as LOrealarrd Unilever use the competency-based selection approach to try and avoidthis pr-oblem. Competency assessment helps measure an individual's accom-plishment accurately. A competency is a 'set of observable performancedimensions, including skills, attitudes, knowledge, or abilities that are linkedto high performance, and provide the organization with sustainable competi-tive advantage'. Competencies are characteristics demonstrated by superiorperformers. These characteristics determine people's long-term behaviour andthus their long-term performance. The competency-based approach to selectionfocusses on observable behaviours, which are manifestations of these under-lying characteristics. Competencies are used to predict success.


Steps Followed in the Analytic Hierarchy Process

1 . State the goal of the decision clearly. For

example, the goal may be 'to select a gen-

eral manager'.2. Develop a list of criteria or factors that are

important in making the decision. The crite-ria may be, for example, the skills of the can-

didates and the behaviours related to these

skills. The criteria should be mutually exclu-sive but collectively exhaustive. They shouldbe clearly related to the demands of the job.

3. Define the criteria in clear and operationalterms. For example, 'managerial skills' maybe defined as 'effectively communicatingthrough speech and writing'.

4. Structure the problem as a hierarchy of cri-teria or options. The goal of decision-mak-inB is at the top of the hierarchy. ln the middle

are the component factors and sub-factors.At the bottom of the hierarchy are the deci-sion options. ln selection, the decision op-tions are the candidates.

5. Follow the prioritization process. This in-volves assigning values or weights to the

Source'. Swiercz and Ezzedeen 2001

criteria and sub-criteria based on their rela-

tive importance. Criteria are compared us-

ing the pair-wise comparison process. Expert

Choice helps in pair-wise comparisons. Cri-teria or sub-criteria are compared with othercriteria or sub-criteria at the same hierarchi-cal level with respect to the property at the

next higher level of hierarchy. For example,

the three main criteria for selecting a gen-

eral manager (goal) may be technical skills,managerial skills, and leadership ability.These three skills (criteria) will be comparedwith each other through the pair-wise com-parison method with respect to their relativeimportance for the position requirement ofgeneral manager. Pair-wise comparisons are

used to compute the relative weight of each

criterion assigned by each decision-makerand by all decision-makers collectively. A

mathematical process compares each option(candidate) on each of the criteria and rates

the options from 'most preferred' to 'leastpreferred'.

The competency approach attempts to identify broad executive competen-

cies, some of which are generic and needed of all candidates by all firms whileothers are more idiosyncratic firm requirements. This approach incorporates

situational conditions and seeks to match a candidate's competencies to the

requirements of the situation, and therefore to help making a selection decision.

Thus, a competency-based approach allows managers to take account of the

business needs of the organization and use measurement techniques forrecruitment and selection that are objective, compared to traditional methods.

Changing business dynamics cause changes in the competencies required ofexecutives. The process used to identify competencies associated with high

performance on the job is based on the following assumptions.

o In every organization, some employees perform better than others.o High performers work differently from the others.


o Differences in performance relate to specific characteristics (competencies)of outstanding performers that are often not present in others.

The best way to identify the competencies of high performers is to studythem systematically, measure their performance, document their characteristics,and convert these characteristics into selection criteria for new hires. A firmmay follow certain steps to develop a competency-based selection approach(see Exhibit 5.7).

It is generally believed that the competency-based selection methodrequires a high initial investment. However, in the long run, it results in severaladvantages such as lower employee turnover, faster adaptation to change byemployees, and competitive advantage for the firm.

Virtual HiringCompanies in the IT sector have a huge demand for professionals and hire inlarge numbers. The industry recruits around 100,000 persons annually, about650/o of whom are fresh graduates. To hire such large numbers, firms have tovisit a number of campuses, sometimes as many as 100 campuses. IBM Indiavisits 68-70 campuses each year while Wipro Technologies visits 160 colleges.Infosys received more than 10,000 resumes from 70 universities across the

Steps in Competency-based Selection

r ldentify target jobs.. Develop competency model(s) for the target

jobs. This may be done by having an expertpanel of people familiar with the target jobrequirements brainstorm to identify keyaccountabilities as well as the competenciesemployees need to perform on the job.

r lnterview current incumbents of the targetjob(s). The purposes are to confirm the com-petencies identified by the expert panel as wellas to record examples of these competenciesas demonstrated in actual work situations.These interviews that have these purposes arecalled behavioural event interviews (BEl).

r Use data from the expert panel and BElto iden-tify behaviours and personality characteristics

Adapted from: http://www.mom.gov.sg/NR/rdonlyres/C22BCEA5-8699-4EgE-8240-4B6ACC475OCt /1410/2632_RecruitmentSelection.pdf , accessed on 21 luly 2006

that distinguish superior performers from thosewho are average or low performers.Validate the characteristics (competencies).This may be done by assessing a sample ofsuperior and average performers on the com-petencies identified. lf the assessment (ratingsor rankings) show that high performers rankhigher than average performers on these com-petencies, the competency model can be usedfor selection.Obtain data on applicants with respect to thecompetencies in the competency model. Oneor more of the various methods of selectiondescribed eail ier can be used for obtai ning thisdata.


world for 100 internships it had on offer in 2005. These firms are now lookingat virtual hiring using video conferencing. It is not possible for the firms tophysically visit all campuses. Infosys already hires interns through videoconferencing, and also senior managels in some cases. With the cost ofemployee selection becoming very high, some organizations are opting forinterviews through video conferencing. This saves cost as well as the travel-related time of interviewers. However, video conferencing requires that the

interviewer as well as the interviewee have access to video conferencing.

Person-Culture FitThe objective of selection is to hire the 'best' or the 'most suitable' candidate

for the job in question. It is reasonable to conclude that an employee with the

right skills will perform the job successfully. When employees are successful

in their jobs, it results in increased productivity, lower employee turnover,and better products and services.

Until now, we have focussed on hiring employees who have the necessary

knowledge, skills, competencies and other requirements identified throughjob analysis. This is the traditional approach to employee selection, also called

the person-job fit. Person-job fit seeks to match skills and characteristics of an

employee with those required for performing the job successfully and which

are provided for in job specifications.A new approach to employee selection is emerging. This approach is based

on the premise that individual job performance is not a function of personjobfit alone. Rather, it also depends on the group/team he/she works with, as

well as the culture and values of the organization. Therefore, it is also impor-tant to assess person-team fit and person-culture fit. For example, Southwest

Airlines states, 'We value people who like to have fun'. This hiring philosophygoes beyond the individual-job fit to reflect company values. The process ofselection does not take place in a vacuum. It has to be placed within the

context of the job, group/team, organizational culture, and also the interna-

tional culture. In selection, the following types of 'fit' should be assessed:

o person-job fit;o person-group fit (match between the candidate and the immediate work

S'roup);. person-organization fit (fit between the individual's personality and the

cultural values of an organization); ando person-international culture fit (fit between individual and cultural

values of another country.

Work in organizations is increasingly organized around teams. For example,

in the IT industry employees come together in project-based teams. The team

disbands after the project is completed. Members of the disbanded team are


then assigned to other project teams. Therefore, new approaches to selectionare giving importance to person-group fit at the time of hiring. A person mayhave very good technical skills, but may be a poor team player. This mayprevent this person from performing to his full potential and contributing tothe firm all that helshe is capable of. Generally, when firms assess candidatesfor their team or work-group related qualities, they seek to determine the rolethe candidate can perform in the team. Each team member must take on acomplementary, but not identical, role for the team to perform well. All teammembers cannot be leaders. This approach to hiring recognizes that eachindividual has strengths and weaknesses, and that the weaknesses of one canbe complemented by strengths of another member of the team.

All teams that have worked together for some time develop specific culturalnorms and values. These norms relate to how team members dress and howthey communicate with each other, whether team meetings start on time, andso on. When a new person joins the team, unless the new member conformswith the norms, or onles thl management wants to bring in a cultural change,there is potential for conflict. Usually cultural conflicts occur because ofineffective hiring. Often, during the interview process, the interviewers getcarried awayby a couple of qualities they like in the person, and overlook theother indicators that suggest that the person is not likely to 'fit in' the culture.

Person-organization fit includes the person-job fit and goes beyond toincorporate the fit between the personalify of the individual

"ttd th" culture of

the organization. According to this approach, the individual-job fit is impor-tant since technical skills are important for job performance. However, socialand interpersonal skills are more important for success on the job as well asfor job satisfaction. For example, if teamwork is a key value in an organiza-tion, then candidates must be assessed for their ability to be team players.This approach places greater weight on social and interpersonal skills on thegrounds that it is easier to train for technical skills than change or developsocial skills or other aspects of personality. The 'desire to learn new skills'cannot be taught as easily to employees as job skills can be. A culturalmismatch between a new hire and the organization can lead to job dissatisfac-tion, poor job performance, and high employee turnover.

The emphasis on person-organization fit by firms has led to a renewedinterest in the use of personality tests and increased use of job simulationexercises. Job simulations also help in hiring effectiveness by providing anopportunity to the applicant to understand what it would be like to work forthe organization. Thus, the applicant has a more realistic view of the organiza-tion. However, assessing person-organization fit is expensive. The main fea-tures of the traditional (person-job) approach to employee selection and thenew (person-organization) approach are presented in Thble 5.5.

Traditional Approach: Person-Job Fit New Approach: Person-Organization Fit

r Hire for 'jobs' r Hire for'organizations'

. Individual behaviour seen largely as a

function of the person

r Individual behaviour seen as a function of thesihration

r Selection attempts to capitalize on individualdifferences; chooses individuals best suitedto the job

. Individual can be moulded for highperformance through socialization after theyare hired

r Job performance is a function of the 'fit'between KSAs and job demands

r Job performance is a function of the 'fit'between individual and organizational culturein addition to person-job fit

r Ignores characteristics ofcandidates thatare irrelevant to immediate job requirements

r Goes beyond KSAs to hire total 'people'

r Essential for on-thejob success for jobs thatdemand specific technical skills andknowledge

' People perform best when they are in anintellectually stimulating environment

r More concerned with finding new employees . Concerned with finding and retaining newemployees

. Results in high quality products and services r Results in high commitment, job satisfaction,lower absenteeism and turnover, and highperformance

Source. Bowen, Ledford, and Nathan 1991

3O2 Strategic Human Resource Management

Table 5.5: Traditional Approach versus New Approach to Employee Setection

STAFFING

As firms go multinational, they send their employees to their offices inother countries. Firms also hire people from countries other than the parentcountry of the firm. It is important that an employee working overseas shouldhave the ability to adapt and adjust to cultural differences. This issue will be

dealt with in greater detail in Chapter 12.

PROCESS: RECRUITING AND SELECTTING EMPLOYEES

The process of staffing begins with human resource planning (see Figure 5.1).

A firm cannot begin to hire unless the human resource requirements, in termsof the kinds of skills and competencies as well as how many employees are

required, has been determined. Even then, the HR function does not begin torecruit unless it receives a formal authorization to fill positions or to increaseworkforce from line managers belonging to different departments. Theseauthorizations are called employee requisitions. Employee requisitions clearlystate the nature of the job the new employee will be required to perform fiob


description) as well as the skills and competencies required to perform the jobsuccessfully fob specification). Sometimes, the HR department may initiatethe process by reminding the functional managers to send authorizations. Thestaffing process, as any other HR activity, is a shared responsibility betweenthe HR and line functions.

The firm must attract suitable candidates in sufficient numbers and ofappropriate quality to be able to meet its HR requirements. Whether or notthe staffing process results in the selection of an employee who performs wellon the job depends on how effective the process of recruitment has been. trt iseasy to see that the 'best' candidates cannot be selected if they are not includedin the applicant pool generated through recruitment.

The process of hiring consists of seven interrelated stages:

1. clarifying hiring philosophy;2. recruitment planning;3. developing an effective recruitment strategy;4. searching for job applicants;5. screening applicants;6. gathering information about candidates; and7. making a final selection decision.

Let us consider each one of these stages in some detail (see Figure 5,6).

Clarifying Hiring PhilosophyIt is important for a firm to be clear about its hiring mission and philosophy.This requires that there should be clarity about what the organization standsfor and its future direction. This helps the firm determine the type of people itwill require. For example, if a firm is going in for a culture change from atraditional family-run company to a professionally-managed high-growth firm,its hiring requirements will change.

The hiring philosophy of the firm should be aligned with company values.Let us go back to the example of Southwest Airlines that 'values people wholike to have fun'. The firm should take the corporate value statement andassign adjectives to this statement to describe the type of people it wants.Once the firm knows who it would like to hire, it can develop a statement thatexpresses it clearly. For'example, if the firm would like to hire achievers, thehiring mission may read, 'We hire achievers who love to sell'.

Recruitment Plannirg ,

Before beginning to recruit, the firm must state its recruitment objectives. In ageneral sense, the goal of recruitment is 'to attract the best people with theright skills who can create maximum value for the firm'. Recruitment objectivesare derived from the statement ofjob vacancies. The objectives specify'what


Figure 5.6: Stages in the Staffing/Hiring Process

type' and 'how many' of potential applicants to be contacted to fulfill all HRrequirements.with qualified applicants. The information about the 'type' ofapplicants required is readily obtained from job specifications.

A firm must always recruit more candidates than it actually seeks to hire.Some of the candidates may not be suitable for the job while others may notbe interested in accepting the job offer. However, too large an applicant poolhas a negative impact on recruitment efficiency. As firms seek to maintaincompetitiveness through cost advantage, most firms maintain a careful vigilon hiring budgets. It is difficult to precisely determine the number of candi-dates to be contacted. However, a firm can make some estimates. A tool thathelps an organization decide how many applicants to recruit for each jobopening is the yield ratio (YR).

The YR is the relationship between the number of applicants at one step ofthe hiring process relative to the number of people who move to the nextstep. An example of YR is presented in Exhibit 5.8.

i r _..,*:-".*-*== ,, =_., ,,, ,".,, , =,. .*=li itli Evaluation i

Clarify hiring missionand philosophy

of the firm

. Develop recruitmentmethod

r Activate

o Where to recruit from. Which methods to use

o When to recruitr What inducements to offer

Gathering informationaboui candidate through

selection method(s)r Multiple-hurdle approach

. Compensatory approach

. Combined approach


An Example of Yield Ratio

To hire 10 new employees, the hiring process proceeds as depicted. Yield ratio at each stepis identified.

To select .l

candidate the firm will have to recruit 12 candidates. Therefore, to select 1 0 employees,the firm must recruit 120 candidates.

Adapted from: Mello 2OO3

Yield ratios are available generally for employee groups for which the firmhas hired in the past. However, YR will not be available for employee groupsbeing recruited for the first time (for example, a firm that is hiring women forthe first time, such as when the Indian Navy began to recruit women on theShort Service Commission) or for recruiting methods being used for the firsttime (for example, personality tests). In such cases, the organization has toeither rely on guesses or develop estimates based on the hiring experiences ofother firms.

Recruitment objectives are also influenced by government regulations and/or internal policies of the firm. As we discussed earlier, there may be legalrequirements with respect to hiring quotas based on considerations such as

caste, gender, region, etc. (reservations) in order to correct prior discrimina-tory practices) or a firm may prefer to hire from a particular region because itsprevious hiring experiences from that region have been good. For example,global IT majors hire professionals from Bangalore and Hyderabad. Theseexternal and internal factors constrain the recruitment efforts of a firm.

Developing an Effective Recruitment Strateg'yCompany philosophy and recruitment objectives must be converted into tac-tics or strategv. The recruitment strategy involves making decisions about

Total ApplicantsInitial Screening InterviewSelection InterviewPhysical Examination

Job Offer

Job Offers AcceptedOverall Yield Ratio

t20604030l5l0

120:10

0

2:l3:24:32:l3:2

12:l


o where to recruit from;o which recruitment method(s) to use;o when to recruit; ando how to attract people to apply.

Where to Remtit From

As we have discussed earlier, a firm may recruit from internal or externalsources. When recruiting externally, firms may recruit from the local, regional,national, or global labour market. In deciding where to recruit, the followinggeneral criteria may be applied by firms.

o Unskilled labour may be recruited locally, whereas for skilled workforce,a firm may recruit regionally or nationally.

o Local shortages of unskilled labour may require organizations torecruit from a larger labour market. For example, shortage of nurses inthe UK or the Gulf countries resulted in the recruitment of nurses fromIndia.

o The location of the organization may influence the decision. A firm ina metropolitan city may be able to hire managerial employees fromthe local labour market. However, a similar firm in a backward regionmay have to broaden its search for the same employee grouP.

Generally speaking, however, firms recruit from areas where there is a highprobability of success, and/or where past experience dictates likely success.

Most of the fast growing sectors like BPO, IT, telecom, and retailing are newand do not have historical talent to hire from. Hence, they hire managersfrom other sectors with skill sets that are relevant to their industries. As firmstap unconventional labour markets for hiring some skill sets, mobility is beinggiven a new meaning in Indian industry. Cross-sector movement is increasingand walls between departments are blurring. For example, the marketing headof an automobile major may today join a pharmaceutical compan/, and an

executive from a soft drink major may move into the insurance sector. Execu-tives are not just switching sectors, they are also shifting departments as wellas job functions with equal ease. In many cases, when a firm is looking for a

specific skill set, the industry a candidate has experience in is immaterial. Inthis case, it is the experience in handling a particular situation that becomesimportant. Sometimes, a firm wishes to hire a person who has experience inmanaging, for example, acquisitions, turnarounds, joint ventutes, or even aparticular company exposure. For example, FMCG executives with strongmarketing skills have become a source of marketing talent for almost all sectors.

Similarly, hospitality industry employees who have good communication skillsare being sought after by BPO firms and hospital chains. Even within the firmitself, companies like IBM, Infosys, and Accenture are investing in retraining

Acquiring Human Resources 3O7

and 're-skilling' employees to help them move up the corporate ladder, gainmulti-dimensional knowledge, and in the process build their own talent poolacross functions. This is in line with the bigger changes that are taking place inthe corporate world. Domain knowledge and technical skills have becomerelatively less critical. Companies are realizing that technical skills can bedeveloped and groomed by the firm, but it is the leadership and entrepre-neurial skills that firms need to recruit for. However, as cross-sector movementbecomes more common it will be a challenge for organizations to manage thediversity due to employees coming from different sectors and with differentfunctional backgrounds.

Which Recruitrnmt Methods to Use

A number of recruitment methods are available for a firm to choose from.Some methods are better suited than others for recruiting specific employeegroups. For example, the campus recruitment method is a good source ofentry-level managerial professionals. The choice of recruitment method(s) is

based on the following considerations.

. Type of job or employee group. Unsolicited applications are a goodmethod for recruiting unskilled labour but may not work well for recruit-mg managers.

o Cost of method. Some methods like media advertisements are costly.o Time taken for results. Different recruitment methods differ with respect

to the speed with which they provide the firm with a new hire. Newspaperadvertisements may take as much as three or four months before the

selected candidate actually reports for work. On the other hand, recom-mendations may result in a new hire almost instantaneously. If a firmwould like the new hire to report at work as soon as possible, then news-

paper advertisements are clearly inappropriate.

A firm needs to weigh all the three considerations in choosing the methodof recruitment for a particular job. Firms often tend to use more than one

method of recruitment simultaneously.

When to RemiltAs the ongoing war for talent worsens, the winners will be separated fromlosers only if they can get the best talent on board the fastest and the earliest.

As discussed above, recruitment methods differ in how much time they take

to generate an applicant pool. Based on HRP, every organization has a fairidea about when the vacancies ale likely to occur due to business expansion,retirements, promotions, resigrrations, etc. except in cases of unexpectedvacancies. The decision about when to initiate the process of recruitmentdepends on the time the hiring process will take. Due to competition for


executive talent, firms are hiring far ahead in advance of the position fallingvacant. Companies are also hiring in advance for position, rn.rih lower in thihierarchy where the turnover rate is higher and the cost of keeping themwithout work (benching) is lower. Almost all sectors, from IT to Ite-S, telecornto retailing, and media to financial services, are resorting to advance hiring orproactive hiring. Headhunters call such proactive hiring'lighthouse appoint-ments' by headhunters. Companies are hiritrg even if th"y ao not neJthesepeople immediately. For example, at Reliance, Pantaloon, etc. the search timefor top positions has more than doubled from three to four months two yearsago to six to twelve months now

How to Attract People to Applyone of the most important aspects of a firm's recruitment strategy is the wayit plans to attract potential candidates. To strengthen and increase the prob-ability of the success of its recruitment efforts, the firm should determine what'inducements' it has to offer to potential candidates. The recruitment effortshould be preceded by an assessment of the strengths and weaknesses of thefirm that may attract or repel applicants. The analysis of strengths and weak-nesses should include the reputation or image of the firm; l,ocation of theoffice or plant; the compensation package; the working conditions; the natureof the job; security of employment; opportunities for career progression; andthe culture of the firm.

The firm can use its strengths as inducements to attract candidates. Attractingcandidates is like 'selling'the organization. The firm should identify its strongeJselling points and publicize those since they would appeal to the applicants.For example, if a firm has unique practices, they shouid be publicized-. Flexiblework arrangements, promotional opportunities, and performance-basedrewards are some unique practices. If a firm provides fast-track career growth,this factor may be highlighted during the recruitment effort.

A firm such as Microsoft that enjoys a good corporate image and reputationmay not have to put in much dffort in building inducements in developing itsrecruitment strateg'y, all other things being equal (see Exhibit 5.9). However,

1n !1Shlf competitive markets, the same firm may have difficulty in attractinghighly skilled employees. During these times, this firm will have to increaseits recruitment efforts.

However, in trying to attract candidates, a firm must guard against oversell-ing' When a firm oversells some of its features, it increases the likelihood ofunrealistic expectations on the part of candidates. Problems occur when thesecandidates are hired and join the organization. On confronting reality, theymay realize that things are very different from what they were led to believeduring recruitment. The candidate may end up feeling cheated and respondby leaving the firm.


Inducements: How to Attract Candidates to 0pportunities in the Firm

With several sectors facing a serious mismatchbetween demand and supply of skilled man-power, talent acquisition is being reported acrosssectors, especially in sunrise sectors such as in-surance, aviation, hospitality, retail, media, re-search, and banking. The emergence of newindustries and the opening of an industry to newplayers results in the poaching of talent. Newentrants to a sector usually offer a hike in sala-ries to the tune of about 50% to employees toleave their existing jobs. For example, with theadvent of Kingfisher and SpiceJet, the aviationsector witnessed job-hopping in a big way. Pi-lots who were being paid Rs 150,000 a monthgot a raise of 25-33oh for changing jobs. Apartfrom such monetary inducements, the new play-ers are also offering opportunities to fly biggerand newer aircraft. Flight engineers and cabincrew are also being hired on higher salaries.Media is another sector in the middle of a poach-ing drill with 100% salary hikes in some cases.

ln the retail sector, there is not a big hike in base

salary. The focus is on attracting talent with otherinducements, such as employee stock ownershipplans (ESOP) and bonuses with balancedscorecard system. Expatriates in the retail sectorare being offered very lucrative packages. For

example, the compensation of an expatriate hiredfor the retail sector included an all-expenses-paidholiday in lndia for two months every year.Start-ups are also selling the idea of working forsomething exciting and new. ln the banking sec-tor, there has been a movement of top manage-ment from established organizations to newbanks such as Yes Bank. ln this case, the com-pensation is benchmarked against the industryaverage/ but it is the 'chance to create some-thing new' and'performance-linked ESOPs' thatis being used as inducements for top managersto change jobs. Top managers do not changejobs for money alone but also for challenging

assignments. Some even accept a lower hikewhile switching jobs in return for a larger jobresponsibility or better working contracts, suchas a European shift instead of an American onethat calls for late nightworking hours, in the case

of a BPO operation.Many firms also offer a salary hike to senior

managers to the tune of about 30% on the previ-ous pay packet, and in addition, also offer a guar-anteed cash bonus in the first year. This bonus is

called the signing-in bonus and ranges from one-and-a half to two months' salary, which couldmean Rs 800,000-1 ,200,000 for a typical seniorexecutive or Rs 500,000-800,000 for a middlelevel manager.

A special case is of the recruitment of chiefexecutive officers (CEO). There are few reallygood CEOs available in the country and hencethey are a prize catch that no firm wants to lose,High-performing CEOs are also the ones who arethe target of poaching. This has led companiesand executive search firms to try and make of-fers attractive enough for a successful CEO toaccept and stay on. While the innovative struc-turing of CEO compensation is prevalent, therehas also emerged a new vocabulary in relationto CEO compensation. The new vocabulary in-cludes 'collapsible ESOPS', 'underwriting of op-tions', 'market premium bonus', 'staying-onbonus', 'forgivability of loans', and so on. So,

apart from a sign-on bonus, there is a joiningbonus (for furnishings etc.) plus a pre-joiningholiday at company expense. Moreover, compa-nies are willing to make CEOs partners in wealthcreation, so equity is offered to the candidate at

this level. While ESOPs have been around, thelatest trend is toward 'underwriting of options',which means that if at the time of investing, theCEO is not making any money, he will be givena certain Bum. Often, when an MNC executivejoins a family business, the CEO's contract has a

Contd

310 'Strategic Human Resource Management

Exhibit 5.9 Contd

clause that states that if the company fires theCEO, it will have to pay a hefty severance pack-age to the fired executive.

While the company is 'selling' its strengths toattract potential candidates, the latter also seek

to assess what the firm has on offer in relation totheir own needs. Values and need patterns of thesociety and of people change over time. Hence,different factors attract potential candidates atdifferent times and at different stages of their ca-reers. Earlier, while executives were in awe ofHindustan Lever Limited, considering a job withthem a dream job, they are no'longer in awe.Rather, they are looking for the best career pros-pects and study their job respo-nsibilities andgrowth opportunities before, accepting the joboffer. ln recent times, the trend indicates that all

Source'. Sinha and Kant 2005; Mahanta 2005

things being equal, executives would now ratherwork for a fast-growing lndian company or a

local group rather than for an MNC. This is be-cause many lndian businesses provide the samemonetary benefits and work environment as

MNCs. As lndian companies scale up and go glo-bal, they are also willing to pay more than MNCsfor the same job in some cases. Salaries, perqui-sites, and work environment are not the only vari-ables in the decision matrix of an executivelooking for a career move. lntangible factors likethe work challenge, their relative position in theorganizational hierarchy, and the company'swork ethic and corporate culture are also thingsthat executives look for. These are the factors onwhich lndian firms score over their MNC coun-terparts.

Inducements or attracting candidates is not a one-way process. \Mhile thefirm sells itseli the potential candidate is also evaluating what the companyhas to offer against what he is looking for. For example, one person may bedriven by money while someone else wants a job with challenge and respon-sibility. Younger workers want career advancement while older workers maybe more concerned with security.

An important aspect of developing an attraction strategy is to understandwhat candidates from a particular employee group are looking for and thencustomize the recruitment message to provide the desired information.

Searching for Job ApplicantsAfter recruitment plans and strategies have been developed, recruiting canbegin. However, strategy cannot be immediately put into practice. First, theHR manager cannot initiate recruiting activities unless there is a requisitionfrom the concerned functional department. Secondly, most recruitmentmethods require considerable development work before they can be activated.For example, a firm cannot just visit a business school during placement timeto recruit from campus. For campus recruiting, developmental activitiesbegin months ahead of the actual campus visit. These include, for example,preparing and distributing company brochures, contacting campus placementofficers, holding pre-placement talks, etc. The HR manager starts recruiting

Acquiring Human Resources 31 1

activities after receiving the authorization. Depending on whether the firm isrecruiting internally or externally, appropriate recruitment methods are usedto generate the applicant pool.

Initial Screening of ApplicantsThe applicant pool needs to be scaled down. A firm will select only somecandidates, the 'best' candidates, from the applicant pool. Initial screening isthe part of the staffing process that signifies the last stage of recruitment indthe first stage of selection. Based on job descriptions and job specifications,candidates who are obviously unqualified for the position in question areeliminated. For example, candidates with inadequate or inippropriateexperience or education are screened out. Some firms may conducf anlnitialscreening interview. An initial screening interview also provides anotheropportunity to the firm to communicate the expectations it has from potentialemployees clearly. This helps the candidates consider whether they are reallyserious about the job opportunity or whether they would like to withdrawtheir candidature. Initial screening may also be based on informationprovided by applicants in application forms. However, when the applicantpool is very large, screening interviews may be impractical and costly. At theend of initial screening, the applicant pool reduces in size. Howevlr, firmsmust be carefui not to screen out potentially successful employees.

Gathering Information about CandidatesWe have already discussed that selection involves assessing the applicantsagainst the criteria established in the jobr analysis. The criteria against whichapplicants are assessed include educational qualifications, work experience,past performance, Personal characteristics, and physical characteristics. A firmmust gather as much information as possible about the candidates to makethese assessments and to be able to make effective selection decisions. Allselection methods discussed earlier help the firm gatherjob-related informationabout the applicants. Each method is best suited to obtain a particular kind ofapplicant-related information. For example, interviews help understand howan individual handles stressful situation, the ability to handle interpersonalsituations, the communication ability of the candidate, etc. personality testsare designed to measure certain characteristics of individuals such ur upiit rd",emotional resilience, the ability to work in teams and so on. Firms iutr ,.,s"reference checks to verify the information provided by the candidate. Referencechecks have become important in certain sectors, a recent example being theBPo sector. Like recruitment methods, the choice of selection method(s) by afirm will vary depending on considerations such as cost, expertise required,time available, etc. (see Exhibit 5.10).


Type of job For blue collar workers, inter-

views may not serve any purpose. However,

a firm may be uncomfortable hiring a man-

ager without conducting an interview.Cost of selection method The assessment

centre approach is expensive. lt is appropri-ate when hiring for top positions. The hiringbudget of a firm may not permit the use of

assessment centres.Expertise required Some selection methods

such as personality profiling require consid-

erable expertise and can be administered onlyby a person trained in its use.

r Time available When a firm needs to hire im-

mediately, an interview may be the most suit-

able.. Skills and competencies These need to be as-

sessed.

Based on the requirements and constraints, a

firm will use one or more of the selection meth-

ods to gather information on candidates. Once

the firm has this information, it seeks to use this

inf.ormation to select the candidates with the hiSh-

est probability of success on the job.

Factors Determining Choice of Selection Method(s)

Making a Final Selection Decision

Information about candidates may be combined in different ways to reach a

selection decision. The way a firm will use the information will depend on the

particular selection approach of the firm. A firm may follow one of three

approaches to selection: (1) multiple-hurdle approach; (2) compensatory

"pptou.h; and (3) combined apProacl. These three approaches are depicted

dirgt"--atically in Figures 5.7a,b, and c. In the multiple-hurdle approach,

each selection method is seen as one step of the discrete selection process

(Figure 5.7a). The approach, as the name suggests, is made up of multiple

huidles. It begins with the initial screening interview and ends with the final

selection decision.Any candidate who 'trips over' any hurdle goes 'out of the race' of job

candidacy. For example, if the job requires five years of work experience and

the initiai screening shows that a candidate has only two years of work expe-

rience, the candidate is rejected. Thus, in the discrete selection process, there

is progressive elimination of candidates at each step (where each step is a

d"iu-gith"ting method) until the firm locates the individual who has all the

skill and other human requirements at the 'minimum acceptable level' as Pro-vided in the job specifications. However, this approach may result in the elimi-

nation of a potentially good candidate just because he/she received a PooIevaluation at a particular steP.

All individuals have strengths and weaknesses. It may be difficult to locate

a person who has all the skill requirements at a certain acceptable level. This

Acquiring Human Resources 31 3

Selection tests

IEmployment interviews

IReference checks

ISelection decision Conditional job offer

I

IPhysical exam Job offer

Figure 5.7a: Muttipte-hurdte Approach to Selection

is especially true when recruiting for managerial and professional jobs, forwhich multiple qualities are required for success on the job. The compensatoryapproach (Figure 5.7b) recognizes this limitation and is therefore more realistic.As the name suggests, the lack of certain qualities may be compensated by thepresence of certain other qualities. Hence, information about all aspects isgathered for all candidates.

Figure 5.7b: Compensatory Approach to Setection

ation forms


Figure 5.7c: Combined Approach to Selection

The information gathered for each candidate is combined comprehensivelyfor making a selection decision. In combining information, different qualities

measured may be assigned weights to reflect their relative importance for the

successful performance of the job in question.The comprehensive approach is costly and time-consuming since it requires

all candidates to be put through all the steps in the selection Process. There-

fore, most firms rely on a combination of multiple-hurdle and compensatoryapproaches (Figure 5.7c). \Alhen the applicant pool is very large, the multiplehurdle approach is used until the number of candidates is reduced to a smaller

and manageable number, say 10 or 15. Subsequently, the compensatoryapproach is used.- btrce the selection decision has been made, it has to be communicated to

the successful candidate. An employment offer is made through an employ-

ment letter'

EVALUATION OF STAFFING PROCESS

When the selected candidate(s)joins the firm, the staffingprocess is completed.

However, it is important for a firm to know whether its efforts have been

worthwhile. Every organizational activity should add value and contribute to


improving firm performance. This is true of all HR activities and hence ofrecruitment and selection also. Evaluation of the staffing process involves twoactivities-monitoring and feedback.

Both the recruitment and selection processes are monitored for efficiencyand effectiveness by tracking various indicators. The main performanceindicators are quality, quantity, and efficiency of the process. Thble 5.6 givesthe commonly used indicators for measuring efficiency and effectiveness ofrecruitment and selection.

Table 5.6: Measuring Efficiency and Effectiveness of Recruitment and Setection

PerformanceIndicators


Quantity . Size of applicant pool. Yield ratio (comparison of the

number of applicants at one stage ofthe recruiting process to the numberof applicants at another stage)

r Number ofjob vacancies filled

r Are all job vacancies filled withqualified candidates

r Selection rate, or the percentagehired from a given group ofcandidates

Number hiredNumber of applicants

100

Quality . Number ofjob offers made. Qualifications of candidates vis-d-vis

job specificationsr Percentage of applicants offered jobs. Number ofjob offers made versus

number of vacanciesr Job performance of selected candidates

(new hires) after six months on the job. Number of selected candidates who

stay with the firm at the end of one year

. Quality ofjob performance ofselected candidates

r Rate ofacceptance ofjob offers(number of offers accepted/totalnumber of offers made)

Efficiencv Cost/Benefltr Cost-per-hire (recruiting costs/number

of vacancies). Cost-benefit per recruitment method

(comparison of cost of hiring froma recruitment method with the lengthof time the applicant hired on the basisof that method stays with the firm)

r Cost-per-hire by recruitment method(number ofjob acceptances bymethod,/number of candidatesinterviewed)

r Staffing efficiency ratio (total staffingcosts/total compensation of thosehired)

Contd


Thble 5.6 Contd

PerformanceIndicators


Timer Time-to-fill (length of time taken to fill

job opening, that is, number of daysbetween the date the position wasapproved for staffing and the date thenew employee started work)

Time it takes for the new employeeto report to work from the time ofthe first day of recruitment

Effectiveness r Comparing recruiting efforts with pastpatterns

r Benchmarking recruiting efforts withthose of other organizations

r Information on job performance,absenteeism, cost of training, andturnover by recruitment methodindicates relative effectiveness ofeach method

r Tiacking the success rate ofapplicants where success rate is thequality of the employees hired andwho perform well on the job

r Success base rate (number of pastapplicants who were selected andwho became successful employeesbased on information fromhistorical data)

r Benchmarking (comparing thesuccess rate of the firm with that ofother employers in the area orindustry)

Modi.fied: http://www.mom.gou.sg/NR/rdonlyres/C228CEAs-8699-4898-8240-486ACC4950C1/1410/2632-RecruitmentSdection.pdf, accessed on 2lJuly 2006; Mathis andJackson 2003

The data obtained from performance indicators can be used to improvethe recruitment and selection process. This data helps determine whether thereis a need to change recruitment methods, whether inducements offered havebeen effective, and whether the appropriate selection methods have been used.Exit interviews of departing employees also provide feedback about differentaspects of HR activities. For example, a new hire who resigns from the jobwithin six months may reveal in the exit interview that the job he was requiredto do was vastly different from what he was led to believe. This may help thefirm improve upon its strategy for attracting talent.

SELECTION OUTCOMES

As mentioned earlier, selection involves predictions. It seeks to predict whichjob applicants are likely to perform successfully on the job, if hired. Predictionis a 'best guess' process; it can never be perfect since it is based on futureprobabilities. Selection decisions may result in two types of outcomes; correctdecisions, and selection errors (see Figure 5.8). Correct selection decisions are


Selecting a candidate whoperforms well on the job

Rejecting a candidate whowould nol have performedwell on the job, if hired

Selecting a candidate whodoes nof perform well on the job

Rejecting a candidate whowould have performed wellon the job, if hired

Figure 5.8: Selection 0utcomes

of two types: selecting a candidate who performs well on the job or rejectinga candidate who, if selected, would not have performed well on the job.

While the importance of the former is obvious, the significance of the latteris not readily evident. It is only when the firm has clearly stated hiring policies,objectives, and criteria that it will be able to discrirninate (fairly) amongcandidates and predict their success or failure on the job.

An evidence of selection error is poor performance of the selected candidateon the job. However, several factors, such as low motivation and lack of facilitiesfor job performance, rnay contribute to poor performance. All performancefailures cannot be traced to faulty hiring. Another type of selection error takesplace when a potentially good candidate, who would have performed well onthe job, is rejected. Though there is no way a firm can determine this error, itis important to be aware of the possibility of rejecting a candidate who shouldhave-been selected.

The purpose of designing the staffing process carefully is to increase thechances of correct selection decisions and minimize the chances of selectionerrors. Recruitment objectives, recruitment strategy, choice of selectionmethods, etc. all contribute to the quality of selection decisions. However, it isprudent to recognize that 'to err is human'. It is not possible to eliminateselection errors entirely. As media baron Ted Turner once remarked, Afterall, Jesus Christ only had to make 12 appointmentsl and one of them was abummer'. It is important to expect errors and to pldn to minimize them.

STRATEGIC RECRUITMENT AND SELECTION

It is important to ensure that the recruitment and selection processes are stra-tegic. A dynamic business environment has resulted in greater strategicbehaviour on the part of organizations as they strive for competitive advantage.An important aspect of organizational strategic orientation is to ensure that

31 8 Strategic Human Resource Management

the firm has the resources over the long run to meet the demands of the chang-

ing environment. A key resource of the firm that helps it achieve competitiveadvantage is the human lesource, or the workforce of the organization.Recruitment and selection, alongwith other HRpractices, facilitate the achieve-

ment of the firm's business strategy. Therefore, the recruitment and selection

processes need to be strategically driven.Strategic integration between HRM and business strategy is achieved when

each activity making up HRM in organizations is vertically aligned withstrategic imperatives. Recruitment and selection practices are key HRactivities and must also be strategically aligned. Previously, recruitment and

selection were labeled as 'traditional' activities with a standard approach. Inthe traditional approach to recruitment and selection, the first step is toidentify the type of person who will perform a particular job effectively.Subsequentl/, applicants are assessed against the defined personal attributes

in order to determine a person-job fit. In recent times, however, the centralfocus of recruitment and selection have become more driven by business

strategy. Instead of hiring employees solely on the basis of person/job fit, firmsplace a premium on person-organization fit. Therefore, applicants are

selected against organizational rather than job-specific criteria. Also,strategic orientation in recruitment and selection has led to the increased use

of sophisticated selection techniques and greater involvement of line manag-

ers in the entire process of selection.The above developments in the process of recruitment and selection

provide for a greater integration between employee resourcing and business

strategy. Millmore suggests that for recruitment and selection to be classified

as strategic, th"y must demonstrate three primary features: (1) strategic inte-

gration, (2) long-term focus, and (3) a mechanism for translating strategic HRdemands into appropriate recruitment and selection specification.

Strategic IntegrationAs suggested above, recruitment and selection are powerful means of aligningemployee behaviour with the business strateg'y of the firm. Recruitment and

selection play an important role in the success of organizational strategy.

Strategic recruitment and selection (SR&S) involves an alignment of hiringpractices with the strategic planning process of the firm. It also involves trans-

lating the strategic plans of the firm into those employee attributes that are

critical to successful accomplishment of strategic plans.

Long-term Focus

Strategic recruitment and selection also represent a long-term focus. Theobjective of SR&S is to develop recruitment and selection practices so that


the firm has the HR attributes that are critical to the future and long-termsuccess of the firm.

Mechanism

Staffing is concerned with choosing people who will contribute to the long-term success of the firm. To accomplish this, it is important to forecast the HRrequirements necessary for the successful achievement of the strategic plansof the firm. It is also important to develop various staffing activities to findsuch people.

Strategic recruitment and selection that safisfy the above three features cause

recruitment and selection to become more important to the firm and also

make it more sophisticated and complex. The outcomes of SR&S have asignificant impact on organizational practice in several ways.

First, the effort and cost of effective recruitment and selection is preferableto the cost of managing poor performers.

Secondly, greater effort and financial investment made in the recruitmentand selection process will certainly lead to an emphasis on evaluating (l) theeffectiveness of the process as well as (2) the contribution of recruitment andselection to the attainment of strategic objectives.

Thirdly, higher investment in the process as well as greater complexityin person specification focusing on person-organization fit will require the

use of a combination of several methods of selection to assess potentialrecruits.

Finally, the complex and critical nature of SR&S requires a multi-stakeholder approach and recognizes recruitment and selection as a two-way

Process.As a multi-stakeholder approach, the recruitment and selection process is

seen as best served by the active involvement of all relevant stakeholders, thatis, the firm and the candidate. Being a two-way process, SR&S encourages the

participation of candidates and is sensitive to the impact of the Process oncandidates. The firm also provides enough information to the candidates aboutthe vacancy and its context so that the candidates can make their owninformed self-selection decisions.

These four features of recruitment and selection, however, are seen only as

secondary features and are not considered to be sufficient on their own toresult in SR&S. The three primary features of strategic integration, HRP, and

long-term focus are important. When the primary features are taken togetherwith the secondary features, they can be depicted as an explanatory frame-work of SR&S practices (see Figure 5.9).


Figure 5.9: conceptual Framework of strategic Recruitment and selection

Adapted fiom: Millmore 2003

Staffing EffectivenessStaffing effectiveness may be influenced by several factors. For example,situational variables that may impact staffing effectiveness include labourmarket conditions, type of vacancy, time and cost constraints, and character-istics of the people involved in the hiring decision. More recently, there havebeen suggestions emphasizing the importance of organizational characteristicsin determining staffing outcomes. These organizational characteristics includestructure, size, and strategy. As mentioned earlier, recruitment and selectionhave moved beyond the traditional person-job fit emphasis to the strategicapproach that focusses on person-organization fit. The question being raisedin organizational staffing is, 'What skills, aptitudes, behavioural styles etc. aremost compatible with future organizational objectives and strategy?,

The staffing process has several stages as has already been pointed outearlier in this chapter. These stages are:

o choice of selection criteria;o selection of recruitment method;


o development of marketing strateg/io choice of selection technique; ando final decision.

Chapter 1 discussed variotypology put forth by Miles asupport and seems to have ito Miles and Snow, even wimay adopt different structures, processes, and strategies in the pursuit of orga-nizational goals. Let us now use Miles and Snow's typology to illustrate link-ages between business strateg-y and effectiveness of the recruitment andselection Process (see Thble 5.7). Using Miles and Snow's typology, Olian andRynes assessed the appropriateness of particular staffing practlces at each stageof the selection process for each business strategy.

Table 5.7: Linkages between Business strategy and sR&s Effectiveness

Business Snategy Typology

Defender Prospector

BusinessStrategy

r Function in relativelystable markets

. Depend on developmentof efficient technologyand production

r Find change threateningr Focus on improving

efficiency in technologicaland transformational

Processesr Devote few resources to

research and development

. Identify and exploit newproduct and marketingopportunities

. Decentralized authority,informal procedures

r Thrive on change

. Seek to match newventures with thepresent business set-up

r Operate in stable as

well as dynamicmarkets

r Frequently organizedinto matrix structuresthat combine bothfunctional and product$oups

HiringManagerialTalent

. Managers have narrowspecialized skills

r Almost always promotedfrom within

. Often acquired fromoutside

r Drawn from intemalpromotions, externalrecruitment, mergers,and acquisitions

DominantPowerCoalition

r Consists of financialand production experts

. Individuals withbackgrounds inmarketing or productresearch anddevelopment

r Experts in marketing,applied research, andproduction

Contd


Table 5.7 Contd

Business Strategy Typology

Defender Prospector Analyser

StaffingPractices

Individuals hired at lowlevel, receive considerableon-thejob training, andslow, steady promotionsif they show promise intheir functional areas

Employees facerelatively frequentchanges in job dutiesand assignmentsMore likely to hireappropriatelyexperiencedindividuals, sincespeed is important formoving into newproduct lines

Some employees arehired at low levels andmoved to positions ofhigher responsibilitywithin functionsSome employees arebrought in at higherlevels to providequick, ready-madeexpertise

Recruit-mentMethods

. Internal sources . External sources Mixture of sources,including cross-divisional or cross-product transfers,external recruitment,and internal promotion

EffectiveRecruit-mentMessages

Convey information aboutcentralization of control,emphasis on internalpromotion withinwell-defined functions,importance of meetingcost and production goals,and high investment inemployee developmentMore formal disseminationof information throughthe use of recruitmentbrochures, videotapes, orstandard presentations bythe firm's representatives

Indicate dynamism injob and projectassignments,decentralized control,risk-taking in workprocedures, andemphasis ontechnological andmarketing innovationsConvey recruitingmessages informally,and make use of linemanagers who aremore aware of thechanging requirementsand characteristics ofvacancles

Messages similar todefenders'in stableareas oftheorganization, andmore like prospectors'in change-orientedsectorsAlso emphasize

'

likelihood of transfersacross product ordivisional linesIn stable parts of thefirm, formal,standardizedrecruitment channelsare used; change-oriented divisionsuse less formalchannels and rely moremore on line managersto transmit information

Contd

Business Strategy Tlpology

Defender kospeetor Analyser

Criteria forHiring

Less weightage given topast achievementsMore emphasis on futureaptitudes or potentialIndividuals with highneed for security andlow tolerance for changeand ambiguib'more wellsuitedEmphasize relativelynarrow range ofspecialized skillsClearly articulate selectioncriteria

Focus on pastachievement in desiredknowledge, skills, andabilitiesSeek individuals withhigh tolerance forambiguity and awillingness to incur riskWider and more generalrange of aptitudes andabilities for adapting totheir more rapidproduction or serviceshiftsLess likely to formalizeselection criteria becausejob requirementschange with changes instrategic direction

Focus on both, pastachievement andfuture potentialWider and moregeneral range ofaptitudes and abilitiesClearly articulateselection criteria

SelectionMethods

r Use future-oriented tests

such as aptitude tests andseek to assess potentialpromotability

. Rely on methods thatemphasize theapplicant's work history,such as ability tests,reference checks

. IJse combination ofmethods

SelectionDecision

Involve HR specialistsin final hiring decisionsGreater corporatecontrol over finalhiring

Greater line influencein hiring decisionsLess corporate controlover final hiring

A mix of the twoFall somewhere inbetween, withcorporaterepresentativesproviding guidancebut not having thefinal authority tomake a final decision

Source: OIiar' and Rynes 1984


Tabk 5.7 Con.td.

HIRING FOR A DIVERSE WORKFORCE

An important HR challenge faced by organizations is the management of adiverse worKorce. There are more women, older workers, minorities, and


disabled workers in the workforce today. Diversity has become a part of thevocabulary of firms and their management, especially since the 1g00s. Thereis no standard definition of diversity. In general, the term implies'd.ifferences'.(see Figure 5'10) Organizations undertike workplace diversity initiatives to(l) " avoid the legal .o.rr"qrr"rr.es of ,niolating theselaws sophy of social r"rpotrribility; (3) reap the benefitsof a ce; (4) manage the shortage of available talent;and expectations.

1. The law in India requires 22.5010 reservation of government jobs forsc/sr candidates, 50/o reservation for children of war widows, and 30/oreservation for the physically handicapped. Public sector firms inparticular are called upon to ensure adequate representation to thosesections of society who are historically or socially disadvantaged. It ispart of affirmative action to support the weaker sections of society.Both public and private sectors are required to ensure that there is nodiscrimination or differential treatment based on race, gender, caste,etc. in the hiring process.

2. Many firms take special steps to recruit a diverse workforce to conformto their philosophy of social responsibility or altruism.

3' Global competition requires that firms be creative in their approach tohiring talent. A diverse workforce helps the firm to innovate and toexpand into new markets.

4. Organizations are facing a shortage of skilled talent. Hiring from non-traditional sources provides them with optional sources ol talent andhelps them bridge the talent gap. Hiring older workers, women,minorities, and employees with different racial or cultural backgroundsalso reflects a response to the demands of the changing demographicsituation in most societies across the globe.

5. Organizations sometimes hire a diverse workforce in response toexternal factors such as image development, public relations, and thepressure to conform because 'everyone else is doing it'.

To abide by the law

To fultill social responsibility

To draw upon the advantage of a heterogenous workforce

For managing shortage of available talent

To build company image

To conform with external pressures

Figure 5.10: OrganizationaI Motives for Adopting Diversity Initiatives


To hire a diverse workforce, organizations need to take specific actions toattract workers from different backgrounds and develop HR programmes toretain them. Certain categories of the workforce, such as women and minori-ties, may not respond to traditional recruitment efforts because of unequalopportunities in the past. These groups may go completeiy unrepresented ina tJpical recruitment process. Therefore. specific actions should be taken toattract these sets of workers. Recruitment programmes should be made moreinclusive.

As a first step, a firm should analyse its current recruitment procedures. Forexample, a firm that recruits primarily from employee referral programmesor unsolicited applications may need to reconsider their use. Most referralsare of candidates who are similar to the existing employees of the firm. Forexample, an employee may recommend candidates from his alumni networkor on the basis of regional or race considerations.

Secondly, firms may use qualified members from these diversity groups inkey recruitment activities. For example, a firm may send a female employeefor campus recruitment, or portray pictures of women or minority employeesin advertisements to lend credence to the firm's claim of being an 'equalopportunity employer' or 'encouraging diversity at the workplace'. Theproduct advertisements of Benetton, the globul retail chain, are an example ofhow they may be used effectively to convey the image of an employer of adiverse workforce.

Several MNCs, such as HLL, Procter & Gamble, Cadbury, and Sony, arebreaking the old mindset of treating certain jobs such as sales and marketingas male bastions and are hiring and grooming more women to prepare themfor future leadership roles. Global research suggests that a diverse organiza-tion leads to more innovation and better performance in the workplace. Hence,gender diversity is a focus area in the Indian context as well. Hindustan LeverLimited is making sure that there are more women in their 'listers' (high-potential employees). Procter & Gamble grooms women performers for topjobs by offering them location-free jobs and roles, extended leave to addresspersonal issues, and flexi-time. Hindustan Lever Limited also supports diversitythrough its women-friendly work policies. For example, it has a sabbaticalpolicy that lets women managers take up to five years' leave in two intervals;it also lets women to work part-time or consult. Almost 160/o of middle man-agement positions are occupied by women. Sony also initiated a genderdiversity project to promote the careers of women employees. The companybelieves that a diverse workforce that appropriately reflects the demographicsof a company's consumer base and fulfills their talent needs will keep itcompetitive and successful.

Though there is a need to recognize workplace diversity issues, it is importantto recognize that diversity can be a double-edged sword. Diversity initiatives


can lead to significant conflict between employees as well as harm, if notmanaged strategically. Therefore, when a firm seeks to undertake diversityinitiatives, it will do well to answer the following questions.

o Why is diversity important for the organization? A firm may initiatediversity initiatives for a number of reasons, as discussed earlier, but theywill be successful if the objective or purpose for adopting these is clearlyunderstood.

o How does diversity relate to the mission and to the strategic objectives ofthe organization? It is important for the firm to understand how diversityrelates to the current state of the organization as well as its intendedfuture direction. For example, if a firm wants to expand its markets inter-nationally, a culturally-diverse workforce can be a facilitating factor. Howinclusive will the diversity initiatives be? This relates especially to those

minority groups that are not protected from discrimination by law. Forexample, people who have serious mental illnesses or who abuse drugsmay be classified as disabled. However, in the absence of laws providingfor equal opportunity for these groups of people, firms do not considerthem for employment.

o Should the firm undertake special efforts to attract a diverse workforce?There is a need to analyse the present recruitment sources and methodsof the firm. However, this will also depend on whether the firm is adopt-ing affirmative action to redress past discriminatory practices or, alterna-tively, to treat everyone equally in present and future employmentpractices and decisions. A firm is likely to adopt more inclusive andintense recruiting efforts when the aim is to make amends for past dis-

crimination.o How do the current employees feel about diversity? \Vhenever a new

policy or programme is adopted by an organization, it has the potentialto disrupt the status quo. This is likely to result in some resistance withinthe organization. At the same time, these efforts are also closely watchedby those outside the firm, such as customers, potential employees, etc.

Firms must identify potential obstacles to promoting diversity, such as

employee attitude, resistance, cultural factors etc. Adequate and aPPro-

priate actions need to be taken to anticipate resistance to diversityactions and manage it. For example, the ongoing debate in India aboutextending caste-based reservations in jobs to be extended to privatesector firms is being met with resistance on the part of industry associa-

tions, current managers and employees of these firms, as weli as certainsections of the society who are likely to be potential candidates. Further,there are fears being expressed that such reservations may have an

adverse impact on the credibility and reputation that Indian firms enjoyin the international business community.


o What specific type(s) of divelsity initiatives will be undertaken? Thespecific initiatives should be consistent with the motive for adopting theseinitiatives as well as with the strategic objectives of the firm. The firmalso needs to address the issue of how much time and money will beinvested in these initiatives and how these efforts will be measured foreffectiveness.

Diversity is a buzzword today in management circles but one that can beextremely dangerous if adopted as a fad. It is important to understand thefactors necessary for the success of diversity efforts.

An important kind of diversity in contemporary business environment isthe cultural diversity brought about by a globally diverse workforce. Atelecommuting firm in Delhi accesses audio records of doctors' prescriptionsfrom a toll-free number in the IJS, transcribes them, and delivers thetranscribed prescriptions back to the doctor overnight. British Airways tracksfrequent-flyer mileage out of Mumbai. Ernst and Young may be filing acompany's income tax with an Indian or a European accountant. Coca ColaIndia has rnoved several of its managers info global assignments.

As firms scan the globe for the best resources and talent, they manage theirtalent globally, Apart from the benefit of cost saving, a global workforce canbring additional value to the firm in improved quality, skills, market access,and productivity. The firm can tap the world's best talent and hence needs aholistic approach to managing talent. The HR leadership needs to work withthe top leadership of the firm to develop the strategy for sourcing global talentfor the firm. The sourcing of talent from across the globe has emerged as afundamental change in the way business is conducted. Firms need to evolveappropriate HR strategies to ensure the adaptation of employees from differ-ent cultural backgrounds. Issues related to global talent are dealtwith in greaterdetail in Chapter 12.

AXTERNATIVES TO HIRING PERMANENT EMPLOYEES

Much of the discussion in this chapter implies that recruitment and selectionprocesses in a firm are designed to locate and hire permanent employees inorder to fulfill the HR requirements of a firm. However, environmental trendssuch as globalization and high competition have created pressure on firms toseek cost advantage. Changes in the business environment have also resultedin managernent trends such as rightsizing and a re-defined employer-employee relationship. The growing trend of hiring and retaining a contin-gent workforce was discussed in Chapter 2. In the past two decades, there hasbeen a lot of debate about temporary or ccntingent workers as alternatives topermanent employees. Many companies are hiring temporary employees.The main goals of hiring a temporary or contingent workforce are staffing

-t


flexibility and lower long-term labour cost. Organizations seek to reduce thefixed cost of hiring through these alternative work relationships. However,there are concerns being expressed that these goals often come at the costof two other important organizational goals-employee productivity andloyalty. Contingent arrangements take the forms of independent contractors,temporary agents, leased employees, temporary help services, re-hiringformer employees, and hiring from the non-traditional labour pool (see

Figure 5.1i).

Independent ContractorsCompanies may hire independent contractors, also called consultants, to dospecific work for the organization either on-site or off-site. For example, whenmedical transcription is contracted out, consultants can pelform the job athome. The nature of work that is contracted out may range from routine jobsthat constitute the non-core activities of the firm to highly specialized jobs forwhich the firm may lack adequate skills. For example, jobs such as marketingresearch or payroll administration are often contracted out.

Employee Leasing

This is also called staff sourcing. A firm may lease employees from a leasingcompany for a fee. When a firm needs certain skills that are not available in-house or are in short supply, it may seek trained employees from the leasingfirm. The leased employees are employees of the leasing company whichperforms all personnel functions for them such as payroll, employee benefits,

Figure 5.11: Types of Contingent Workers

Types


and other HR functions. The client firm simply pays a fixed fee to the leasingcomPany' Leased employees remain with the client firm for a longer durationthan temporary employees. when the project gets over, the leaseJ employeesreturn to the leasing firm. Thus, the client firm saves fixed costs andcost oflay-offs and simultaneously benefits by getting well-trained employees. Firmsmay lease out cleaning and security services. Skilled workers ire also leasedby firms. For example, additional tax accountants may be needed by a firmduring tax season. Since there is strong fluctuation in the demand for accoun-tants, a firm may not want to hire accountants on a permanent basis. At suchtimes, the firm may lease accountants from an accounting firm. Many firmsdo not employ workers on jobs such as project implementiuott; instead, theyprefer to employ workers under a third party which takes care of monthlysalaries of the employees for a management fee. Some firms which hire in thismanner are Tata Iron and Steel Company, Hindustan Zinc, Bharat HeavyElectricals Limited, and Bank of India,

Temporary Help Servicestaditionally, temporary staffing services were seen only as a source of semi-skilled clerical workers. Today, however, temporary services extend to skilledworkers such as nurses, programmers, etc. Temporary services provide trainedand experienced personnel who can be put to work quickly and also removed.Temporary help firms often specialize in the kind of skills they make availableto- firms. For example, there are temporary firms providing soit-"r" eng'ineers.There is also a trend toward hiring stop-gap cEos. Ma Foi ManagementConsultants Limited offers the highly specialized service of providing interimmanagers. Interim managers are highly skilled professionals at or above therank of functional heads who work with a company on a specific project andthen move on. Temporary workers get their salaries from the client firm,unlike leased employees. However, the client firm does not have to pay fringebenefits or provide training to temporaries.

Re-hiring Former EmployeesAnother option to external recruiting is to hire former employees, although,strictly speaking, it also constitutes recruiting from external sources. How-ever, the cost of re-hiring a former employee is half that of hiring a new person.Re-hires become productive on the job immediately since they are familiarwith the firm. Since former employees are familiar entities, the risk of a costlymis-hire is almost completely eliminated. Former employees may also be usedas a source of referrals. Some firms offer former employees a reward for referralswho are hired. Agilent Technologies and McKinsey are examples of firmsthat invest significantly in cultivating and managing the network and


relationships with former employees. Today, less than 50/o of the 3,000 engi-neers graduating from premier Indian Institutes of Technolo gy every yearwork with the infrastructure sector. Most of these engineering graduates are

attracted towards the IT sector. Earlier, Larsen & Toubro, the country's biggestheavy engineering and infrastructure development company, used to attractthe best talent. With the boom in the IT sector and very high salaries andperformance bonuses, the firm is finding it difficult to hire from campus. Inorder to fulfill its human resource requirements, the firm revoked the policyagainst re-hiring former employees, and is getting in touch with formeremployees who left the company five to ten years ago and are oPen to return-ing. Alread/, about 40lo of ex-employees have returned to the firm. Several ITand BPO firms are willing to re-hire former employees. The companies are

showcasing employees who have returned to encourage others to follow. Thistrend of re-hiring former employees is being promoted by firms to appear as

an employer of choice. 'Ex-employee' may also refer to retirees of the firm.

Hiring from Non-traditional Labour Pool

Another way in which firms avoid incurring the cost of permanent employeesis by hiring from the non-traditional labour pool. Among them are womenwho are entering the working world at a late age and have no work experi-ence, such as housewives who are stepping out of their homes in search of acareer for the first time or who can work from home. Amway, for example,has successfully tapped this labour market. An MNC bank has retained aconsulting agency to recruit over 100 women employees of the above descrip-tions for part-time permanent jobs. These candidates are expected to have agood command of English and the right attitude. With just a brief orientation,they are able to perform in industries like banking, BPO, etc.

Other non-traditional sources of talent include retired personnel who are

willing to work a few hours a day but are not interested in full-time employment.The firm can employ people from these groups when there are seasonal workfluctuations or even for a longer duration, at a lower cost.

Several firms are hiring former defence personnel to serve as independentdirectors on their boards. \Mhile ex-army personnel have traditionally been

hired by industry in the HR and security functions, appointing them as directorsis a new trend. The qualities for which firms are keen to have former armyofficers on their board are strategic and tactical thinking ability, experiencewith high-technology systems and huge logistics and supply chain machinery,operational thinking ability, ability to withstand pressure, high values,leader-ship skills, and ability to motivate others. An important responsibility of inde-pendent directors is the selection of top executives. The defence services are

considered to have one of the best selection processes in India, so their officers


are believed to be able to judge candidates well. Wipro, Videocon, East IndiaHotels, Hero Honda, Reliance Energy,Jet Airways, and Ballarpur IndustriesLimited are some of the firms that have defence personnel on their boards.

Apart from the different types of contingent arrangements, the skill levelsof contingent workers may also vary. Contingent workers may be less-skilledor highly-skilled. The highly-skilled contingenl workers (SCW) differ frornthe less-skilled contingent wolkers in the level of training and educationrequired for a job. Highly-skilled contingeni workers perform jobs requiringhigher levels of education and experience, such as in the IT industry. Less-

skilled contingent workers are clerical workers and manual labourers, r,r'hose

jobs require less education or experience. Highly-skilled contingent rvorkerswork at a firm as long as their skills are required and then move to anotherfirm. Since SCWs are temporary workers and not regular or permanentemployees, the,v are hired without incurring some of the commitments associ-

ated with regulal employees. Until recently, it was assumed that firms benefitfrom hiring SCWs because they do not have to pay employee benefits ormaintain a long-terrn employrnent relationship. It was also assumed thathiring SCWs did not result in any negative reaction from similarly-skilledregular employees because their jobs were secure. Recently, this assumptionhas been challenged. It has been argued that in organizations rvhere regularemployees work alongside SCWs, regular employees may experience inequitybecause SCWs earn substantially more in direct compensation than they earnin direct and indirect compensation combined. The SCWs are paid a wagepremium because of their unique skills, which are not available in the hiringfirm, and to compensate for the inconvenience of contingent work, lack ofbenefits, higher risk of unemployment, and, sometimes, poor working condi-tions. This premium is called compensating wage differential (CWD). TheCWD often makes the direct compensation of SCWs significantly higher thanthe average employee's total compensation. This results in feelings of inequityon the part of regrrlar employees. In certain situations, the inequity rnay resultin regular employees' quitting the firm, and therefore companies are concernedabout retaining their skilled regular employees. If these employees quit thefirm, it results in loss of company knowledge and training. It is more difficultto replace highly-skilled regular employees compared to the less-skilled ones.To counteract the effects of hiring SCWs, HR managers of the hiring firm canadopt and implernent certain HR approaches to reduce turnover and increaseproductivity of high-performingregular employees. Some of these approachesare described below.

o Develop systems to enhance organizational commitment of regularemployees, such as training leaders to instill loyalty and increase employeecornmitment.


Table 5.8: Advantages and Disadvantages of SkitLed Contingent Workers

Most included in benefits programmesReduce the firm's recruiting andselection costsAllow access to specialized skills withoutincurring training costsAre easier to dismiss than regularemployeesIncrease companies' ability to hire a

flexible workforce that grows and shrinkswith product and service cyclesHelp the company reduce long-termlabour costsHelp acquire specialized skills that willbe too expensive to develop in-house

Source David2005

o Focus on work relationships with supervisors to enhance productivity.These can be enhanced significantly by training supervisors to improvethese relationships. Relationships with co-workers may be strengthenedthrough employee empowerment, cross-ttaining, participation, decen-tralization, etc.

o Create ways, such as ESOPs, internal promotions, and skill-based pay,to reduce the probability of employee turnover.

See a synopsis of the advantages and disadvantages of hiring skilled contin-gent workers at Table 5.8.

Temporary Staffing

Temporary staffing, or temping, has become lndian temporary service firms like Ma Foi,common in lndia over the past few years/ espe- Peopleone Consulting, and Teamlease have overcially in the services sector. Since 2000, there 10,000 employees each on their rolls. ln lndia,has been a significant growth in temporary em- the growth of temporary staffing has been drivenployees. lnsurance, telecom, lT and lteS compa- by the services sector rather than by the manu-nies currently employ over 50,000 temps. Clobal facturing sector. Clobally, it is the industrial seg-

temping majors like Adecco and Vedior, and ment that accounts for about 70% of temps.

Contd

May become a source of information for regularworkers about opportunities in external labourmarket as well as an aid to regular employees forentering contingent ernploymentFirm has little control over contingent employees;this threatens organizational quality standardsCompensating wage differentials paid to SCWsresults in perceptions of inequity by the regularemployees; the latter may leave the firm if SCWsare hired for the long tenn when these skills maybe needed only for a limited time or are skills thatchange rapidlyhovide firms with an opportunity to witness workof potential employees before hiring them as

regular employees, and so satisfy a requirementof the hiring strategy of the firm

Exhibit 5.11 Contd

Labour market liquidity, or the ease with whicha company can add or remove labour depend_

other company by the temporary staffing firm.An assignment may not be followed by anotherassignment immediately; there may be a breakof a couple of months. The temporary workermay even receive statutory benefits like provi_dent fund for the duration of his assignment.Temporary jobs have existed in lndia for years,but primarily in the unorganized sector; thephenomenon of workers being employed tem-porarily in the organized sector is new. However,only 5"/o of the workers in the organized sectoraretemporary employees; labour laws, whichcurrently stand in the way of a temping boom,need to be modified to extend the benefits of flexi_staffing to manufacturing firms also. A new trendis that of mid- to top-level corporate executivestaking on temporary assignments. They are called'floaters' or 'on-contract hires, and move from:ffi.': "T"il[:]lil:ily-own temporary CEOto fill th nt takes over the

might hire a

ate to set upprevalent atl. Executives

who take temporary assignments are not ,has-

beens' or those who 'do not have jobs,; on thecontrary, they are most successful in their spe-cific field of activity and are experts to the core.They use temporary assignments as an opportu-nity to encash on their expeftise before they settledown in another job with a long-term commit-ment. These are typically the executives with thellT-llM tag in the age group of late 30s and 40s,driven by the variety and flexibility in working

Acguiring Human Resources 333

hours, and the challenge ofshort deadlines. Theseexecutives earn more fromments than they would in simiThey are also motivated by ttime with their family withouttemporary managers at the middle or senior levelfor certain reasons, which are detailed below.

r Subsidiaries of multinational corporations hirefloaters because MNCs follow very strictheadcount ratios and subsidiaries need toshow a significant revenue jump to their par_ents even if they add a single extra manageror a front-end sales force.

r Many companies abroad hire interim manag_ers to reduce their pension liability.

r Companies hire temporary workers when therequirement is for a specific project or assign_ment.

r Some firms use the opportunity of a tempo_rary assignment to see if they would like tohave a longer association with the executive.These firms put an 'absorption clause, in thecontract that provides for the hiring of the ex_ecutive as a full-time employee after theproject ends if both parties wish it.

Sector-wise, lT is the biggest user of tempo_rary managers, because project-specific assign_ments are far greater in number. The concept isalso catching up in the manufacturing sectoi. lnFMCC firms, it is often used for branch or re_gional managers to achieve a sales target in ashort period or for the launch of a product orservice. Usually, the process of hiring temporarymanagers begins with the company contactingthe HR agency, which has a list of floaters whoare then deputed for the assignment. The com-pany pays the contract amount to the agency,which pays the manager after keeping its fee. TheHR consulting agency may recruit some perma_nent temporary staff in different domains. Mostof them get paid irrespective of the work flow.Client firms who make use of services of these HR

Contd


Exhibit 5.1/ Contd

agencies are required to pay an honorarium evenwhen it is not using the services of the agency.

Temporary staffing at senior management andstrategic levels is beginning to catch on in lndia.Temporary managers are on the payroll of vari-ous HR agencies. lt is believed that increasingattrition rates at top levels in some sectors havetriggered this trend. ln lndia, internal interimCEOs have been common. However, now firmsare open to having external interim CEOs. Whilethe interim CEO operates like a permanent CEO,he/she is generally hired for a short term, ranging

from three months to two years. The interim CEOis given a clear assignment with a clearly definedtenure specifying start and finish dates. lnterimCEOs are used by firms for business turnaroundsand restructuring, filling urgentsenior- and board-level vacancies, change and culture manage-ment, lT systems implementation, programmeand project management, new product launches,merger and acquisition management, team de-velopment, and crisis management. However,firms in lndia do not yet like to openly admitthatthey have an interim CEO.

Source: Sinha and Kant 2OO4; Ramnath 2005; Coyal and Rajawat 2006

HIRING CONSIDERATIONS IN BPO FIRMS

The dramatic growth of the BPo industry is a worldwide phenomenon. Busi-ness process outsourcing firms in India have experienced spectacular growthin the past five years. This rapid growth has also brought managerial chal-lenges with respect to recruitment, staffing, training, and retention of workersand managers with the requisite skills and abilities to provide quality service.The BPo industry is among the largest recruiters in India, hiring over 70,000people every year. The top 10 BPO firms hire an average of 40,000-48,000people annually at an expense of Rs 400-480 million. The average cost perhire in the BPo sector is approximately Rs 10,000-12,000. At the currentgrowth rate of 500/o per year, the BPo industry is expected to double itsemployee strength every two years. The employee costs of IT and BPO firmshave risen by 4l0lo over the fiscal year 2005-2006. Almost 35-40010 of therevenue of IT firms goes into workforce costs. Attrition for the top IT majorshas risen by 2-3olo iln2005-2006. Let us look at some issues related to recruit-ment and selection faced by the BPO industry.

Skill RequirementsFlawless verbal communication and service orientation are the most impor-tant skills required in call centres. At the time of selection, agentslassociatesgo through voice/accent, language, and typing speed tests. 'rhe organizationstructures of call centres change rapidly and new roles keep getting created.Processes such as loans, stock trade, and insurance claims offer high-end jobsbecause they require risk profiling, analysis of credit limits and creditworthi-ness of customers, and decision-making skills. For these jobs, BPO firms hire


MBA graduates and accountants. For the technology help desk, firms hireengineers, science graduates, and those with Microsoft certification. High-endBP9:_:ltloy post-graduates. Evalueserve recruits from the IIMs, IIT.;FMS,and XLRI. Their talent pool comprises MBA graduates, chartered accoun-tants, doctors, and lawyers.

Inducements OfferedTo attract and retain talent, BPO companies are taking several measures, suchas paying higher base salaries, night shift, and overtime allowances; and offer-ing cash and non-cash incentives to employees. The variable cash componentin the salary is based on performance and offered across all levels. Non-cashincentives include company-sponsored education policy, health/life/accidentinsurance, free transport, subsidized meals and free concierge services thatemployees can use to pay their telephone, electricity bills, and insurance policypayments. Firms also maintain help-desks for discounted loans, free creditcards, and for filing tax returns. Business process outsourcing firms are alsooffering skill allowances that take into account criticality (sizeltraining) andcomplexity (error tolerance level/process complexity). Skill allowancei'mayrange up to Rs 2,400 per month. Performance bonuses are also paid.

External Labour MarketMaly companies are facing skill shortages and facing extreme difficulty infinding candidates with either back-office or call centre experience. Since theback-office and customer care industry is fairly new in many emerging econo-mies, the availability of supervisory and/or managerial candidaies is oftenquite limited. This is because people have had limited opportunities to obtainthe experience that is traditionally necess ary to handle a second- or third-level managerial position. It is expected that the industry will need about300,000 managers and supervisors by 2008. That is about jOo/o ,rro." than theentire industry today. This suggests that every single individual in the Bpoindustry today can become a supervisor within four years, and that there willstill be a shortage of executive talent. For many companies, these labour short-ages are driving firms to hire employees away from other organizations, oftenusing higher wages and signing bonuses as the primary lures to attractwork-ers from other firms. The industry is also likely to recruit from a number ofrelated industries and professions. such as accounting and financial servicesand customer service (hotels, airlines, etc.). However, the BpO industry willalso seek to meet the demand from the internal labour market by identifyinggood performers and promoting them up the ladder more rapidly ihan ,ro*ui-

Until recently, software and BPO companies in India had developed inclusters like Bangalore, Gurgaon/NCT region, and Mumbai/pune. Some


companies are realizing that large clusters in a single location or reg'ion maybe harmful since it leads to higher attrition, battle for talent, and puts pressureon the city's infrastructure. Firms cannot afford the knowledge loss (due tohigh training costs), nor can they continue to increase salary (since the basicpremise of offshoring is the low-cost advantage). They ha-ve found the solu-tion in de-urbanization, or shifting from metros to smaller, Tier II cities likeHyderabad, Chennai, Kolkata, Chandigarh, Ludhiana, etc. Business processoutsourcing companies will move to towns that will have better educationalinfrastructure to ensure supply of workforce. The main reason for moving tosmaller cities is the difficulty in retaining talent in metropolitan cities in theface of increasing scarcity of skilled personnel. Dell International Services(DIS) has set up a centre in Chandigarh. Wipro is planning to move into citieslike Mangalore, Mysore, Kochi, Vishakapatnam, and Goa. Wipro has startedidentifying towns and cities where it can build IT development centres orBPO service centres. Some cities are more suitable for BPO firms than for ITcompanies. The reason is that BPO companies require graduates with eitherlanguage skills or financial and other process-related skills. On the other hand,IT firms require engineering or science graduates who can be trained in pro-gramming. Though Goa does not have a high talent base, migration to thestate is much more likely from the metros due to its climate, beaches, andinternational environment. This does not hold true for cities like Mysore orVishakapatnam.

Some organizations are looking at the global labour market and targettingexpatriates as an important source of talent. One US-based MNC has a'return home' programme that targets individuals who were educated in theUS and worked with it there for a number of years. By seeking out employees,often with young families, who are looking to return to their native countries,firms can retain talented employees and have corporate talent migrate to theiroperations in emerging economies. Spouses of expatriates and US retireeswho are interested in part-time work may also be a good source. Bothprogrammes are aimed at individuals who have a combination of work expe-rience and strong English language skills and are interested in working in anew and dynamic work environment.

Government PoliciesThis is an external environmental factor that may affect the hiring effective-ness of a firm. The government's proposals, to increase reservation in eliteeducational institutions, and to impose job quotas in the private sector, haveresulted in certain apprehensions in the BPO sector. According to players inthe BPO industry, there is already a dearth of qualified workers, and anyadditional restriction on who to hire is likely to worsen the situation. Further,


BPo firms are required to perform according to global standards. Hence,irrespective of caste, creed, etc., firms seek employees who meet global stan-dards. The top management of the Bpo industry is in support ofiffirmativeaction and feel that companies should make efforts to hirl candidates frombackward classes and deprived communities, but they should be giventhe freedom to hire a candidate with suitable skills, rather than being flrcedto hire someone who is not good at work. During selection intervieu,s inBPo firms, caste-related information is neither asked for nor stored in theemployee database. Hence, employees belonging to oBC and sc/sr com-munities are currently employed not because of their caste, but because oftheir merit.

Recruitment MethodsBusiness process outsourcing firms are trying to meet the challenge of keep-ing hiring costs to a minimum throu h the use of new recruitmeni methodls,such as job portals on the internet, walk-ins, career offers on homepages ofcompany websites, and employee referrals. Referrals are the most popularmethod; companies pay cash incentives to employees who refer pttentialhires. Referral hiring costs are half that of traditional hiring methods likeadvertisements or third-party hiring firms. While recruiting bonuses mayprovide a short-term incentive, employees may want to demonstrate to peersand families the 'validity' of their new profession. By recruiting others to iorkin the same location and industry, employees are able to demonstrate that callcentre and back-office_work i_s not only financially rewarding but also sociallyacceptable. Progeon, the BPO outfit of Infosys, is experimenting with ,"rr"."1innovative methods that will bring the right candidate to the firm. One methodis called the 'campus ambassador programme', where an identified student ina college gets a thorough briefing on the BPO industry-how it works, thecareer path it offers, its future growth opportunities-and on progeon. The.-tud"i! then spreads the word about the industry and the company to peers inthe college. This reduces hiring costs.

Campus RecruitmentCampus recruitment is an integral part of the recrqitment strategy of Bpofirms, as it allows access to a large pool of candidates. In many countries, on-camPus recruiting at the university level is just beginning to be used to attractpotential employees. While less valuable in high-growth markets that requirelarge numbers of candidates in a short time-frame, the firm,s university iela-tions can help attract a regular volume of candidates, particularly in marketswhere foreign language skjlls are important. Managers in Bpo firms suggestthat the government should set up institutes where Landidates, irrespectfi of


their caste, can be trained, and hired from. Dell International Services, whichhas a centre in Chandigarh, has recently partnered with the Chandigarhadministration to train potential employees in skills relevant to the BPOindustry under the Chandigarh Training on Soft Skills (CTTOSS) programme.To make students industry-ready and employable immediately on gradua-tion, the IteS indushy has developed programmes for long-term partnershipwith educational institutions. These programmes include providing trainingto the teaching community on various aspects of the BPO industry and intro-ducing optional subjects in teaching curricula. For example,24/7 Customerrecently launched its education programme called '24/7 Yarsity' in AndhraPradesh, designed for lecturers and professors of educational institutions toequip students to leverage career opportunities in the BPO industry. In thefirst phase of this programme, English professors from over 25 colleges inTier II cities of Andhra Pradesh were trained on various facets of communica-tion. Other campus recruiting activities include guest lectures at universities,centre tours, and mentoring efforts. Overall, campus recruiting appears to bean emerging method for attracting candidates for call centre and back-officework in many locations.

Selection Methods

Global firms are outsourcingprocesses that involve sensitive information aboutcredit cards, bank accounts, and insurance policies and give employees ofBPO firms direct access to customer assets and, therefore, the potential tosteal them. Recent incidents like fraud at Mphasis' Pune operations have raisedthe issue of data security and protection and brought new dimensions to theselection process of the BPO industry by increasing the sensitivity of companiestowards employee selection, psychological profiling, as well as socio-behavioural risk assessment.

Psycho-profiling is not a new idea. It has been a part of industry selectionprocedures. Firms in BPO are now planning to use psychologists to adminis-ter tests to candidates and judge the likelihood of their committing a crime onthe job. These are called the 'G'tests, where 'G' stands for greed. These G tests

classify persons who test negative on aspects like handling data and managingboundaries as threats. However, tests that can establish criminal intent or state

of mind of a potential employee also need to be developed, and they have totake into account many socio-economic and other conditions. With incidentssuch as an employee of a BPO firm being caught selling sensitive informationto an undercover journalist in 2005, and the arrest of another employee inSeptember 2005 for allegedly stealing data, assessment of behavioural riskshas gained currency.

Socio-behavioural risks were not paid any attention in the initial wave ofoutsourcing to India. However, firms are now approaching consultancy


organizations for socio-economic and behavioural assessment of employeesat BPOs and call centres while offshoring/outsourcing work to India. Tiroughthis method of risk assessment, these firms seek to predlct employees' attituietowards protecting confidential information and probability of giving in topressure' Firms also ask their consultants to check the credentials, includingcriminal records, of employees who are likely to work on a project. Consultanc!firms are being asked to make an assessment of the likelihood of data theft inBPOs as well as crime and conviction rate in cities where work will be done toget an idea of overall risk.

Frequent hiring by the IteS and BPo firms makes it difficult for them toobtain all the essential information about the candidates. In most BpO firms,an interview lasts for an average of 4-7 minutes, which is extremely inadequatetotnow the person. Most companies conduct checks otr e-ployles by doinga five-year police track record search, a financial background cLeck fiom theregulatory bodies, and a reference check from past employees.

However, there is evidence of high incidence of resume fraud in the Bpoindustry, which has increased the significance of pre-employment screening.As many firms have migrated from Bpo to high-end-knowledge pro."i,outsourcing (KPo), they have raised the hiring standards since Kpo needshigher skills. The change in hiring standards is one reason for the increasingincidence of resume fraud by aspirants for BPO jobs. A Hill and AssociatesSurvey reveals that 560/o of the candidates provided false information at thehiring stage,20lo provided incorrect details about both education and employ-ment, and more than 40lo candidates gave false education-related c.edentiais.There were discrepancies in the employment details of around 180/o of candidates, and in several cases candidates gave mobile numbers that were hard totrack. The most common misrepresentations in resumes were about workhistory and additional skill sets to enhance their chances of being hired. It isalso possible to provide fake certificates and degrees.

To counter these frauds, BPO firms are hiring specialized agencies calledpre,-employment screening (PES) service providers to check the backgroundand references of prospective employees. These service providers checkpersonality, expertise, people skills, attitude, and beliefs with previousemployers, Peers, and friends; verify academic and professional qualificationswith educational institutions; and look for social credentials .olh u, dowryindictments, alcoholism, and sexual harassment claims. In some .ur"a,they monitor employees after employment as well. Earlier, Bpo firmsresorted to selective checks only, but now they conduct checks on all prospec-tive employees. These background checks have raised recruitment iosts byabout 150/0. For example, iGate Global Solutions, a Hyderabad based technoi-ogy lnd operations firm, pays about us$300-400 per person for carrying outchecks on applications. Technology-intensive MNCs in security and risk


analysis, banking, and finance are relying on third-party PES service provid-ers. The phenomenon is spreading across sectors due to globalization. Pre-

employment screening is a legal requirement in other countries, though notin India. The trend is catching up in India as many IT and IteS jobs are beingcreated in India, and because of the limitations of 'reference checks'. Somefirms have their HR teams work closely with screening agencies to double-check bona fide certificates and references. Firms are also hiring detectives todo an impartial background scrutiny, in addition to the first-level checks bytheir own recruitment teams. More recently, companies are approaching uni-versities as well as police departments for verification requests. Universitiesand police departments charge a fee to provide the necessary information.

The incidents of data theft by some employees of Indian BPO firms has ledthe National Association of Software and Services Companies (NASSCOM)to propose a national registry of BPO and call centre employees. This registrywill be a database of trained and certified personnel and trainers for the IteS/IT industry maintained by a common national body and will be shared withindustry players as required, and run by a third party for a'marginal fee'. Thedatabase is being prepared by National Securities Depository Limited (NDSL).It will include employment background and biometrics details like finger-prints as well as details like police checks and photographs. This registry, whenready, will allow the details of BPO employees across the country to be avail-able at the click of a rnouse. However, employees have the option of refusingto be in the registry. The database will supplement background and referencechecks since they have traditionally not been very useful. Besides curbingelectronic crimes by listing 'history-sheeters' of the industrl, the list is also

expected to help curb attrition by pointing out frequent movers.The National Association of Software and Services Companies has taken a

quality control initiative that is likely to change the hiring process of BPOfi.rms. It has proposed a single national-level examination for entry-level jobsat BPO firms to replace the tests they give. The examination, called'NASSCOM Assessment of Competence' (NAC), shall be given online andshall test the aptitude of candidates on different skill sets. The NAC shallbuild a supply of the IIeS/BPO workforce that shall be certified and availableto meet the present and future requirements of the industry. Though theproposal is still in the pilot stage, all the big names in the industry such as

Genpact, Convergys, Progeon, Wipro, ICICI One Source, etc. have alreadysigned up with NASSCOM for using NAC. The NAC shall be made manda-tory if its pilot succeeds.l It is expected that companies will benefit from this

1 Nl,SSCOltt planned to start administering the NAC in November 2006, according to a

NASSCOM press release, http://www.nasscom.inlNasscom/templates/Nr:rmalPage.aspx?id:50359, accessed on 3 November 2006.

Acquiring Human Resources 34,1

since hiring costs will go downwill be shorter and training reqstandardize hiring benchmarks. Theresult in the prescription of a profile

Hiring Process

Another challenge faced by the BpO

material, and produce goods. ro'. ""ffir:iT::tJ",'Jl"t*:l Lil,,ff ;l:scientific method and not as a functional process. In the Bpo industr"y, theconventional process, in which one team conducts the entire process'from

to meeting candidates till getting people. Hence, Accenture has divided thehiringnerate CVs; (2) take candidates through

matrices. (3) measure the recruiting process on kly

The sheer number of potential candidates often places lirnitations on thecapacity of firms to screen and evaluate the candidales. yeL despite the largenumber of candidates, the ability to hire the right employees for potential"lystressful, customer service positions rerr critical. Tto uddr".. the problem

ates, employment agencies often

:ffi 3::ffilTff ",T,'il,1i1'Tou,,,lj

rew. Ho wev e r, th e rin al in t ervi ew s an d .:fl* :ilJ""i#ffill li J iffi ;company.

Quality of HiresThe BPO It is achallenge t to hirethem. The racter_ize BPo firms has resulted in many firms compromising on their selectionprocess and criteria. The degree of selectivity employers plactise is an indica-tor-of their attempt to compete on the basis of qrritity ,".rri.". The ,select rate,is the percentage of the total pool of applicanis that is hired. The lower theselect rate, the more selective the

"-ploy"t is in hiring new applicants. Theindustry average of the interview-to-hiie ratio varies between 100:g and 100:12for the voice business and between 100:12 and 100:16 for the non-voice


business. The interview-to-hire ratio is also called the yield ratio. The yieldratio of 100:8 for new hires suggests that out of every 100 candidates who turnup for a walk-in interview, only about eight are worth hiring. Call centresserving global customers hire one of every ten applicants on an average whilethose serving domestic customers hire one of every four. This suggests thatglobal call centres are considerably more selective in hiring than domesticcall centres. The select rate is highly influenced by labour market conditions.The rapid growth of call centres in India has caused demand to outstrip sup-ply and the select rate to be relatively high.

To meet the huge demand for people, some firms have devised a novelmethod of meeting its requirements. Firms like 3Global and Wipro BPO arehiring people through pre-hiring training (PHT). Pre-hiring training is for thoseapplicants who did not clear the selection process but are likely to meet hiringrequirements if trained. Firms believe that such borderline candidates tend tobe more loyal. The duration of PHT is for a minimum of two weeks, but mayextend to two months. During the PHT, the candidates are paid a smallstipend. taining of borderline candidates focusses on improving communi-'cation skills (grammatical skills, written English, and spoken English) andcomputer skills (using a computer to sort data, typing speed, and basic knowl-edge about different software packages). At the end of the training, the skillsof these candidates have to be at par with those who were hired in the firstinstance. These candidates get the final offer of employment only after theyclear another round of interviews. Firms are using PHT to hire at least 500/o ofthe candidates they reject in the first instance.

The IBM Institute for Business Value conducted a research study to under-stand opportunities and unique human capital cost challenges faced by com-panies in relocating a number of business processes to lower wage countries.One of the messages that came across clearly is the importance of addressingHR issues as part of the strategy for locating a service centre. First, companiesneed to understand the composition of local labour markets in terms of theirsize, education levels, and the availability of language skills. \Mhile there maybe large labour pools, those with specific language capabilities or managerialskills may be in relatively short supply.

Companies also need to review their experience in managing existingoperations and their corporate reputation in the area. An existing local pres-ence, even in a non-related line of business, can have a strong positive impacton recruiting new employees, retaining existing talent, and attracting in-houseexpatriates. Finally, companies need to be cognizant of the overall businessenvironment, which includes the current regulatory structure, tax incentives,the role of organized labour, and the transportation infrastructure. There iscurrently little direct involvement of government and organized labour in theBPO industry, but as it matures, additional scrutiny could be placed on issues


suchas working conditions, contractor benefits, and exit decisions. Localemployment laws and practices may govern or limit the combined use ofcontractors and regular employees performing similar activities. There existchallenges of recruiting and selecting employe-es for call centres in emergingeconomies.

The chapter discussed the context of the increas-ing importance of human resource acquisition strat_egies. The objectives of and differences betweenrecruitment and selection activities were high_lighted. The role of environmental factors, bothinternal and external, in determining the successof a firm's efforts to recruit and select a candidatewas discussed. The internal and external sourcesand methods of recruiting qualified individualswere examined. The chapter also presented a gen_eral discussion of various selection methods a firmmay use for gathering information about jobapplicants to select the ,best' candidate. Newapproaches beingused by firms for recnritment andselection were also discussed. These included e-recruitment, contest hiring, competency-basedapproach to selection, and person-culture fitapp,roach, among others. Various stages of thestaffing pro ce ss-clarify ing the hiring philo s ophy,recmitment planning, developing the recruitment

ferent approaches to making selection decisions as

well as the types of selection outcomes.

The importance of the strategic alignment ofrecruitment and selection activities was empha_sized. Miles and Snow's tlpology of business strat_eg'ies was used to illustrate the linkages betweenbusiness strategy on one hand and recruitment andselection aknowledge "#t?:nworkforce. -+-..r h., rwhenthey *"fl,J#tr

rssues.

Acquisition of Human Resources is the processby which a firm hires employees to ensure ihat therequired number and types of employees are avail-able to perform organizational ictivities success-fully and accomplish organizational objectives.Compensating Wage Differential (CWD) is thewage premium paid to skilled contingent workersas compensation for bringing unique abilities notavailable in the hiring firm and for the lack of

benefits, higher risk of unemployment, and, sorne-times, poor working conditions.Competency-based Approach to Selection isan objective approach to recruitment and selec_tion, and seeks to match candidate competenciesto_the requirements of the situation in making theselection decision by focussing on obser.r-ablebehaviours.


E-recruitnent is the use of the internet to find jobs

(web searching) and recruit candidates (web recruit-

i"g)'Employee Leasing, also called'staff sourcing', is

the leasing of trained employees of the leasing com-

pany to the client firm for a speci{ic period when

certain skills are not available in-house or are inshort supply for a fee.

Employer Branding is the process by which or-

ganizations make themselves attractive to prospec-

tive candidates and involves the intersection of the

principles of marketing and brand-building and the

rigour of HR practices"

Employment Agencies are agencies that help in-

dividuals at the middle level or below find job op-

portunities and also help organizations search forcandidates.

Executive Search Firms recruit top-level execu-

tives for client firms on a retainership basis.

Independent Confactors, also called consultants,

are hired by firms to do specific work on-site or

off-site.

Inside Moonlighting is the performance of addi-

tional work that arises occasionally in a firm by its

employees.

Job Boards are websites that let employers to postjobs and search for candidates.

Person-Organization Fit is the fit between the

individual's personality and the cultural values ofan organization.

Person-Job Fit seeks to match the skills and char-

acteristics of an employee with those required forperforming the job successfully and which are pro-vided for in the job specification.

Psychometric Tests are designed to measure one

or more psychological attributes of individuals, like

interests, aptitude, ability, personality, etc' to helpemployers predict how the candidate might behave

in a particular team or situation, relate to others,

and approach and solve problems.

Recruitment is the Process of discovering poten-tial candidates and of generating a pool of quali-fied applicants by encouraging qualified candidates

to apply for actual or anticipated job vacancies inthe organization.

Recruitment Methods are specific means of at-

tracting potential employees to the firm.

Recruitment Sources are the locations where

qualified individuals can be found.

Selection is the process of gathering informationabout job applicants and using it to make hiringdecisions by predicting which job applicants, ifhired, will perform the job successfully and whichones will not.

Skilled Contingent Workers (SCW) are tempo-rary workers who perform jobs requiring high edu-

cation, experience, and training.

Staffing is the process of finding, attracting, and

hiring new employees.

Virtual Hiring is the use of video conferencingby firms to hire candidates when they cannot meet'

Websumes are webpages or blogs that candidates

set up and use to 'sell' their candidacy for jobs.

Yietd Ratio is the relationship between the num-ber of applicants at one step of the hiring process

relative to the number of people who move to the

next step.

]i.]r::]::|:!:.,...;.....,i]']1i'::.]:.:..!:J:..:i,';ConceptReviewQuestions

1. Define the terms'recruitment' and'selection'.Describe the linkage between business strat-

egy and the effectiveness of the recruitmentand selection process.

2. What factors in the exterrral environment place

limitations on the ability of a firm to recruit

and select a candidate of choice? Give ex-

amples.

3. Discuss the advantages and disadvantages ofrecruiting internally versus externally. List and

briefly discuss any two external methods of re-

cruitment.

8

4

5

6.

Discuss how the internet has changed the waycompanies recruit. Enumerate the advantagesand disadvantages of e-recruitment.

Explain the competency-based approach to se-

lection. \44ry has this approach gained impor-tance in the current business environment?

Discuss the relative merits of personjob fit andperson-organization fit. Why do firms today

Have organizations changed the way they hirefrom educational campuses? \Arhat factors haveIed to these changes? Discuss the innovationsthat have been introduced in campus hiringin recent times, citing examples. Criticallyevaluate the campus placement strategy andprocess followed by any two organizations thatvisit your campus. Can it be said that theseorganizations had'successful recruiting expe-rience'in your campus? What criteria did youuse to make this judgement?


hire for 'culture fit'?

Briefly discuss the various stages of the staff-ing process.

Discuss any two forms of contingent workarrangements that provide the firm with alter-natives to permanent hiring. \4rhat are the prosand cons of hiring contingent workers?

2. What do you understand by the term 'diver-sity'? Which groups of employees constitute adiverse workforce? What initiatives can a firmadopt to attract and retain a diverse workforce?Enumerate the reasons that firms adopt diver-sity initiatives. Give examples of diversityinitiatives of some firms you are familiar with.Do you think diversity is a double-edgedsword? Why?

. ,,'.i i;i,"'Critical ThinkingQuestions --i,.:, -:i:;::,r'.!i'j,,i.:i:':,.;r:,ri:r..rr*i.:.,,i.):

1.

I.

i:::,;,.-q $itu;ation and Role Play

Go through daily newspapers, business maga-zines, or special editions of newspapers carry-ing advertisements for job vacancies. Select tworecruitment advertisements, one traCitionaland one contemporary. Identify and comparethe features of the two types of advertisements.Also check the websites, Tf any, of these twofirms.

. Did you find the new contemporary adver-tisement to be more creative? Why?

. Do you think the new advertisement cre-ates a positive image of the company andresults in 'employer branding'?

. Describe the online recruiting process fol-lowed by these firms. Compare and evalu-ate the effectiveness of online recruitmentprocess of each of these firms.

. Which of these firms is likely to be moresuccessful in hiring quality talent? Why?

2. A leading software firm has recently faced highemployee turnover atthe middle managementlevel. Most of those who left this firm movedacross industries for better pay as well as fastercareer progression. The firm is at the momentscouting for a general manager (projects). Thefirm had approached a placement agency. Theagency shortlisted five candidates. Mr Biswas,the HR manager, screened out three candi-dates, and is not too satisfied with the othertwo candidates either. Mr Biswas is meetingMr Singh, vice president (projects) to discussthe candidates shortlisted by the placementagency and to explore other possibilities.

Two students should volunteer for this roleplay. One assumes the role of the vice presi-dent (projects) and the other that of the HRmanager. The discussion should begin withMr Biswas's apprising Mr Singh of the shortlistof candidates forwarded by the placement


agency. Mr Singh wonders what options thefirm has in order to fill the vacancy with a quali-fied candidate and in good time. The two willdiscuss the pros and cons of using the place-ment agency for recruitment. Exploring vari-ous recruitment methods and their pros andcons, the two should finally agree on one or acombination of recruitmentmethods. The role

l. The objective of this exercise is to help stu-dents understand the factors that should betaken into consideration in developing a re-cruitment strategy. The exercise is introducedto the class by clarifyingits objectives. The classdivides into groups offour or five. A brieflec-ture is given to students about the decisionsthat need to be made when developing therecruitment strategy. Each group is assignedthe task of developing a recruitment strategyfor one of the following organizations: the In-dian Armed Forces, a BPO firm in a metro-politan cilty, a luxury hotel in a hill station, a

The objective of this project is to help students gainan insight into the various hiring issues of the BPOindustry Students form groups of three or four.Each group chooses two BPO firms, one Indianand one international, for a field visit, and inter-views the HR managers to obtain information re-lated to various hiring issues. Four or five linemanagers in each of these organizations may alsobe interviewed to understand their perception ofstaffing practices and major hiring challenges con-fronting these firms. Students are encouraged toread the section on'Hiring Considerations in BPO

play should be followed by a class discussionto evaluate the potential usefulness of a place-ment agency as a tool for recruitment. Theinstructor should also steer the discussion toexplore the most suitable method of recruit-ment in this case. The class should also be en-couraged to discuss the pros and cons of hiringa temporary manager in a software firm.

retail firm, and a central university. Groupsmake assumptions about various aspects, suchas the cxternal environmental factors, targetemployee group for which the strategy is be-ing developed, their level in the hierarchy, andso on. Each group prepares and presents a re-port followed by a general discussion led bythe instmctor. The discussion should centre onthe factors each group took into considerationwhile developing the strategy and why. Atten-tion may also be drawn to how recruitmentstrategy may differ across different types oforganizations and why.

Firms' as well as newspapers and business maga-zine reports on the BPO industry to get a generalidea. Each group prepares a report on major hir-ing issues that confront the BPO industry in gen-eral, and the firms they visited in particular. Thegroup must also include in the report their recom-mendations for enhancing the effectiveness andefficiency of the hiring process (recruitment andselection) in the BPO industry. The instructor rnayask each group to make a class presentation of theirreports. The presentations may be followed by aclass discussion on the issue led by the instructor.

team working in computer operations at StanfordUniversity. They invented a technology to link theseparate computer systems at Stanford. Cisco's

Hiring for Excellence at Cisco Systems

Background

Cisco Systems Inc. was founded in 1984 by LeonardBosack and Sandy Lerner, a husband-and-wife

products enable computers to communicate witheach other, offering customers end-to-end networksolutions. Cisco has been at the heart of many his-toric changes in technology. The company helpedcatalyse the industry's move toward internet pro-tocols and is now at the centre of fundamentalchanges in the way the world communicates; it isthe worldwide leader in networking for the internet.It is leading the transition to a network-centric tech-nology environment. Almost 14 billion devices willbe connected to the internet by 2010. As the net-work evolves into a platform, users will be able tocommunicate from any device and in whatevermode they choose.

A $ tZ billion high-technology company, Ciscowent public in 1990. Its revenue growth has beennearly a hundredfold in seven years. It is the fast-est-growing company of its size in history, fastereven than Microsoft, with a market capitalizationof over $200 bilhon. Cisco competes in marketswhere hardware is obsolete in 18 months and soft-ware in six. Cisco's stock has risen roughly 50,000percent during the decade between 1990 and 2000.In fiscal 2005, Cisco achieved record performanceacross almost all financial and operational metricsand generated $2.0 billlon in cash. The annualizedrevenue per employee, a measure of productivity,was approximately $ZOO,OOO in 2005, up from ap-proximately $+SO,OOO in fiscal 2001. This is signifi-cant given that the firm also increased headcountin fiscal 2005 by 12 percent, primarily in sales.Cisco is one of America's great success stories.

Cisco's Leadership, Culture, and Values

John Chambers, Cisco's CEO, has an energetic,self-effacing manner; 'my definition of leadershipis, don't ask someone else to do something youwouldn't do'. John Chambers' kindness is nevermistaken for weakness. Three things that can getsomeone fired at Cisco are (1) not producing busi-ness results; (2) not recruiting and developing theright people; and (3) not being a team player. Ciscodefines its mission to 'be the supplier of choice byleading all competitors in customer satisfaction,product leadership, market share, and profitability'.

Acquiring Human Resources J47

Its business purpose is 'to shape the future ofglobal networking by creating unprecedentedopportunities and value for our customers, employ-ees, partners, and investors'. Cisco's culture Wasfounded on the principles of open communication,empowerment, trust, integrity, and giving bacx tothe community. These same values thrive at Ciscotoday.

Cisco espouses five core values: (1) dedicationto customer success; (2) innovation and learning;(3)partnerships; (4) teamwork; and (5) doingmorewith less. Each of these values is continually ar-ticulated and reinforced in the mission statement,current initiatives, policies and practices, and cul-ture of the company. Not many companies taketheir culture as seriousiy as Cisco in managing thebusiness and in hiring. Ross Fowler faced 18 inter-views before he was hired as managing director,Australia. Many of these interviews were conductedto ensuring that the culture and values fit betweenCisco and Fowler was good. Cisco sees it as a two-way process; both company and candidate areencouraged to assess each other. According toFowler, the key elements of Cisco's culture arehaving stretch goals, fun, teamwork, the ability todrive change, and giving back to the community.Cisco values the ability to sense when the markethas moved and the ability to adapt accordingly veryhighly. The single most important value at Cisco iscompetence has to be good at what onedoes-and is enforced more by peer pressure thanby management. If one cannot do one's work, onegets pushed out fairly quickly. Another importantvalue is frugality; all Cisco employees, from thetop down, always fly economy class. This is to en-sure that the value is delivered to the shareholder.However, frugality at Cisco is not about beingcheap, but about getting the 'best value'.

Cisco's values are considered very importantfor continued success. Therefore, its HR group en-sures that the culture is aligned with the businessstrategy and continually reinforced. Talk about theculture is backed up by actions. A range of mecha-nisms is used to reinforce values. 'All hands'meetings are held quarterly to communicate the


company values and to ensure that everyone feels

included. The culture and values are also empha-sized in communications through the companyintranet. Important events are delivered tc the desk-

top computers of employees. Attempts are madeto create an exciting environment, characterizedby high levels of motivation, empowerrnent, andrecognition. Cisco has parties, including a Christ-mas bash with 100 food stations and entertainment.They also provide other employee services, such

as onsite stores, dry cleaning services, fitness cen-tres, ATMs, automobile oil changes, and mobiledental clinics with appointments made via e-mail.

Decentralization is encouraged. Employees donot have to take permission on every little thing.At Cisco, senior management gets cubicles in thecentre of the fluorescent-lit space while employeesget the windows. All offices are of the same size.

Consistent with its emphasis on people manage-ment, the company was ranked 24th on Fortune's

list of the '100 Best Companies to Work for inAmerica' in 1999, and was ranked fourth onFortune's list of America's most admired comPa-nies in 2000.

People at Cisco

In 1999, the company had more than 26,000 em-

ployees operating in over 54 countries; in 2005,38,056; and today, more than 47,000. Women whowere vice presidents or even more senior num-bered 33 at last count. Cisco has a voluntary attri-tion rate .unong employees of about 80/0, muchlower than the average 300/o employee turnover at

Silicon Valley. Working with Cisco is an experi-ence in itself. Its employees believe that 'It's ad-

dictive to work for Cisco. It can take over your lifeif you let it'. Cisco employees are always smiling,because it is a great place to work and they are allgetting rich from stock options.

Recruihnmt and Selection

Effective recruiting can be a powerful strategicweapon. Developing innovative sources to find the

bestpeople is just as important as the selection pro-cess. The challenge is not only hiring the right

people, but to find them before the competitor.Cisco is known for its non-traditional recruitingmethods. To attract the highest calibre people,Cisco's recruiting team targets what they callpassive job seekers-people who are happy andsuccessful where they are-because the mostsought-after employees are not very accessible. AsBarbara Beck, vice president for human resources,

says they 'usually are not cruising through the "wantadst".

For the past several years, Cisco has averagedover 1,000 new hires every three months, anachievement by any standard, since Silicon Valleyis one of the tightest job markets in the US. Therecruiting team at Cisco first identified the kind ofpeople they needed to hire, their ideal recruitmenttargets. They then held focus groups with the idealrecruitment targets, such as senior engineers andmarketing professionals from competitors. Throughthese focus groups, the recruiting team found outwhere these people spent their time and how theyhunted jobs. The team then innovated a hiringprocess that reached these potential applicantsthrough a variety of routes not usually usedin recruiting, such as infiltrating art fairs andmicrobrewery festivals and other places they fre-quented. Silicon Valley's annual home and gardenshow has been a particularly fruitful venue. Thefirst-time homebuyers that the event attracts also

tend to be young achievers at successful high-tech-nology companies. Cisco recruiters work thecrowd, collecting business cards from prospects,and speaking with them informally about their ca-

reers.

Cisco continues to place newspaper help-wanted advertisements, but rather than listing spe-

cilic job openings, the advertisements feature itsinternet address and an invitation to apply. Becknotes that Cisco is a high-technology company and

'if you don't leverage the technology, you won'tbe able to leverage HRs capabilities'. On theinternet, it can post hundreds of job openings in-expensively and lots of information about each one.

The website has a built-in monitor that measures

important aspects of its recruiting programmes,such as the number of visits to its site. Since most

prospects visit the website from their workplaces,the company can even tell where they worl.

Besides this, Beck also notes, that the top 100/oof.the-highest-performing employees are not typi_cally found in the first round of layoffs f.om oihercompanieslikely to beTherefore,formers rel

E-remtiting at Cisco

using Cisco's resume builder. By monitoring thewebsite, the recruitment team realized that their

easy for stealthy job-seekers. It will let users clickon pull-down menus and profile themselves in l0minutes sers can hit a but_ton that,Gift Lis :::'.'1,3:?Jf;:::cessful Habits of a Great Employee'. The websitehas caused 30-500/o of all resumes to be submittedelectronically and routed automatically into a da_tabase that can be accessed immediately.

job. The.firm goes beyoncl technology. Focus groupresults showed that referrals from friends *I"." upowerful factor in the job search process. The re_sponse 'I'd do it if a friend told me he had a betteropportunity at Cisco than I have at my currentemployer' caused Cisco to launch an initiative_the'friends' programme-to help prospects makea friend at Cisco who could describe *hut it *u.

Acquiring Human Resources J4g

company as prospects and who have similar back_

It works like this. A designer of printed circuitboards clicked on the ,Make Friends @ Cisco, but_ton at the website. She received a call from a printedcircuit board designer at Cisco, the volunteerfriend, who talked about life at Cisco. The volun_H:'j ,:#"}f["TJ:"ffja job, been with her earlierfi_rm 1l years and was not really looking to leave.Having a'friend'made the difference. ilrlr"r, u r"_

150 requests e wishing tobe introduced ource pro-vides about a

It is believed that about 600/o of the people whojoin Cisco do so because they have a friend there.


Every time a referral is hired, the Cisco employeegets $500-2,000. Referral rates at Cisco are twicethe industry norm. Cisco uses internal communi-cation tools such as newsletters and the intranet toupdate employees about the referral programme.The real power of Cisco's website is not that it helpsactive job seekers move more quickly; it is that thewebsite sells the company to people who are happyand satisfied in their current jobs and have neverthought about working at Cisco. The firm targetsthe passive job-seeker.

Cisco is also making their managers' time-con-suming recruiting process easier by hiring in-househeadhunters. Since hiring a new salesperson sixmonths earlier can mean several million dollars inincremental revenue, expediting the hiring processfar outweighs the expense of the additional staff.

Based on performance reviews conducted threemonths after employees start work, and a contin-ued low turnover rate, the networking giant be-lieves its talent pool remains undiluted. Chamberssays, 'Our philosophy is very simple-if vou getthe best people in the industry to fit into your cul-ture and you motivate them properly, then you are

going to be an industry leader'.

Cisco Networking Acadern! Program

To help foster access to education andprofessionalopportunities worldwide, Cisco founded the CiscoNetworking Academy Program in 1997. This is aglobal e-learning programme that offers studentsan opportunity to pursue IT curricula throughonline instructor-led training and hands-on labo-ratory exercises. Since its creation in 1997, over1.6 million students have enrolled at more than10,000 academies located in high schools, techni-cal schools, colleges, universities, and community-based organizations in more than 163 countries.

The programme trains students to design,build, and maintain computer networks. By com-bining education and the intemet, Cisco Network-ing Academies help students acquire the skillsneeded for IT:related jobs and for higher educa-tion in engineering, computer science, and relatedfields.

Diuersi,ly Initiatiaes at Cisco

Cisco is dedicated to connectingbusinesses, people,and communities. As a leading global company, itrecognizes that inclusion and diversity of thoughtis a business imperative. Achieving business ob-jectives is seen as directly related to the advantageof having an inclusive workforce and a diversegroup of suppliers. Employees at Cisco come fromdifferent cultures and geographies, with a varietyof viewpoints and styles of interacting, unique back-grounds, experiences, and values. Cisco believesthat such a diverse workforce gives the companyaccess to new ideas, promotes better decision-mak-ing, and helps the firm understand the needs ofthe customers better. A workforce of inclusion aiso

allows the firm to be well-positioned to anticipateimportant market changes, and be more respon-sive to customer needs. Cisco's Equal Opportunities Policy commits the company to recruit,promote, re-assign, and train people, regardless ofrace, colour, religion, gender, sexual orientation,age, disability, or nationality.

Cisco boasts of a global workforce. In 2005,710lo percent of the employees at Cisco were based

in the US, 150/o in Europe and the Middle East, 90/o

percent in the Asia Pacific region, 2olo inJapan, and30/o in central and South America. To promote andfoster an environment that supports diversity, Ciscoencourages networks that enable employees toconnect with other employees who share cultures,identities, or career goals.

Gender Initintiues

Cisco recognizes that women are under-repre-sented in IT and has a team dedicated to developa number of avenues to encourage and promoteprofessional roles for women in the technology in-dustry. It established the Gender Initiative in 2000to recruit women, ensure that women have access

to the sarne career opportunities as men andprevent them from being channeled into low-paidIT jobs, and provide women with the IT skills nec-essary to participate in all aspects of the globaleconomy. Two gender initiatives at Cisco are Girls

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in Technology Initiative or Women's Initiative andEmployee Women's Access Networks (WANs). TheGirls in Technology Initiative or Women's Initia-tive encourages girls and young women to con-sider careers in engineering and technology, andsupports them in their pursuit of high-technologyeducation. It also aims to increase career opportu-nities for women in high-technology industries andencourage more girls to consider technology ca-reers and focusses on providing advancement anddevelopment opportunities for women employees.This initiative is further supported by the Women'sNetworks, by connecting members-women whowork in engineering and technologyjobs-with stu-dents in high schools and universities, with the hopeof ultimately increasing the number of futurewomen engineers. Employee Women's AccessNetworks (WANs) seeks to empower womenemployees at Cisco to grow professionally. The

Qgestions

1. What is the hiring philosophy of Cisco? Ho.,vhas it contributed to Cisco's becoming an em-ployer of choice? How does Cisco leverage itsrecruitment process to enhance its 'employerbrand'?

2. Based on the information provided in thecase, reconstruct and evaluate the recruitmentstrategy followed by Cisco Systems. What is itabout Cisco that makes people want to workfor it?

3. Is 'culture' highly valued at Cisco? Do youthink that Cisco's 'recruiting for culture' or

Athley, T.R. and M.S. Orth 1999, 'Emerging Com-petency Methods for the Future', Human ResourceManagement, vol. 38 no. 3, pp. 215-26.


WANs offer networking, mentoring, and careerdevelopment resources to women employeesthroughout Cisco's global operations. This servesto increase Cisco's competitive advantage andhelps it achieve its mission by capitalizing on thetalents and skills of its women employees. In 2005,there were 27 active WANs throughout Ciscoworldwide.

This is a company that has repeatedly rein-vented itself. It is indeed intriguing to work outwhat Cisco has that others do not, how it has beenable to be so flexible and fast. These are times whenit is hard to find people and to get the people youfind to become productive quickly. How has Ciscomanaged this startling growth in an industry wheretechnology is constantly changrng intellectual capi-tal is scarce, financial capital for new start-ups isabundant, and the competition is brutal?

4.

5.

6

'p ers onlorgan ization culture fi t' appro ach hasbeen successful?

Based on evidence from the case, discuss theimportance and advantages of e-recruitment.

What objectives and goals does Cisco seek toachieve through its diversity initiatives?

Do you think Cisco's gender initiatives aredirected towards increasing the supply oftalented workforce to the firm? What otherinitiatives at Cisco increase the probabilityof continued supply of adequately trainedworkforce to the Iirm in future?

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Training andDevelopment ofHuman Resources

After studying this chapter, youwill be able to:

r understand the need {or trainingand deveiopment

r define training and developmentand understand some relatedconcepts such as education,experience, and learning

r understand the purposes andbene[iLs of employee trainingand development

r appreciate the significance oftraining ancl development incontemporary businessorganizations

r understand the linkage betweenbusiness strategy and training

e understand the four phases ofthe process of ffaining anddevelopment

r acquire an insight into trainingand development methods

r gain a perspective on thespecial forms of training anddevelopment and on the role oftechnology in training

r understand the competency-based approach to training anddevelopment

INTRODUCTION

Since the 1990s, the economy has been characterized byintense global competition and rapid technological advance.Dramatic changes in the economy and the consequentcorporate restructuring are bringing forth significant trans-formation in organizational structure and work practices.There are changes taking piace in the structure ofjobs, skillrequirements, and the labour-management contract. Newjob skills and greater levels of workforce skills are requireddue to changing job profiles and organizational structures.Changes of this magnitude in the corporate world havesignificant implications for training and development of theworkforce. It is increasingly being felt that the best way forboth organizations and employees to develop a competi-tive advantage in the global economy is to improve the levelof workforce skills. Organizations must continually readjustthe size and skill composition of their workforces.

This chapter begins with a conceptual overview of theterms'training' and'development'. The differences betweenthe two terms are highlighted and related terms such as

'education','experience', and'learning' are explained. Thepurposes that training and development programmes servewithin an organizational context are also discussed. Thechapter explores the growing significance of training anddevelopment in a business environment characterized bycompetitive pressures, technological advancement, andchanges in organizational and work str-ucture. These changeshave created the need for expanded skills and continuousskill upgradation to prevent obsolescence. Within thiscontext, the reasons for training and development (T&D)becoming a strategic organizational activity are discussed.


The chapter also examines the linkage between business strateg"y and train-ing. It is emphasized that for T&D to be strategic, it is important to developT&D activities to support the business strategy of the firm. Miles and Snow(1978) gave a typology of business strategies to explain this linkage. Thischapter describes the four phases of the training process, viz. needs assess-ment, programme design and development, programme implementation, andevaluation.

Cost-benefit approach, return on investrnent approach, and benchmarkingare discussed as methods to determine the value of training for busines, p"r:formance. Special forms of training relevant for organizations characterLedby changes in nature of jobs and organizations are also discussed. Theseinclude team training, diversity training, training for global assignments, train-ing for leadership skills, and new employee training (orientation). The chapterends with a discussion of some recent developments in training and deveiop-ment. These include the role of technology in training (e-training) and thecompetency-based approach to management development.

TTIE NEED FOR TRAINING AND DEVELOPMENTIn the contemporary business environment, organizations and.managers arefaced with several types of changes in their environment. These include, forexample, a dynamic business environment, new technologies) new competi-tors, fluctuating productivity, changing nature of jobs, employee turn&er,etc. To successfully manage such changes, managers must make the right choicewhile making decisions. Therefore, they must keep themselves informed andupdated in their field. Managers also have the responsibility of managing anever-changing workforce operating in a dynamic environment. In ordei toachieve their goals, organizations require employees who have the relevantskil]s, knowledge, and competencies. Firms seek to ensure that they have the'right type' of human resources by hiring people with the required skills andcompetencies. The IT services industry hired about 70,000 employees in 2005and is estimated to add approximately 100,000 new employees by the end of2006. Though there is no dearth of people available, certain skills are in shortsupply. For example, the industry is finding it difficult to get technical architects,functional ERP professionals, semiconductor design engineers, and animationand program management eng'ineers.

Even if an organization finds the right skills, there is no guarantee that theseskills will continue to be relevant and important for organizational goals. Anindividual who enters the workforce today with certain skills is unlikely tohave these skills go unchallenged through the rest of his/her work-life. Similarly, many jobs that exist today were not there 50 years ago. The nature andcontent of jobs evolves and changes as discussed in Chapter 2. The coming

Training and Development of Human Resources 357

years are likely to herald new jobs that will require new set of skills. Forexample, no one had heard of the job of aweb designer about20 years ago.Professionals with new technology skills, such as those with experience in aspecific SAP module, are hard to find. Moreover, a large percentage of thework force will need new or significantly expanded skills to match the growingdemands of their job. This includes technological skills, customer ,"lutlornskills, etc.

With the resurgence of the manufacturing sector, the country is faced witha shortage of vocationally trained workforce. It is estimated that in Indiaapproximately only 60/o of the r,t orkforce is vocationally trained. Hence, lead-' ing firms are investing on re-training the force with multi-skills. All of thesechanges and their consequences have made it imperative for firms to makeconsiderable investments in HR training and development. Organizationshave no cho'ce but to put the recruits through long training prtgtu--"r.Typically, IT services firms are spending upwards of Rs 30,00b-4b,000 fortraining one engineer. In the last quarter of the year 2005,Infosys spent 1.10/o

of its total revenues on training. The company places great emphasis on regularupgradation of skills. It also holds regular value workshops toreinforce articu-lated values and has also set up a Global Education Centre and InfosysLeadership Institute in Mysore. The firm will invest upto Rs 12 billion in thiscentre by the end of 2006.

TRAINING AND DEVELOPMENT: BASIC CONCEPTS

riaining is d: process that attempts to improve employee performance on acurrently held job by providing the employee with the knowledge and skillsneeded for their present job. It is designed to bring about changes in specificknowledge, skills, attitudes, or behaviour. An ideal training effort is one thatmeets the goals of the organizations well as those of the employees. Deaelop-mentrefers to learning opportunities directed toward helping employees grow.Generally, the term development is used to refer to newleaining experiencesprovided to managerial employees, and hence, it is also called managementdevelopment. The development opportunities are not limited to improvingemployee's performance on their current jobs; rather, developm"rt ,"pr":sents efforts to help an individual acquire capabilities beyond those requir"a Uythe current job. Management development consists of all learning experi-ences provided by anorganization to upgrade knowledge, change attitudei, orincrease skills in order to improve current or future managementperformance.Employees with appropriate capabilities enhance organizationaf competitive-ness and its change adaptability. At the same time, for- the employees, devel-

lpment extends opportunities for career growth. Thus, development isfuture-focussed and benefits both the organization and the individual.


Taken together, T&D refers to a planned, continuous effort on the part ofthe organization to improve employee competency levels and firm perfor-mance. taining and development activities are designed to align

"-p1oye"tof a firm with its corporate strategies. The two terms, 'training' and 'dlvelop-ment' may be used interchangeably, but sometimes a distinction is madebetween the two. Table 6.ilightights the main points of difference betweentraining and development.

Distinction is also made between'general training' and'specific training'.Training that helps employees gain skills that can be used at most workplacesis called general training. Communication skills training is an example ofgeneraltraining. General training is equally useful in many firms. It raisesworker's productivity at other employers by the same amount as at theemployer that provides the training. Workers can take their acquired transfer-able skills to other employers. Therefore, general training is a risk for theemployer providing it. This risk is often referred to as the poaching or 'cherrypicking'problem, that is, other organizations may hire trained workers awaywith better salaries and positions. Since general training benefits the employ-ees by increasing their future wages, the employees are often willing to paythe cost of general training. Specific trnining, on the other hand, is training thatincreases the worker's productivity only at the employer's"workplace. Theemployees gain information and skills that are directed specifically to theemployee's own workplace. For example, non-transferable skills that are

Table 6.1: Training and Devetopment: A Comparison

Development

. Process designed to bring about a relativelypermanent change in employees' skills,knowledge, attitudes, or behaviour in orderto improve their performance oncurrently held job

. Process designed to impart learningexperiences in order to help employeesacquire skills and competencies for futureresponsibilities

r Imparts technica-l skills r Imparts managerial skills

r Focus on small number of technical skillsspecific to the current job

r Focus on broad range of skills applicablemore generally across different situations

. Directed towards non-managementpersonnel

r Directed towards managerial personnel

r Present-focussed, short-mn r Future-focussed, long-run

r Activity designed to manage an existingperformance problem

r Activity designed to be a continuous process


organization-specific include understanding the processes and computersystems that are peculiar to a particular orgaiization or a proprietary systemspecific to the organization. Thus, if two companies -"rg" ind one set ofprocesses and systems is phased out, some non-transferable skills become

ls is beneficial onl1, to the current employeracquired skills in other organizations. Due tonerally not willing to pay for specific trainingbetween employers and employees to shari

the benefits.Managers need a broad uariety of skills, such as leadership and supervi-

sory' communication, general business, organizational, and technological skills.They need a soli h they op"erate andthe structure and needto te familiarand comfortable

, regardless of theirparticular area of expertise. Employees need to clearly undersLnd the culture,philosophies, policies, and procedures of the organization. taining anjdevelopment, therefore, should be both general Jnd organization-specific.Given the talent crunch today, organizatio^ toduy are willi"ng to provide theiremployees with opportunities to develop their general skills to. Several firmsloday sponsor their employees for higher elucation. computer Sciencescorporation (csc) encourages its employees to upgrade their skills. The

loyee might want to take to the extentid leave to pursue the course. Some

-,,r ri, il:?Tffi; prosramme on

Some Related TermsApart from the terms 'training' and 'development' there are other terms thatresult in changes in an employee's skils and competencies, and therefore,must also be explained. These terms are 'education,, ,llarning', and ,experience;(Figure 6.1). Let us understand the rneaning of these terms"and ho#they aredifferent from'training'.

Training and education Education is broader in scope than training. It doesnot always have an immediate or a specific application. For examplJ, educa-tion provided in a management institution aimi at developing an individual'sknowledge, skills, and competencies in a comprehenrirr" -uirr"r so that theyare applicable across several situations rather than developing skills relating tta single job. Thus, education increases the range of possible ,"Iporrr", availibleto an individual. Education prepares an individual to assess situations andselect the most appropriate response from the range of responses available.


* KSA: Knowledge, skills, and attitudes

Tiaining, on the other hand, is designed to help an employee learn themost appropriate response to a situation. It, therefore, limits the range ofresponses available to an employee. An example of training is the firefighter'sdrill. The firefighter must precisely follow the steps in case of a fire. However,when a manager has to allocate funds for different organizational activities,there is no 'best' way. Rather, the rnanager must use his/her judgement andgather information to reach optimal budget allocation decision,

The term 'training' is used to refer to activities designed to improve the jobperformance of non-supervisory personnel. Managerial positions, on the otherhand, require elements of education. In recent times, the distinction betweentraining and education has blurred. As decision-making responsibility getsdelegated, training programmes too come to incorporate elements of education.

Change in KSAs. inorder to improvepedormance on

currently held job

Provide learningexperience to help

employees acquire KSAs.for future jobs

Belatively permanentchange in behaviour

that results from practiceor expeflence

Developing KSAs- thatwill be applicable across

several situations. ltincreases the range of

possible responses

Learning on the jobthat takes place

informally and withoutplanning

Figure 6.1: Terms Retated to Training and Devetopment

PURPOSES


Training and experience taining is a planned and systematic process,whereas experience results in learning on the job, without planning. Theimportance of learning by experience is extremely high. However, traininghas certain advantages over experience. Tiaining reduces the time it takes foran individual to reach maximum efficiency. Left to oneself to learn throughexperience by doing, an individual may take longer to reach the same standardsof performance. Moreover, learning by experience can sometimes prove tobe costly. For example, a pilot cannot be left to learn to fly an aircraft throughexperience. In such cases, training is important.

Training and learning Learning refers to any relatively permanent changein behaviour that results from practice or experience. Hence, learning .utt beformal as well as informal. Informal learningtakes the form of 'learning'throughexperience. Formal learning occurs during a training episode. The process oflearning is inherent to training, development, education, and experience, inthat each seeks to bring about a change in the behaviour of an individual.

taining programs serve several organizational functions beyond direct skilldevelopment.

OF TRAINING AND DEVELOPMENTtaining and development serves important purposes other than providingan efficient way to obtain needed skills at higher levels (Figure 6.2). Forexample, firms that include training as a way of career mobility may use it tocommunicate 'fairness' and commitment by the firm to its employees and asa means of having employees internalize the norms of the organization,particularly as job structures move away from direct supervising or controlmechanisms. The major purposes served by T&D of managerial and non-managerial employees are described below.

Performance improvement The main purpose of training is to improveindividual and organizational performance. When employees .t" r.naLl" toperform in accordance with expected standards due to deficiency in skills,training often becomes instrumental in minimizing those problems. Forexample, an otherwise competent manager may be ineffective due to lack ofinterpersonal skills. Imparting interpersonal skills training may help themanager perform more effectively on the job. Thaining is also useful to help anew recruit or a newly prornoted individual to reach performance standardsso,oner than they would otherwise. Often, organizations hire new employeeswho have the aptitude to learn but may not be immediately ready for the job.After hiring, organizations train these newcomers to perform qpecific tasks.By improving the job performance of employees, training contributes toorganizational performance improvement also. However, not all performance


Figure 6.2: Purposes of Training and Devetopment

problems may be due to skill deficiency and therefore training may not beneeded. taining may not be a solution to motivational problems resultingfrom dissatisfaction with the immediate superior.

Updating skills Technological advances result in changes in the nature ofjobs. This results in new skill demands for these jobs to be performed success-fully. Employees who fail to adapt to changes in the nature of jobs and theway jobs are performed become obsolete. Managerial obsolescence is thefailure to keep pace with new methods and processes that enable employeesto remain effective. Thaining helps in upgrading employee skills to meet thechallenges of technological advancements and prevents managerial obsoles-cence. Tiaining and development programmes concern all aspects of anorganization like finance, manufacturing, general management, IT, etc.

Solving problems Organizations face several problems such as schedulingdelays, inventory shortages, absenteeism, employee turnover, union manage-ment disputes, etc. Tiaining provides one means for solving these problems.

New employee orientation New employees come to the organization withcertain expectations. They experience anxiety and discomfort when they findthat reality is different from their expectations. Their interactions with otherorganizational members lead them to form impressions about the organiza-tion and its employees. Moreover, for some time, the new employees performbelow their potential since they are still getting familiar with the job and with


the organization. Orientation training helps new comers adjust faster tothe organization in their run-up to become fully functional members of thefirm.

Preparation for promotion Promotions serve to motivate and retain per-sonnel. When people perceive career growth opportunities in a firm, theyare attracted to jobs in the firm. Organizations design their training andmanagement development programmes to prepare and enable employees toacquire the skills needed for a promotion. Thus, T&D facilitates employeemovement from the present job to a job with higher responsibilities.

Opportunities for personal growth Many employees strive for continuousgrowth and seek challenges in their present job. Thaining and developrnentserves to help employees in their quest for personal growth. Employee growthleads to improved job performance as well as greater organizational effective-NCSS.

It is evident that T&D leads to both individual and organizational perfor-mance improvement. As mentioned earlier, T&D benefits both the employeeand the organization, causing a win-win situation (Figure 6.3). Thaining shouldbe analysed in its organizational context and in the context of its havingmultiple determinants in addition to its technical function of increasingefficiency. Recently, there has been a growth and expansion of the notion oftraining to include a broader focus on those skills that may not contributedirectly to efficiency or productivity but are general skills and thus moretransferable.

Figure 6.3: Benefits of Training and Devetopment

o lncreased efficiency andprofltability

o Reduced employee turn-over (voluntary)

r Reduced involuntary turn-over (e.g terminationsdue to skill deficiency)

. Enhanced productivity

. Makes employees rnoreaccountable as they gainmore knowledge and skills

o lmproved performanceo lncrease in employability

(skilled workers seen asmore attractive bycompetitors

r Enhanced motivaiiono Job becomes more

rewardingr Opportunity for upward

mobility in the firm


SIGNIFICANCE OF TRAINING AND DEVELOPMENTGlobalization of business, advancement in technology, increase in skills atrvorkplace, and constant change has made learning very important for organi-zations. Significant changes have occurred in organizations as a result ofdownsizing, technology, and customer demands for new and better productsand services. Competitive pressures have made firms more conscious of pro-ductivity levels. The result is that firms often expect more work to be accom-plished by fewer people. In the process, decision-making is delegated downthe line. Changes in technolog/, products, and methods have had a majorimpact on job requirements. All these changes translate into more emphasison training and development within the company and into the need foremployees to constantly upgrade their skills. Providing training and learningopportunities for employees is especially important in the services economy.Service providers, across all sectors, cover large and small firms who attemptto communicate and then satisfy customer expectations through tangible andintangible benefits. The context for providing services to customers is charac-terized by the difficulty in achieving homogeneity; the personal contactbetween customers and staffduring the delivery of the service; and the difficultyin correcting faults and service quality breakdowns.

In such a context, training of employees and managers is considered thekey element of business strategy for building successful service encounters.Organizations must keep on learning if they want to maintain or improvecompetitive advantage. The most important source of competitive advantagefor an organization is its workforce, that is, its human resources. To ensure thatemployees continue to remain competent, firms need to engage in continuousT&D. taining and development is the response of organizations to thedemands of a constantly changing business environment. The significance thatT&D has assumed in organizations can be judged by the kind of investmentcompanies make in employee training and development infrastructure andresources. For example, globally, FedEx spends close to US$155 million and1523 man-hours on training each year. Every employee spends four to sixweeks in mandatory training apart from 15 days optional classroom training.Employees are also entitled to an additional US$2,500 annually as tuitionrefund. HDFC gives upwards of 35,000 hours of formal training to itsemployees, u'hich works out to about six to seven days of training a year Perperson. Infosys has a US$125 million annual outlay for T&D. Accenture'sglobal spend on T&D has been $S+6 million between September 2004 andAugust 2005.

Training as a Strategic Organizational ActivityEmployee training and development has assumed great significance in thepast few years. In a knowledge economy, it is no longer sufficient to get


employees to attend an occasional training module a few times ayear. Firmsoperating in a globally competitive market need to train and re-train theiremployees. The emergence of training as a strategic organizational activity isdue to several reasons (see Figure 6.4).

Advances in technolory Technological advances lender many skills obsoleteand simultaneously develop new skill requirements. As skiil requirementschange due to technological advances, training is required to help the wgrkforcelearn the new skills. Technology impacts jobru.ros all hierarchical levels. Forexarnple, those who draw their expertise from a knowledge base, such assurgeons, computer programmers, etc. will be challenged by the advance-ments in this knowledge base during their careers. At the other end, typistsmust now learn use of computers for performing daily activities. To remaincompetitive, organizations must continue to train their employees to learnand use the latest available technologies. Continuous learning has becomeimportant for managers and workers alike in such a dynamic environment.

work redesign The redesign of work has brought in jobs that assign broaderresponsibilities to employees. Employeer "." teqrrlred to take-initiative,develop interpersonal skills to be able to perform well, and work in teams.Therefore, they need to acquire a broad range of skills, .rcir u. team work,

Figure 6./+: Emergence of Training as a Strategic Organizational, Activity: Reasons


collaboration, and conflict management. Another change in organizations istowards cross-functional teams, Cross-functional trainingis required to facilitatethe employees to broaden their range of skills to enable them to meet new jobdemands.

Mergers and acquisitions With mergers and acquisitions, rules of corpo-rate competition are being rewritten, and change has become inevitable. Amajor challenge during mergers and acquisitions is to integrate employees oftwo organizations that have different cultures. At these times, training becomesa strategic tool.

Restructuring Organizations are downsizing, or reorganizing with regularityin order to remain competitive. Whenever a firm restructures itself, trainingissues are likely to emerge. Common training needs during restructuringinclude new job skills, morale, outplacement, change management, etc.

Workforce diversity Diversity of workforce has increased, as alreadydiscussed in earlier chapters. Moreover, globalization of business operationsrequires managers to acquire knowledge related to cultural differences anddevelop skills to manage them. Therefore, diversity and cross-cultural train-ing becomes important, to ensure that cultural differences are understood andmanaged effectively. tainers need to design and deliver training modulesthat help organizations address diversity issues by helping managers learn torespect diversity in cultures and learning styles.

Employee mobility The notion of lifetime employment stands challenged.Employees move from one organization to another with higher frequencythan in the past. This also suggests that firms are hiring more frequently. There-fore, orienting and integrating new employees to the workplace is taking upmore of organizations' time.

In addition to these strategic reasons, training is important for new hires,for those assigned to new job responsibilities, and to improve performance oncurrent jobs. Tata Consultancy Services (TCS) is working on developing anon-line game to be included as part of the induction kit of a new recruit. Thisgame will seek to familiarize TCS inductees around the world with the cultureof the company. The challenge faced by TCS is to introduce every employeeto the common global company culture.. This is no small task, because TCSemploys 71,200 people of 53 nationalities in 34 countries and recruits 2,500people every month.

Organizational changes toward outsourcing have ushered in different kindof challenge for training and development activities of the firm. As firmsoutsource and increase their use of contingent workers, there exists the poten-tial for weakening of the firm's core investment in workforce skills. Segmentsof the workforce that were formerly considered part of the organization are


now either contingent workers or are located in external supplier firms thatare usually smaller and have less capacity and fewer r".o,lr.", to train. Theseworkers are not considered for training and skill development opportunitieswithin the firm. In this context, individuals have to

"rroirr" greater responsi-

biliq. for their own skill development in order to remain em-ployable. '

Although r&D is highly significant in today's competitive environment,traditionally it was seen as a solution to performance-related problems afterthey occurred and was thus reactive in nature and imparted as an afterthought.It was neither strategically aligned nor viewed ur

"n important contribution to

organizational goals.,N1any firms continue to conduct ad hoc trainingprogrammes or consider training as a fad. However, firms are increasinglyrecognizing the value of training for accomplishing organizations, stratelilgoals. Tfaining and development is seen as proactive (see an example in t]recontext of sales at Exhibit 6.1). Strategic goals and objectives of the organization

Upgrading Sales Troining: A proactive Approach

Firms are investing in initiatives to improve cus-tomer satisfaction; one such initiative is salestrain ing.

Maruti's sales training budget has grown 35-40oh every year. lf senior management time andresources spent on training are factored in, thisfigure wouid double. Reliance lndustries report-edly spent Rs 170 million ro acquire NIS Sparta,a Delhi-based sales training institute. Companieslike Codrej, Mahindra & Mahindra, and Evereadyhave set up sales academies. LC organizesaround 20 workshops in its branches every yearat a cost of a few million rupees. ,These work-shops are aimed at arming its sales and market-ing team with the skill sets to handle trade andcustomers.

Other companies that have been traditionallyknown for their sales training programmes, suchas HLL and Maruti Udyog, are moving theirprogrammes to the next level. Maruti trains6,000-7,000 people at its dealer outletsevery year. ln 2003, HLL rolled out ,projectDronacharya' to impart continuous training for

Source: Pande and Banerjee 2004

about 5,000 stockists' salesmen to.improve theircapabilities and skills.

Retail formats are changing and old relation-ship-based selling is transforming into a more fact-based and customer-focussed activity. Thechanges in demographics, expectations, as wellas in the retail landscape have pushed firms tore-look at the skills needed by the frontline sales-force. The increasingly competitive scenario hasled to the realization that the company,s rela-tionship with distributors and dealers is the mostimportant. Hence, a proactive sales force be-comes very important. Therefore, sales trainingprogrammes need to be carefully designed.

With retail becoming more demanding,Cillette lndia has increased the number of train-ing personnel in the firm. The training functionat Cillette lndia has one head-office based na-tional sales training manager. ln 2OO4, the com-pany appointed four regional trainers to assist thenational sales training manager. The budget forsales training was also hiked. The firm is alsooutsourcing some training to specialists.


are translated into HR terms to identify the type of skills that the firm willrequire to achieve these goals. In its proactive form, T&D focusses on antici-pating the skills that the firm will require and on ensuring their availability bydesigning appropriate interventions. This suggests that training has becomestrategically aligned with the business goals of the organization.

HRM APPROACHES TO TRAINING AND DEVELOPMENT

Several changes have taken place over the years in corporate strategy as wellas in the training provided by firms to their employees. During the era ofcrafts-based enterprises, apprentices worked alongside their master who wasa skilled and an experienced craftsman, and gradually learned the skills. Inthe manufacturing age, workers started working together in factories. Theworkers no longer owned the machinery but they were still the masters of theproduction process because they possessed the skills and expertise. The frag-mentation and separation of activities began with Adam Smith's idea of thedivision of labour. This saw the advent of increasing task specialization andbegan to lead to a continuing disqualification of the worker. This process offragmentation of expertise became the basic feature underlying the classicorganization theories of 'Thylorism' and 'Fordism'. Taylorism proposed the'one best and oniy way' that implied training the worker in the 'best way' ofaccomplishing a task. Fragmentation of expertise is, however, characterizedby a short-term nature, fragmented and shallow content of knowledge, andtransmission of skills that can be immediately applied to measure work tasks.There are three HRM approaches towards T&D in organizations, as explainedin Figure 6.5.

fluman capital approach Itviews training as an investment in human capitalthat gives returns in the form of increased productivity. The strategic frame-work ofJackson and Schuler (1989) considers human resources a significantfactor of sustained competitive advantage for a company. This implies thatwhen the capabilities and skills available to an organization in the form of theskills and competencies of its individual employees are superior to those of itscompetitors, the firm gains an advantage over its competitors. In this context,training becomes invaluable, since it results in the development of the humanresources of the firm into a valuable and unique resource that cannot be copiedand is not substitutable.

Contingent approach A theoretical approach that has received maximumattention is the contingent approach. It views training (or any other HRMpractice) and the business strategy of a firm as interdependent. It does appear,then, that training is related in a systematic manner to the generic businessstrategies formulated by the organizations. However, one problem with the

Training and Development of Human Resources 3i6g

Figure 6.5: HRM Approaches and Training and Development in grganizations

relationship between strategy and HRM practices is the diversity of typologiesof strategies proposed in the literature lsee Chapter l). SomL .orr.lrrriJrrr,however, can be drawn based on the contingentipproach. For example, infirms that follow the innouation strategyand the quatity strategt,training is likelyto be oriented towards developing multiple skills. Innovatln strateg,y ir ulrblikely to be linked with training oriented to providing skills needed in thefutuie and for better group co-operation and results. When a firm follows adynam.ic glout! strategy or a c,ost strategy, training is likely to be highlyspecialized and oriented towards a short-term puy-oif. Firms following

"firofitstrategy emphasize training the individual.

Strategic fr amework Using T&D and management d evelopment pro grammesas a comPetitive weapon has emerged as an option in recent y"uir. G do thisthere is a need to strengthen the link betweerrbusiness strategy and T&D. Toensure that training adds value to an organization, the training strategy shouldbe linked to organizational objectives and the business strateg!. Strategic train-ing is concerned with developing training plans and activities that are"alignedwith organizational strategic plans and decisions and human ,"*orrr.. flu.r-ning (HRP) efforts. Hence, strategic traininginterventions and activities focus ondeveloping those competencies and skills among employees that improve theirjob performance and also result in competitirr" ud'nu.rtuge for the organization.

LINKAGE BETWEEN BUSINESS STRATEGY AND TRAININGFor training efforts to be strategic, it is important to develop trainingprogrammes and activities to support the business strategy of the firml

Training is an investmentin human resources thatgives returns in the form ofincreased productivity

Strategic Framework

Training results in thedeveiopment of those skillsand competencies inemployees that are uniqueand superior to competitors,leading to competitiveadvantage

Dependency relationshipbetween training andbusiness strategy of the firm


Organizations can obtain skills through hiring or develop skills through T&Dactivities. taditionally, T&D practices focussed on training individuals to over-come specific job-based deficiencies or to impart knowledge and skills pre-dicted to be of use in the future. Strategically aligned staffing and trainingactivities help organizations acquire and develop human resources requiredto achieve competitiae aduantage. Exemplary organizations recognize that aworkforce with superior skills is a primary source of competitive advantage.These firms use T&D to create change-readiness in the organization. Theyalso ensure strong linkages between strategic business plans, goals, and T&Dactivities. These firms review and update their T&D goals on an annual basisto continuously match the changing strategic needs of the business units. Train-ing professionals is part of the strategic planning process to ensure that humanresource considerations such as availability of talent are taken into accountwhen formulating strategic goals. Motorola and P&G are examples of organi-zations that undertake such exercises.

Another way in which organizations can establish strategic linkage of T&Dactivities is by having a clear statement of training policy. Some organizationsestablish training as a prerequisite for consideration for promotion. Compa-nies like P&G require employees to undergo training each time they receive a

promotion. Some other aspects of policies relate to number of hours eachemployee is to spend annually in T&D, and budget allocations for T&D. Someorganizations assign the responsibility for seeking T&D opportunities to theemployees.

Organizations investhuge amounts in employee T&D as pointed out earlier.This investment of effort, time, and money will be futile if training does notresult in creating skills that are important for an organization in achieving itsstrategic objectives. Hence, it is important to matbh the training practices andstrategic objectives of a firm. At FedEx, investment in training is seen as acost-saver and a revenue-generator. Unless clearly linked to strategy, even thebest-designed and -implemented training will remain ineffective. This assumes

that the organization has a clear business strateg'y to link training to. Take thecase of a firm that may be trying to distinguish itself from its competition onthe basis of the quality of its customer service. To support the strategic objectiveof the firm, significant customer service training will be needed" The examplesuggests that the training focus and activities must parallel business strategies.

Miles and Snow (1984) provide a conceptual basis for linking training prac-tices with business strategy by identifying four types of business strategiesbased on how'firms adapt to their environments. As mentioned in earlierchapters, the basic strategic types are-defenders, prospectors, analysers, andreactors. The prospector and defender strategies are distinct in their charac-teristics. The analyser strategy is a combination of these two approaches. Letus focus on the defender and prospector strategies to compare training practices


linkages with business strateg'ies (Table 6.2). To explain this linkage, Raghuramand Arvey (1994) addressed two issues:

o Buying versus building skills (skill source)o Types of functional skills (skill type)

The business strateg"y of a firm will influence the decision to buy skills or tobuild skills from within. Moreover, different strategies will place emphasis ondifferent functional skills.

Defender strateg'y is associated with production and process efficiency. There-fore, skill types that lead to improving efficiency of processes are likely to be

Tabte 6.2: Linkage between Business strategy and staffing and Training practices

Type ofBusiness Strategy

Characteristics HRMRequirements

Staffing andTraining Practices

DefenderCompete on thebasis of low priceand high quality;stableenvironment

r Limited product liner Single capital-intensive

technology

' Skills in productionefficiency, processengineering, and costcontrol

. Emphasize technicalefficiency

r Long-term perspectiver Functional structurer Division of labour

Skill specializationEmphasis onproduction andfinance functionsBuild skills

Skill Tlpe. Staff and train for

narrow skillsr Staff and train for

production andfinance functionsSkill Source

r Internal staffingr High amount of

training. In-house training

ProspectorCompete on thebasis of newmarkets andnew products;unstableenvironment

r Diverse product linesr Multiple technologiesr Skills in product

research anddevelopment andproduct engineering

. Emphasize product/market innovation

r Rapid growthr Decentralized structurer Low formalizationr A product or

geographicallydivisionalized structure

Skill flexibilityEmphasis onmarketing/salesand on researchand developmentBuy skills

Skill Tlper Staff and train for

broad skillsr Staff and train for

marketing researchand developmentSkill Source

r External staffingr Low amount of

trainingr External kaining

when required

Source: Ptaghrtram and Arvey lg94


more important for these firms. Thus, these firms are likely to place moreemphasis on selecting and training employees in the functions of productionprocess, finance, accounts, and quality control. Since defenders compete onthe basis of low price and high quality, th"y are more likely to build skillsinternally through training and internal staffing (skill source). This strategyhelps these firms refine their skills toward greater efficiency. It also providesthe firm with competency continuity. Over time, these skills become organ-i-zation-specific, unique, and non-imitable and hence become the source ofcompetitive advantage for the firm.

Prospector strategy is associated with the preference to buy new and diverseskills from external sources. Since the nature of'technological change is un-predictable, firms cannot project the specific skills they would require in fu-ture. When requirement for such skills does come, it is difficult and expensivefor these firms to develop them internally atshort notice. Under these circum-stances, the prospectors resort to external sources for acquiring these skills.With respect to skill type, the prospectors are likely to value expertise in re-search and development, functions that emphasize growth, and marketing.Consequently, these firms are expected to emphasize employee selection forthese functions. The emphasis of training in firms that follow the prospectorstrategy is also on skills required by the marketing, sales, and research anddevelopment functions.

The variations in the skill sources and skill types of business strategy dis-cussed here are based on the assumption that different staffing and trainingpractices are important for achieving different strategic objectives. However,this relationship between source and tlpe of skills may not always hold. Thisis because effectiveness of staffing and training practices may be influencedby several factors, such as the climate for transfer of training, compensationsystem, etc.

Among the more recent theoretical developments, the resource-based view(as discussed in Chapter 1) contributes further to an understanding of howfirms acquire and shape their human resources to establish a sustainable com-petitive advantage. The resource-based view suggests that organizations achievecompetitive advantage through their human resources that are unique,valuable, and that are not imitable. Some of these resources are difficult andexpensive to replace or to acquire when needed. Some resources cannot betraded. Firms that have resources that are difficult to replace or develop mustwork with existing resources rather than attempt to create them. Firms ensurethat they have the required human resource through their staffing andtraining practices. Moreovet, firms achieve competitive advantage to the extentthey are able to create a pool of unique human resources based on its staffingand training practices.


Strategic linkage of training activities results in several benefits for the firm:t

Professionals become business partnersgers to help solve their problems

' ontribute to organizational results through

o Rather than chase latest training fads, human resource professionalsdesign need-based programmes

o Reduces the mindset that training can solve most employee or organiza-tional problems. The focus is on assessing what

"ppio..h-training ornon-training-will help manage the performance issue at hand.

THE PROCESS OF TRAINING AND DEVELOPMENTIn a broa are designed to help the organization achieveits overal goals and objectives shoulJ, therefore, be thestarting p es. The first step in a T&D programme shouldbe to clearly determine and specif the organizational goul., ibjectives, andstrateg'ies' It is important for le entire training ptu."rr to be oriented andaligned with organizational goals and strategieslFor example, if the strategicobjective of a fast food restaurant chain is 'customer delight,, the businessstrategy that the restaurant should choose is one that facil'itates the overallorganizational goal. The training programrne should also be directed towardsbuilding upon and improving .tiittr u"a competencies that will further theorganizational goal. In this case, the skills may be related to customer serviceexcellence. Through enhancing individual employee skills, T&D results inimproved individual and organizational performance.

A strategically aligned T&D proces t"pr"sents the systems approach toT&D. Unfortunately, many organizations do not establishihe tint<age betweenstrategic objectives and trainintraining fads or copy whateverment development is informaltraining plan, taining is offeretage of training opportunities, but these opportunities are not part of a formal

linked als and long_range objectives.results s that are misdirected, poorlyequatel uch organizational investmentad hoc activity, they do not offer much return to the

organization.A schematic diagram of the process of training is presented in Figure 6.6.

The systems approach to T&D involves the following fonr phases.1. Needs assessment (diagnostic phase)2. Programme design and development


. Organizationalanalysis

r Job/task analysiso Person analysis

Gap between skillsrequired and skills

available

Olher actionsrequired (hiring, job

redesign, etc.)

Need forT&D

o Training Goals and Objectivesr Seleciion of traineesr Selection of trainerso Selection of T&D methods

Evaluation olTraining Programme

Figure 6.6: The Training Process

3. Programmb implementation4. Evaluation

Needs Assessment Phase

Needs assessment is a systematic, objective determination of training needsbased on data. It involves placing training within an appropriate organiza-tional context. The goal of needs assessment is to determine whether a needfor training actually exists in the organization. A training need is said to existwhen there is a discrepancy between what is desired and what exists. Needs

, Training and Development of Human Resources 375

assessment takes the form of comparing the skills required with the skills avail-able. To the extent that there may be a skills shortfall-that is, more skills arerequired than are available-training may be required. If a firm decides toinstall a new computer system in its main office, it would first determine thelevel of skills required to use the system. Subsequently, through a skills inven-tory, the firm would determine whether the relevant group of employees havethe requisite skills. A g"p between the two suggests the need-foi training.Comparison between the expected level of performance (as specified by jobanalysis) and the current level of performance of the individuil may indicateperformance discrepancy. If the performance discrepancy is due to a skill orknowledge deficiency that is trainable and can be met by training, it suggeststhe need for training.

An organization should commit resources to T&D activities only if itexpects to achieve some goals. For example, training needs have increased inthe IT services industry today as the average graduate does not possess therequired skills. taining has assumed particular importance in the BpOindustry. With thousands of fresh graduates handling customer queries, thereis an ongoing need to train them on soft and specialized skills. As Bpo firmslook towards moving up the value chain, cultural and value training and trainingto gain understanding of the industry in general and of the organization inparticular has become important. Firms that conduct T&D programmes with-out conducting needs assessment may be investing money where it will notresult in returns. For example, needs assessment may suggest that instead ofconducting training, the organization would be better off if it chooses lesscostly options, such as hiring new employees, job redesign, etc.

There are certain indicators in a firm that suggest the need for training. Themost obvious indicators come from productivity measures, such as reducedproductivity, or poor job performance. other indicators may be high wast-age, accidents, poor product quality, etc. However, these outcomes maynot always be the result of skill deficiency. If the employee has the requiredskil,l, yet is not performing as expected, the performance problem may be dueto factors such as low motivation. In this situation, some other interventionsuch as new incentives or rewards instead of training may prove to be moreeffective. Therefore, systematic needs assessment is important to determinethat training is the solution to the concerned problem. Needs assessment isthe most important step in the T&D process. The entire process flows fromthe needs identified. If needs are incorrectly determined, the trainingprogramme will also be inappropriately directed. Despite its importance, veryfew organizations conduct a systematic needs assessment in the context oftheir strategic plans.

Information with respectto T&D needs assessmentis collected by conductingthree primary types of analyses. These anSlyses are organizational analysis-,


job/task analysis, and person analysis (see Thble 6.3). Figure 6.7 shows the

types of need analysis.

Organizational analysis Tiaining does not exist in a vacuum. The context

in which training occurs has an impact on training effectiveness. The first step

in needs assessment is to identify the forces that can influence the need for

training. Organizational analysis is an examination of the environment, strat-

egies, oiganizational goals, resources of the organization, personnel inventories,

p-"rfor-itt.e data, and climate and efficiency indices to determine where the

iraining emphasis should be placed in the organization and what factors may

affect tiaining. Companies like Motorola and IBM conduct annual surveys to

assess trainingneedsln the context of the company's short and long-term goals'

The strategic initiatives and the short-term and long-term goals of the orga-

nization are reviewed to channelize the training towards specific issues of im-

portance to the firm. For example, a firm that is participating in a strategic

merger or a strategic acquisition will have to manage employees coming to-

gether with different cultures. Thus, the firm may emphasize training on man-

agng cultoral diversity and on understanding different ways of conducting

Tabte 6.3: Source of Needs Analysis Data

Types of Analyses in TrainingNeeds Assessment

Sources of Data

Organizational AnalysisAn examination of the environment, strategies,

organizational goals, resources of the

organization, performance data, personnelinventories, etc. To determine where the

training emphasis should be placed in the

organization

r Economic and policy rssues

r Strategic initiatives of the organization

' Technological change. Technological, financial, and human resources

available to meet training objectivesr Data about turnover, accidents, absenteeism,

etc.

Job Analysis

Job description and job specifications to

determine the content of the trainingprogramme to ensure that the trainee

performs well on the job

. Job descriptionsr Job specificationsr Competencyassessment

PerBon AnalysisTo determine which employees need trainingand which do not

r Attitude surveysr Group discussionsr Questionnaires. Performance appraisalsr Skills tests

r Exit interviewsr Employee performance documents

Adapted from: Bohlander, Srrell, and Sherman 2002


Figure 6.7: Types of Training Needs AnaLysis

business. Similarly, globalization, technological change, and restructuring oforganizations all influence the way work is done and hence the types of skillsrequired by the firm. when faced with employee surplus, IBM tried to reducelayoffs by retraining employees to be sales repres"ntutirr"r. IBM minimizedlayoffs and through its larger sales staff achieved another goal, that is, to improvecustomer satisfaction.

organizational analysis also involves examining the HR inventory. TheHR or skills inventory is helpful in determining retirements and turnover andin projecting employee mobility. Inventories also indicate the number ofemployees available in the organization in each knowledge and skill group.This information is compared to the skills needed as determined by the HRpprocess, thus indicating which skill groups are deficient.

_ Efficiency indices, such as cost of labour, quality of the product, wastage,late deliveries, customer complaints, repairs, etc., may also be examinedlofind discrepancies between desired and actual performance. The climate in-dex can also identify problem areas that can be managed with training. Climateindices include records on turnover, accidents, productivity, attitudi surveys,employee suggestions, etc. Apart from these factors, it is also important toidentify any organizational constraints on training efforts. Adequate facilitiesand resources,may not be assigned for training effort if the top management isnot convinced of the benefits of training.

Job/task analysis Job analysis is concerned with determining what shouldbe taught in training to ensure that the trainee performs the job satisfactorily.Job descriptions and job specifications are of great help at this step. By listingthe specific duties and skills of a job, job descriptiorand job specificationiprovide the basic reference point in determining the trainin g reqrired. Ta:kanalysisis the process of determining what the content of a trainlng progr.*-"

Determine w he re trainingemphasis should be placedin organization, and whatfactors may affect traininglnformation used. Organizational goalso HR inventory. Efficiency indices. Climate indices

Determine r,yhaf should betaught in training thecontent ol the programmelnformation used. Job descriptionr Job speciticationr Competencies reqUired

Determine who needstraining, fype oi trainingneededlnformation usedPertormance appraisals


should be on the basis of the study of tasks, and duties involved in the job. By

reviewing the job description, task analysis determines the specific skills re-

quired for performing the job. T[sk analysis is more detailed than job analysis,

but the purpose is to determine the content of the T&D programme. Task

analysis begins by listing all the tasks and duties included in the job. It thenidentifies the steps performed by the employee to complete each task. Thetype of performance required on the task is then identified followed by the

skills and knowledge necessary for performance.However, in recent times, there is a shift in both job analysis and task analysis.

From a fixed sequence of tasks and activities, this shift is toward a more flexibleset of competencies required for superior performance. Competency assess-

ment focuses on the analysis of sets of skills and knowledge needed byemployees to be successful, particularly in knowledge-intensive jobs. Tiainingprogrammes based on task analysis become dated as the nature ofjobs change.

On the other hand, competency-based training programmes are more flexible.Competency-based approach to T&D is discussed in more detail later in the

chapter.

Person analysis This is the third step in needs assessment. Person analysis

determines which employees require training, and, equally importantly, whichdo not. It answers the question of who needs training in the firm and the

specific type of training needed. Person analysis involves comparing the

actual performance of individuals, groups, or departments (based on perfor-mance appraisal data) to the expected performance standards. The perfor-mance appraisal data helps determine which employees (or groups ofemployees) have been successful in performing the job according to perfor-mance standards, and which employees are not meeting expectations. How-ever, performance data typically do not reveal the reasons for performancedeficiency. \Mhile performance discrepancy indicates areas that need attention,

it is important to determine whether the discrepancy is due to knowledge orskill deficiency or due to lack of motivation as emphasized earlier. Tiainingwill be beneficial for people who lack certain 'trainable' skills. Thus, Personanalysis helps organizations avoid the costly mistake of sending all employees

into training when, in fact, some do not need it. It also helps determine the

present skill levels of employees entering training so that the programme can

be designed to emphasize those skills on which they are deficient. To obtainperson analysis information, companies may use self-assessment, customer

feedback, peers and subordinate feedback, performance appraisal data, etc.

If training is needed, managers and HR personnel should determine whatkind of training is needed, where in the organization training is needed, whatspecific knowledge, skills, abilities, etc. the employees need, and what methods

will best deliver the needed knowledge, skills, and abilities.


Programme Design and Development PhaseAfter identifying training needs, the next step in the training process is todesigrr the learning environment necessary to facilitate leirning and todevelop the training programme. Design and development oflrainingProgramme includes the establishment of training goals, selection of trainees,trainee potential and readiness, focus on principles of learning, selecting trainingmethods for use in the programme, and choice of instructors or trainers.

Establishing training goals and objectives once training needs havebeen assessed, goals and objectives of T&D should be defined. taining goalsshould be integrated with the training needs of the organization in oidlr toensure that these needs will be served when training goals are achieved. Sincethe,entire training programme will be designed to accomplish the traininggoals, it is important to align training goals with organizational objectives-.As training goals are accomplished, the training needs should be met, and theobjectives of the organization should be served. taining goals also providedirection to the training programme.

taining goals and objectives specify what the training programme shouldaccomplish and the specific performance the trainees should be able to exhibitat the end of the training programme. These are the desired outcomes of thetraining programme. Tiaining goals should be clearly stated in behaviouralterms. Well-written training goals have the following characteristics:

o Specify observable actions (e.g., time on target, error rate, etc.) What isto be achieved?

o Specify measurable criteria (e.g., percentage correct, percentage error,etc.) How it is to be measured?

o Conditions of performance. When the behaviour should occur.

The training objective 'Learn to manage time' is vague, and does not dem-onstrate the above characteristics. However, when the objective is stated as,'will make a list of things to be done, assign a priority to each item, andschedule time for various activities 1000/o of the time, and follow this scheduleat least 800/o of the time', it reflects a clearly stated training goal.

Organizations often conduct training programmes without stating objec-tives in specific terms. When they do so, they lose out on the following advan-tages of establishing training goals.

o objectives help determine criteria for evaluating training programmes.o lhey help determine the content of the training programme.o Objectives ensure that the issues identified through strategic planning

are being addressed.o Ensure that training function becomes more accountable and clearly

linked to other HR activities.


o Objectives help training managers demonstrate the strategic value oftraining and gain more support for training activities.

When establishing objectives, it is also important to consider how theaccomplishment of these objectives will be measured. Therefore, evaluationshould be built into the training process right from the early stages of planninga training programme. Follow-up measurement should be designed to directlyevaluate the impact of training activities on meeting the stated objectives.

Selection of trainees Person analysis helps identify the individuals or groupsthat require training. For example, customer feedback may indicate thatcustomers are dissatisfied by the manner in which sales personnel interactwith the customers. In this case, the target employee group that shouldreceive training is obvious. However, not all sales personnel may be selectedfor training. This may be due to several reasons:

o all sales personnel may not need training (if we use the performancediscrepancy logic);

. some sales personnel may lack the ability to learn the skills required andto subsequently use them; and

o imparting training to employees who are unlikely to gain from trainingresults in feelings of personal failure on the part of such trainees. It alsoleads to unproductive expenditure of resources on training.

Thainee potential and readiness Employees selected for T&D programmesshould lrave the ability to learn as well as motiuatiorz to learn from the training,that is, the individuals selected to undergo a training programme should be'trainable' (ready to learn). Thainee motivation can be enhanced by

' o demonstrating the value of training and how they can use new skills ontheir jobs; and

o informing trainees of the benefits of attending the training. These benefitsmay be intrinsic (like personal growth) or extrinsic (like promotion).

Preparing employees, typically high performers, for higher responsibilitywithin the firm is a major input for selecting who will be sent for training. AtJ. Walter Thomson, the best training programmes are skewed towards the staremployees-those identified as high performers and future leaders. Similarly,Ogrlvy and Mather and GroupM extend training to young talent to providethem an opportunity to grow. At GroupM, there is a programme called'Fasttackers' for young achievers through which they are groomed to take onadditional responsibility. Senior executives identified for greater responsibilities are also given special training. For example, atJ. Walter Thomson, top-level managers who have been identified to head offices are nominated for

Training and Development of Human Resources 3g1

the international programme. The firm has also introduced a top achiever,sprogramme.

It is common to encounter resistance from managers when providing man-agement development opportunities. They may be hesitant to admit tJ areasof weakness or that they need additional training, which may give rise toT"ty barriers to participation, most commonly 'lack of time'. Resistance tochange and fear of failure are natural. When T&D is positioned 4s a prerequisiteto growth within the organization, employees are extended an incentive forparticipation. At the same time, it also develops a form of a self-selection processfor identifying employees interested in advancement within the organization.

Focus on principles of learning Thaining is a learning situation aimed atimparting skills, knowledge, or competencies to the learner, that is, theemployee. There are certain conditions in which learning is effective. Thetraining environment should be designed to maximize learning. This can beachieved by incorporating principles of learning in the training programme.The success or failure of a training progtu-nt" is linked to lhlse-learningprinciples. These principles of learning are briefly described in T[ble 6.4.

Selection of trainers In designing the training programme, decision needsto be made regarding who will conduct training, that is, the choice of trainer.The success of a training programme in large part is guided by the skills of theinstructor (trainer). Certain characteristics separate good trainers from badtrainers" Some of the characteristics of good trainers are sincerity, sense ofhumour, knowledge of subject, interest, enthusiasm, ability to give clearinstructions, and ability to adapt style to match trainees, preference andlearning ability. Trainers are also required to keep updating their skills andknowledge. Many firms like TCS have 'train the trainei'progtu--"s in place.

Another issue related to the selection of a trainer relates to whether thetraining will be in-house and conducted by internal training staff member(s)or will be external to the organization and conducted by a consultant or train-ing specialist. Whether the training is internal or external, the trainer shoulddemonstrate the above-mentioned qualities. In several firms like ICICI, Infosys,wipro, Genpact, and in the IT services industry, in-house training has becomecrucial to the growth of the firm.IBM Daksh, the Bpo firm considers trainingthe most important means to deliver high quality talent that has a direct impacion client satisfaction. The company has a separate in-house training grtrpthat has been rechristened the Thlent tansformation Business Unit eigu).The TTBU is run like a separate business with its own finance controller,quality head, an administration and transport wing, and a dedicated HRrepresentative. The TTBU is held accountable for output measures of itstrainees, such as voice quality, rejection rates, cost of delivery, and customersatisfaction metrics.


Table 6.4: Principtes of Learning

Sourca Bohlander, Snell, and Sherman 2002

Many firms are outsourcing part of their training requirements, while severalothers believe in developing an internal talent pool of trainers. The latterbelieve that the best trainers are the line managers and executives who havespent time with the organization and understand the business first-hand.Accenture has outsourced cross-cultural and communication training tovendors. However, for technical training, it develops trainers from withinthrough what it calls a'leaders teaching leaders' approach. In order to encour-age senior managers to take an active interest in training others, some firmslink their performance appraisals and upward growth to investing time in

Goal-setting When the goals and objectives of training are clearly stated andcommunicated, trainees are motivated to make efforts towards goalachievement.

Meaningfulpresentation

Material to be learned should be meaningfully arranged so that eachsubsequent inforrnation builds upon the previous information.

Practice andrepetition

Trainees should be given an opportunity to practise what has beenlearned in the training situation. Active and repeated practise leadsgreater efficiency in job performance.

to

Feedback andreinforcement

I'eedkrack provides the trainees with knowledge of results, so the traineesknow the areas in which they have done well and the areas which needimprovement. Feedback is also motivational. Knowledge about howwell one has performed is motivating. Verbal encouragement or otherextrinsic rewards also reinforce desired behaviour.

Whole vs partlearning

Complex jobs should be broken down into its parts. Tiainees shouldIearn each part separately, starting from the basic to the difficult ones.After mastering each part separately, the trainee should be shownhow these parts fit together.

Massed vsspaced learning

Practice is important for learning a new skill. kacticing a new skill withrest pauses in between (spaced practice) is more effective than practicingwithout breaks (massed practice).

Individualdifferences

People learn at different rates and in different ways. tainees differ intheir learning style. For example, some trainees learn best by actuallydoing (activists). Some others leam by listening to others. Still otherslearn by observing others.

Transfer oflearning

tansfer occurs when trainees use on their job what they have learnedin training. One way to achieve this is to ensure that training situationhas elements of the actual job context.


training others. At ICICI bank, senior executives are required to spend timetraining others. The company has a 'Leadership Talent List' of potential fasttrackers. In order to make it to this list senior executives are required to spendtime training others. Infosys too links training to individuals' performance.

The quality of internal training capability is expected to be a key driver ofbusiness success in the future. It is therefore not surprising that firms areinvesting heavily in training infrastructure. At the same time, firms such as

Accenture, Infosys, and TCS are building external partnerships with educa-tional institutions, as discussed in Chapter 4.

Selecting training and development methods A significant decision indesigning the training programme relates to the choice of selection method(s)to be used for imparting training. A range of training methods are availablefor training employees at all levels. These differ from each other primarily interms of the degree to which they allow and encourage active involvement oftrainees in the process of learning. On a continuum of 'degree of traineeparticipation', lecture methods fall at one end (where there is no participationby the trainee, only one-way-comrnunication), and on-thejob training fallson the other end (where trainee learns by doing). Figure 6.8 depicts thiscontinuum. It is generally believed that training methods that encourage traineeparticipation in the learning experience are more effective than those thatlimit trainees' involvement.

Knowledge, skills and abilities that need to be learned are major consider-ation in choosing training methods. Different methods are suitable for impartingrdifferent kinds of skills. For example, for giving the factual information, one-way communication using lecture methods may serve the purpose. However,when behavioural or attitude change is required, methods requiring greateremployee participation, such as simulations, maybe more appropriate. tainingmethods can also be categorized as on-thejob and off-thejob. The relativemerits and de-merits of on-thejob and off-thejob methods are presented inTable 6.5.

LecturesSeminars andconferences

Method

Case study Simulation On the job

Low traineeparticipation

Degree of traineeparticipation

Figure 6.8: Continuum of Training and Devetopment Methods

High traineeparticipation


Tabte 6.5: Pros and cons of 0n-the-job and Off-the-job Methods of T&D

Employees learn by listening or observing

others in a learning situation away from work'

Conceptual knowledge and certain skills are

learned in this way. These methods supplement

the experience gained from on-thejobT&D methods.learns by doing the job.

More appropriate for certain skills where

learning on the job maY be riskY

Tlainees are free from worries of performingthe job and can focus on learning

Prosr Simple and less costlY

t P.ovides hands-on experience under normal

. loYee Providinggood relationshiP

with new emploYees

. High trainee motivation since trainingis relevant

r Good transfer of learning

Cons. Problems may arise in transfer of learning to

work situationr Iftrainees do not clearly understand the

relevance of training for work, they may lack

motivation to learnr Costs the organization in terms of man

hours when emPloYees are awaY fortraining

Consr Tbaining environment is not well-structuredr Managers may lack training skills and

willingness to imPart trainingr May be costly due to lost production and

mistakes if not handled ProPerlY. May have frequent interruptions due to

job demands

Some opriate for use with non-managerial

employe suited for managerial employees'

Methods rmployees are called training methods'

Methods used for managerial employees are called management development

method ment methods incorPorate

principlaimatimprovingindividualu.rd oig des a view of T&D methods

classifieExhibits 6.2 and 6.3 presents some or T&D methods including

their brief descriPtion.The choice of training methods and programmes is influenced by several

factors, such as availability of trainer, trainer skills, characteristics of partici-

pants, sociocultural environment, programme objectives, principles of learning,

and available infrastructure (Table 6.6)'


Figure 6.9: classification of Training and Development Methods

. Coaching/understudy

r Job rotation. Special/

committeeassighment

. lnternship

. Class-roominstruction

r Lecfureso Serninars and

eonferences. Programmed

instruction. Audio-visuals

. Simulationr Case sludy. Role play. Management

games. ln-basket. Behaviour

modelling. Outdoor

orientedprogrammes

On-the-job Employee Training dnd Development Methods

Training Methods

Apprenticeship Trainig{ lndividuals enteringindustry, particularly skilled workers such as labo_ratory technicians, electricians, plumbers, car_penters, etc. are given thorough instruction andexperience in both theoretical and practical as_pects of work by an experienced worker. lt in_volves some off-the-job training also. Apprenticesearn a stipend during the training period.

lob InstructionTraining A systematic method ofon{he-job training where an experienced em-ployee teaches the job to the newcomer in astepwise manner. lt consists of four steps-prepa_ration of the learner, presentation of skill or

knowledge, performance try-out by the learner,and follow-up by trainer to assess learning.

.$afragement Development Methods

eoachindUnderstudy or Assistant to positionsThe trainee works directly with the person he/she is to replace. The latter is responsible for thetrainee's coaching. The trainee relieves the ex_ecutive of certain responsibilities, performs sev_eral duties under the coach, and in the processlearns the ropes of the job. Some companies likeP&C have a coaching programme as part of theirmanagement development method.

dgb Rotation lt involves moving employees ormanagement trainees to various positions from

Contd

s help organizations getSpecial/Committee Assignments Trainees.are p and'also"get new ideasassigned to temporary committees that function i, nship proframmes helpas a taskforce to diagnose a specific problem, students too; they get course credits.Benerate alternative solutions, and recommend


Exhibit 6.2 Contd

department to department to broaden theirunderstanding of different aspects of business andalso to assess their potential for shouldering higherresponsibility. Job rotation generally involveshorizontal movement of employees and is alsoknown as lateral transfer. Codrej Consumer prod-ucts Limited uses job rotation for helping employ-ees build various skills like knowledge of salessystem, project management, lT skills, etc. Thefirm uses job rotation to prepare employees forassuming a higher responsibility through promo-tions.

the best solution. The trainee learns by being in-volved in specific organizational problems, andalso by watching others. Committee assignmentsallow the employee to share in decision-mak-ing, broaden the understanding, and provide anopportunity to grow.

Internship Students pursuing a course in a col-lege or a university are offered an opportunity toget real-world experience by an organization.Students are paid a stipend during the,internshipperiod.

way to provide knowledge to large groups oftrainees. Lectures also are the best means to in-troduce other more parlicipative methods of train-ing as well as to summarize the learninggenerated through other methods. Firms are us-ing technology for imparting training. There is agrowing trend towards holding lectures and semi-nars through distance learning.

Seminars and Conferences Like lectures, semi-nars and conferences bring groups of people to-gether for training and development. Theseprovide a vehicle for communicating ideas andprocedures and for a debate and discussion onrelevant issues.

Programmed Instruction This is a step-by-stepself-learning method in which the trainee canlearn at his/her own pace. lt consists of three parts:presenting facts and new knowledge (stimulus)to the trainee followed by a question, allowingthe trainee to respond to the question, and

Contd

0ff-the-job Employee Training and Development Methods

Training Methods

Classroom Instruction Training has been gen-erally seen as synonymous with classroom in-struction. Classroom instruction allows a singleinstructor to impart training simultaneously to alarge number of participants. This method is par-ticularly useful for presenting information throughlectures, demonstrations, films, audiotapes, vid-eotapes, or through computer instructions. Forexample, an audiotape of a conflict betweenmanagers from two functional areas can beplayed to an audience. After listening to the au-diotape, the behaviour of the two managers maybe discussed by the trainees, who may be as-sisted by the trainer. This helps develop an un-derstanding of skills in handling interpersonalsituations.

Lectures They are the traditional form of instruc-tion that involves one-way presentation of knowl-edge/concepts. Lectures are a quick and simple

Exhibit 6.3 Contd

providing feedback on the accuracy of the an-swers. The trainee cannot proceed to the nextstep without mastering the information presentedin the previous step. lt is also called self-directedlearning. lt incorporates most principles of Iearn-rn8.

Audiovisual Methods Films, PowerPoint presen-tations, videoconferencing, audiotapes, and vid-eotapes are widely used in training. These serveas effective accompaniment to lectures, seminars,role plays, case studies, etc. These are more ex-pensive but the cost is far outweighed by the in-terest they generate, by the trainee involvementin the learning process, and by the greater reten-tion of learned material. These are useful to dem-onstrate how to perform a job in a stepwisemanner, such as assembling electronic equip-ment or working with a problematic employee.Advancement in technology, such as CDs, videodiscs, DVD, etc. has taken audio-visual technol-ogy a step further by providing interactive capa-bility to trainees.

Management Development Methods

Simulation Method This method develops atraining or learning situation that is designed toclosely resemble the actual work situation thetrainee is likely to work in. This increases the like-lihood of transfer of learning to the work situa-tion. lt is especially useful when it is unwise orimpractical to train employees on the job or onthe actual equipment used on the job. For ex-ample, learning the skill to provide feedback toa subordinate through on-the-job training mayprove to be too costly in terms of likely conse-quences.

Case Study Approach A class-room learning situ-ation, the case study approach presents thetrainee with a written description of an organi-zational problem. The trainee proceeds to analysethe case, define the problem, and generate pos-sible solutions in discussion with other trainees.


This approach is most useful for imparting ana-lytical, problem-solving, and critical-thinkingskills.

Role PIay lt creates a realistic situation in whichone or more trainees assume the role of a spe-cific person in the given situation. This providesan opportunity to the trainee to try out and ex-periment alternative behaviour (autocratic anddemocratic leadership behaviour, for example),in order to develop sensitivity to the limitationsof the other person/ group/ or functional area(workers and management, marketing and pro-duction, line and staff, for example). Role playsare most useful for training managers to handleconflict situations, performance feedback, etc. ByassLr*ning the role of the other person, they im-prove their ability to understand and cope withothers.

Management Games They present the traineeswith the task of making a series of decisions in ahypothetical organization. Each decision impactssome part of the organization. The trainee makesfurther decisions in a continuously evolving situ-ation. The task of the trainees is to decipher whatmakes the model underlying the managementgame to react in the manner that it does, that is,the impact on the hypothetical organization. Sev-eral environmental and business factors are builtinto the game. This ensures that the training situ-ation closely approximates the functioning of anorganization. Management games lead to a higbdegree of trainee participation. The use of man-agement games has become pervasive in the in-dustry and the games have become highlysoph isticated and computerized. Companies I i keCE and Motorola use industry-specific games fortrain ing.

In-basket The trainee is given materials that in-clude items from a manager's typical work-day.These include mail, e-mail, and other pressingmatters such as customer feedback, demand for

Contd


Exhibit 6.3 Contd

a report from a senior, etc. The trainee is requiredto take a series of decisions on each item in thein-basket within a limited time period. The traineeis given feedback on the quality of decisionstaken, the manner in which items were priori-tized, and how well the time was utilized.

Behaviour Modelling This is an approach to im-prove interpersonal skills and is also called in-teraction management. Trainees learn throughobserving. The method involves four steps: mod-eling of effective behaviour (often by use of films),role playing the behaviour by trainees, reinforce-ment of effective role playing, and transfer of

learning to the job. Several firms like AT&T, lBM,CE, etc. have introduced behaviour modellingin their management development programmes.

Outdoor-oriented Programmes Also called wil-derness or survival training, their purpose is todevelop interpersonal skills, team skills, skills forhandling conflict, interpersonal trust building, etc.through participation in adventure games likeriver rafting, rock climbing, etc. These gameschallenge an individual's potential and reinforcethe importance of working together and of suc-ceeding as a group.

Table 6.6: Factors that Inftuence Selection of Training Methods

Employee development, however, is not viewed as the sole responsibilityof the firm. Employees are being encouraged to assume responsibility fortheir own development. For instance, HP, besides providing formal training to

Factor Tbaining Method

Trainer's knowledgeand experience

I

I

Case study: trainer needs to have high level of analytical skillsRole play: trainer should be experienced in handling interpersonalproblems

Tiaine e characteristics r Intellectual level, educational background, age, and experience oftrainees influence choice of training method

. Case studies more appropriate for experienced managers

Sociocultural environment Lectures most appropriate with people culturally used to lecturesTeam training methods more suitable in participative culture

I

I

Programme objectives . Group exercises: for motivating trainees toward learning. Role play: to enhance communication effectivenessr Case study: for problem-solving, analytical, and diagnostic skills

Principles of learning r Motivation, active involvement, and feedback: business gamesr Sequencing and structuring of training material: lecturer Individualized approach, transfer of learning: project assignment

Available infrastructure . Group training: several discussron roomsr Lecture: a classroom, whiteboard, audio-visualsr Computer based training: sophisticated and costly technology


fmR^loyeel through various training programmes, also reimburses emproyeesfor formal courses they might -urrt^to Lke, and ICICI offers its

"-proi"",sabbaticals ofup to four years.An interesting development in ma

opportunity to employees to earnschool. Now several business s

granting MBA programmes around th

f H,1:;:J:T'J"i''"'.y*lTilt:S:rid, the Gavin School of Internatiorru[ Murr_

agement in the US, to edparticipate i" ,"""k i;; ;ilt CU'lheadquarters in South Ko by members ofThunderbird's faculty. It is rogramme and is designed to culminatewith a month-long capsto the Thunderbird caripus in the US.

Programme Implementation phase

Once the learning objectives have bdesigSred, trainees and trainers selectemade, the training can be conducted.progress of the trainees in the directiontored. The monitorin^g is-.usualry done through periodic skill or knowledgetests, observation, or feedback from trainees themselves.

Evaluation Phase

After the training episode is over, and the trainee returns back to job duties or

*li L:Tfi::,,'lT# n*ti:Jilprogramme. It seeks to detedone what it was supposed to estion that remains to be answered atthis stage is: Was training e meeting the stated objectives? Thisquestion is most important to determine the value of training. yet, this is thequestion that remains frequently overlc oked by several orga?rizations. Firmsthat do address this questiott oft".r limit it to assessment of"trainee reactions,such as how well trainees liked the programme, whether trainees think the

nd whether it will help them perform their jobsdback offers some insight aboui the usefulness ofdoes not indicate the extent to which training goalswere met.

f


While everyone recognizes the importance of evaluating training, it is aphenomenon lhalis very difficult to study. This is especiail| true for"on-the-job training, which is mostly informal and, therefore, hard to measure and itseffects on productivity even more difficult to quantify. Since organizationsassign a large percentage of budget for employee training and di,elopmentactivities, it would be prudent on their part to assess whether alt

ôf the

investment has been worth it. Evaluation ensures that T&D programmes areaccountable and-are meeting the needs of employees and the organization inthe most cost-effective manner. This has gained greater signiiicance in acompetitive business environment when organizations seek to improve qualityand achieve cost advantage.

Formal evaluation of T&D programmes serve to demonstrate the contribu-tion these Programmes have made to individual and organizational perfor-mance improvements. In the absence of such evidence, T&D budgets becomethe first casualty of a cost leadership business strategy.

Evaluation of T&D programmes should assess

o the amount of change-degree to which change has occurred in skill,ability, or job performance; and

o the source of change-whether the change can be attributed to a specificT&D programme.

Stages of Training EualuationThe evaluation Phase requires the identification and development of criteriaagainst which the T&D programme will be assessed. The criteria includeparticipants' reactions to the programme, learning, and job performance mea-sures such as accidents, productivity, absenteeism, sales fig.,r"r, etc. The choiceof these criteria is made before conducting the training programme. Theformal evaluation is related to training objectives. Hence, tle criLria for evalu-ation are determined when the objectives of the programme are established.

"' Evahiation is, therefore, not ro-"thing that is taggeito the end of the actualprocess of the T&D programme; instead, how a T&D programme will beevaluated is planned fairly early in the process. Evaluation begins right fromthe time that the T&D programme begins and continues through tilfthe endaryf beyond. There are three stages at which information is gathered to evaluatea T&D programme (see Figure 6.10).

Pre-training evaluation This involves evaluation at the time that the T&Dprogramme is inaugurated. At this stage, the objective of evaluation is to clearlycommunicate the objectives of the programme to the trainees. It also seeks tounderstand the expectations the trainees have from the programme. Pre-training evaluation is useful in ensuring that trainee expectitions are aligned


Pretrainingevaluation

lntermediateevaluation

Stage 3 Post-trainingevaluation

Figure 6.10: Stages of Training Evatuation

with the objectives of the T&D programme. In certain cases, the content andscheduling of the programme rnay be modified to match trainee expectations.

Intermediate evaluation As mentioned earlier, the T&D programme shouldbe monitored while it is in progress in order to ensure that it is progressing asexpected. Evaluating the programme while it is being conducled helps findout if it is going off-course. Mid-course corrections may be introduced to realignthe programme with its objectives. For example, a programme aimed atenhancing communication skills of a group of employees may be found toimpart theory about communication, rather than the skill. Intermediate feed-back from trainees may be useful to modify the instructional method.

Post-training evaluation A T&D programme should at the end assess itseffects. It serves the purpose of assessing whether

o trainees have acquired new knowledge or skills or have improved theirskills and competency levels;

o training objectives have been met;o learning from training has led to improvement in job performance; ando organizational performance has improved when measured against criteria

such as absenteeism, productivity, employee satisfaction, product quality,etc.

Crilerta for Training Eu aluationGenerally, four types of criteria are used to evaluate training programmes.

o Reactionso Learningo Behaviouro Results

The types of data collected for each of these criteria when evaluating train-ing programmes are summarized in Thble 6.7. Most training programmes limitthemselves to assessing trainee reactions to the programme. Relatively few


Table 6.7: Types of Evatuation Criteria

EvaluationCriteria

Data Collection Methods Information Obtained

Reactions Administering questionnaires at theend ofeach session or day and/orat the end of the programme. Thesequestionnaires are called the reactionform or course evaluation form

Tiainees' degree of satisfaction withr The trainer. Subject matter and contentr Tiaining environment

Learning r Paper and pencil tests (multiple-choice)

. Performance testsr Simulation exercises

Tiainees' level of understanding beforeand after the training to determine gainsin knowledge

Behaviour r Performance appraisalr Observation of trainees on the jobr Interviews with trainees and their

managers

Ratings of trainees before and aftertraining to assess the degree to whichtraining has changed theirperformance

Results r Productivity data recordsr Tfacking performance measures

such as productivity, tumover,grievances, absenteeism, sales

targets, etc.. Annual reports of the company

Before and after data on performancecriteria measures

Source Bernardin 2004

organizations seek data related to changes in business results due to training.Though reactions and learning are easier to measure, each criterion is impor-tant for assessing the success of the programme.

Reactions Participant reaction measures seek to assess trainees' opinions aboutthe training programme. Reactions indicate more than whether the traineesliked the programme. Tiainee reactions help gain insights into aspects of theprogramme that they found useful as well as aspects that need to change. Forexample, trainees may be critical of the training methods used, or the depthof coverage of certain topics. This feedback helps in making modifications inthe training design and implementation. Moreover, if trainees do not like theprogranme, they are unlikely to be motivated to learn, or to participate in thelearning process. However, positive reactions do not necessarily indic.atethat learning has occurred. or that training has been successful. Reactions inany case do not provide complete information about the effectiveness of the

Programme.

Training and Development of Human Resources 3g3

egree to which trainees have acquiredIn order to assess the learning tfrutlevels of trainees should be tested

mme. This then serves as a baseline

after the training is comparea ,o a","rfr1""""fr'r:i:*:;'nd skills measured

Behaviour The resulted in a change in trainees,job performance haviour o. f"rtor_ance on thejob. This is, in fa training. Co_pari.on of employees,job performance aining-progru--" can be made todetermine the impact of training. Unfortunat"l-y, -,r".h of what is learned in atraining programme is never used on the job. Thi, do", not suggest that thetraining was ineffective, though it probably was a waste of resources. Trainees

:"y hlr"_$ed the programme (reaitioo d also gained knowledge (lea.ningjfrom it. However, there are that riay prevent the transfer oflearning to the work situationto design the programme to mthe training situation is similar toclimate thatsupports transfer and ication of learning. Xerox assesses thetransfer of learned skills to the through multipfe methods such asobservation of trainees when they rn to iheir jobi posrtraining perfor-mance appraisals of trainees, etc.

the impact of training on theionals are under increasing pres_have contributed to the ,bottom

res such as productivity, sales volume,

measurements must be different for the manufacturing and services sectors.rformance measurement have beenasures such as financial performance

t,t:'i3:ffT" chapter 3 (pase 14e) has

mance. Fitzgerald et ar. proposed that il:i:',:iffTil':fr*:n*",:l;performance. These are competitivene ,-financial performance, quality ofservice' flexibility, resource utilization, : d innovation. These six dimensionsare further divided into two categories- resultants and determinants. competi_tiveness and financial performa.ri" u." seen as the result of other factors,'and

-I


hence these are resultant dimensions of business performance. Quality ofservice, flexibility, resource utilization, and innovation are the determinantsof the financial performance of the firm. taining is most likely to impactupon the determinant measures and thereby influence competitiveness andfinancial performance. However, estimating the benefits of training forimproving business performance is a complex issue because business p"rfor-mance depends on several other factors such as economic climate, level ofinvestment, marketing, etc.

JWT evaluates its training programmes based on trainee reactions (feed-back) and learning. The employees who underwent training learnt to networkand bounce off ideas better, and junior and middle managers also learntto communicate with top managers of the firm (behaviour). AtJWT, it isbelieved that training helps improve the quality of output und irr.."ur"employee satisfaction (results). Contract, another advertisingigency, considerstraining to be of help in stemming attrition (results).

Apart from these four criteria of evaluation, additional methods can beused to assess the value of training (Figure 6.1r). These include

o return on investment (ROI);o utility analysis or cost-benefit approach; ando benchmarking.

Return on investment and cost benefit approach rhe ROI and cost-benefit approaches both seek to compare the monetary benefits of trainingwith the cost of training. In effect, these approaches determine the 'nalue o1training in rupee terms, that is, for every rupee spent on training, what doesthe company gain in rupees? If the cost of training is high and the benefits are

Figure 6.11: Approaches for Determining Vatue of Training

Comparison of benefits oftraining with training cost

Determiningvalue of training

approaches

Evaluating training in theorganization against those

of recognized leaders


low, the utility of training and ROI may be low. The RoI is calculatecl byusing the following formula:

net benefits oftraining costs

x 100

where,

net benefits : total benefit of training - cost of training

Ford Motor company, British Ailways, and Motorola are some companiesthat calculate RoI for training programmes. Usually the benefits are the'amount saved' or 'amount gained' in the year after the training is completed.Some costs of training programmes that should be measured are listed below.

o One time costs such as needs assessment cost, trainers' salaries, cost oftraining material and equipment (computers, handouts), programme de-velopment costs, etc.

o Costs associated with each training session, such as costs associated withtrainer, facilities rental, etc.

o Costs associated with trainees, such as trainee salaries for the trainingperiod, non-reusable training materials, cost of boarding and lodging oftrainees, total man-hours spent away from work, etc.

However, it is difficult to measure an investment in training and the benefitsresulting from training. Though the cost of training can be measured, theprecise financial benefit resulting from investment in training is difficult toestablish. The linkage between training aspects such as the level of trainingactivity, average training man-hours, and factors such as business performanceis difficult to establish because business performance depends on severalfactors and varies across sectors and service types.

The utility model is not so commonly used for training evaluation since it isbased on subjective measures. The utility of a training programme is seen as afunction of measures such as the total cost of the programme, number ofemployees trained, value of the job for which training was provided, effect oftraining on employees, etc.

Benchmarking Benchmarking is the process of evaluating a company's ownpractices against those of recognized leaders in order to identify areas of im-provement. A majority of firms engage in some informal form of benchmarking.As T&D becomes more strategic and important for organizational success,benchmarking is gaining popularity. To use benchmarking effectively,managers must clearly define measures of competency and performance,assess the current situation objectively, and identify areas of improvement. Bylearning what are the best practices of organizations that excel on these

training

396 Strategic Human Resource N4anagement

measures of competency and performance, managers implement specificchanges in their own organizations. The American Society for taining andDevelopment (ASTD) has established a project that allows organizations tomeasure and benchmark T&D activities against each other. Benchmarkingdata that is compared across organizations include data on training costs, train-ing cost per trainee, average training hours per employee, etc. 'Ihese datarelate to three broad areas namely, training activity, training results, and trainingefficiency (Table 6.8).

McDonald's invests more than one billion dollars annually in training. Asearly as in 2001, Infosys spent 2.65010 of its turnover on education andresearch. Every employee at Infosys receives an average of 47 hours of training.ICICI clocks an average of 62 hours of training per employee. The HR func-tions of IBM India and Accenture India are manned by around 300 people,each looking after hiring and training needs. Genpact spent close to $8 millionon training, has 313 trainers along with 70 part-time specialists who alsoconduct domain-specific training for its 25,000 strong workforce across theworld. JWT clocked 2,030 mandays of training and spent Rs 1.2 crores ontraining betweenJanuary andJune 2006. The total monetary allocation fortraining for the full year is Rs 2.25 crores. These are examples of measures oftraining activity. The average training per staff member per year for JWTcurrently stands at 3.46 days. O&M has 30 to 40 man-hours of training peremployee.

Table 6.8: Measures Used for Benchmarkinq Training

Type of Data Measure used for Benchmarking Data

r Tiaining Activities I Percentage of payroll spent on trainingAverage training hours per employeeRupees spent on training each employeePercentage of employees trained per yearTiaining staff per 1000 employees

I

I

I

I

taining Results (bottomJine) r Average percentage of satisfied trainees. Average percentage gain in learning per courser Average percentage ofjob performance improvementr Cost savings as a ratio of training expenses. Profits per employee per yearr Revenues per employee per year

r Tiaining Efficiency I Tiaining cost per student per hourTime on taskI

Source Bertardin 2004; Bohlander, Snell, and Sherman 2002


Some writers on the topic have emphasized the importance of understandingthe 'cost of not training'. Sometimes, the decision to slash training budgets is

aimed at reducing business costs but fails to recognize that cutting backon training is not without costs. For instance, reduction in training budget andtraining activity may result in reduced productivity and service quality, dissat-isfied customers, lower employee commitment, and increased staff turnover.In such a case, the business incurs extra costs that can far outweigh the savingsmade from reduced training activity.

SPECIAL FORMS OF TRAINING AND DEVELOPMENT

Changes in the business environment have thrown up new and unique HRchallenges and new forms of work and organizational structures, as has beenpointed out. In response to these challenges, special forms of trainingprogrammes have been developed by organizations (Figure 6.12). Let us discuss

some of these.

Team TrainingOrganizations may conduct training programmes for individuals or for workteams. Teams are becoming increasingly important in achieving anorganization's operational and strategic goals. For example, members of

Figure 6.12: Special forms of Training and Development


air-crew, a unit of the armf ; a researteam, etc. are all work groups or tetion of each individual member isthe individual as well as of the interacaremethebuiprovides a two-week training to team members to familiarize everyone withthe processes of the organizaiion and the needs of the business. GE also sends

re they oarticipate in business gamesand weaknesses. Mudra Communica_

gency continuously forms and disbands.ent departments. taining for creativity atMudra communications is based on energizing team-me-L"r, to work withone another in producing workable novel solr,Iiorrr.

be used in the conduction of team training.ussions, role plays, simulations, video filmsto impart information, etc. More recently,

adventure_training (wilderness training) is also being ,rr"d to build effectiveteams. At Ramco Systems, outdoor training exercises"such as para-sailing and

developing team_playing skills. esfroteam skills development.

variousrunctionalareas.Members.r.,#,:illilifi Hl:ii#,"fi H:,x:ling in functional areas other than their own to help them gain insight intoother functional areas. This is called crcby peers are ways in which members mCross-training is useful since

Coca-Cola has a team-trainThe programme focuses onand team nindividua nsonal skill nre Team action training focusses on team leadership,$ solving, etc., needed to function effectively as'agr fited from its team training programme by way ofincreased quality and customer satisfaction.

ing. This methodin organizations.

ve adopted thi, _"il::lilllTjilt

Training and Development of Human Resources 3gg

activities that simulate situations that test the individual and the team, andfocusses , accountability,personal the end of it, ih20 per ce rest focusses onteam wh y on one another in adverse situations. Theactivities assigned to teams include, for example, delivering piping hot lunchboxes to 25 addresses using local transport in a specified tlr"", t""-dirrg 1,000impoverished people in a day armed with a few telephones and yelloripages,earning money in two hours in an unknown city, etc. These gurrrl,

"u."believed to act as a facilitator towards understanding the or:ganization and itspeople,,-creating a comfort zone, and reducing attrition. Teami learn to managetime, existing leaders become more open to accepting their limitations, aidreal life pressure creates unlikely leaders.

Diuersity liainingIn Chapter 2, we discussed that workforce diversity has increased significantly.There are more older workers, women, minorities, regional groups, etc. in theworkforce today.J\{oreover, the values and attitudes oTg"rr"ition y also haveimplications for the design and conduction of T&D pro-gru--"s within orga_nizations. one aspect of SHRM is the internationalizition of managemJntdevelopment. This m:ar-ls learning how to do business internationalyjunder-standing cross-cultural/diversity issues, international finance and straiegy, andinternational human resource practices. Some organizations like Mo"iorola,coca-cola, HLL, P&G, and IBM have been prou.tirr" about hiring employ-

e other organizations, however, corr.ciorr.iyrce, unless forced to do so by legislation. A

- by diverse workforce has made diversitymanagement a crucial managerial responsibility. Managing or valuing divei-sity encompasses a range of activities aimed at making -.rrug"r, more awarethat women and members of other cultures ot ,rrbgrJ,,p. -Jy hold differentvalues and assumptions which can affect the way ih"y .o-op"rate, compete,communicate, plan, organize, and are motivated.

Managing diversity in an organizationrefers to two broad categories: cross-national and international. Cross-national management of diversity refers tomanaging the interface between people of two countries. Intemational dlversitymanagement involves managing an increasingly diverse workforce withina glven country. south African, Malaysian, Indian, and American societies,for example, are diverse, and the wori< rce is multi-cultural. Managing suchdiv-ersity requires skilful, informed, and extensive training in inteipeisonalskills and appropriate systems, and an uncierstanding of"both ethnic andcorporate culfures.


Organizations conducting business across the world and operating frommultiple locations sponsor some sort of diversity training. The prevalence ofdiversity training has increased to a great extent in the globalized businessworld. Diversity training involves training for generating awareness about thediverse workforce. The adoption of diversity training programmes by anorganization is likely to be determined by several factors. The following typesof organizations are more likely to adopt diversity programmes:

o Firms that are large in size.o Firms that consider diversity as a strategic priority relative to other

objectives.o Firms having a diversity manager.o Firms having other diversity-supportive practices.

Diversity training is of two types:

o Awareness building training designed to help employees understand thebenefits of a diverse workforce, with the objective of increasing accep-tance of diversity among employees.

o Skill building training designed to provide the KSAs necessary for work-ing with people who come from diverse backgrounds.

In the design of a diversity-training progrirmme, all types of diversities shouldbe considered. These include difference of race, gender, age, culture, educa-tion, backgrounds, etc. A gender diversity-training programme in a film mighthelp employees accept a higher number of women in worKorce, and also torespect them as an equal and as a professional. Skill building progrilmmesmay teach male supervisors how to mentor female employees to prepare themfor career growth, and teach male employees how to interact with and con-duct themselves when working with female colleagues.

Carefully planned international assignments, exposure to relevant induc-tion programmes, and satisfying work experience are important in ensuringdevelopment and transfer of learning. Many companies have institutedmulticultural value-sharing workshops (for imbibing soft approaches). Educa-tive workshops, conferences, and awareness training programmes are neces-sary, but not sufficient for addressing structural inequalities, technical and skillsinequalities, and reward differentiation.

Diversity training programmes are expected to improve the productivityand competitiveness of the firm, reduce conflicts, change stereotypes aboutcertain groups, improve communication, improve work relationships; andenhance the satisfaction of minority groups at the workplace. However,relatively few diversity training programmes are designed independent of othertraining programmes. Most organizations combine diversity trainingprogrammes with other trainings. For example, at Honeywell Inc. diversity


training is part of the week-longas the sales training programme.other T&D programmes is indica

preferably within the first year of beinprogrammes depends on

' top management support and participative implementation-for example,at HP, diversity initiatives u." drirren by its diversity leadership couricil,which is comprised of senior executives;

. support of immediate supervisors and peers;o rewaro mand

itive changes in their behaviour;

o long t itfirsitY Programmes;

. managerial rewards for increasing diversity.

,. valuing diversity_goes beyond understanding and co-operation between

diverse sub-groups. Rather, ii should sr ve managerial and organi_zational effectiveness. The goal to build ripon the streigthsof each individual or subgrou whole is greater than thesum of the parts. A failure to nd cultural and other differences canlead to misguided assumptions, poor working relations, underperformance,and discrimination- Performance, level of contribution, anJpersonal growth

of how people fit into and are treated in thJ workal level changes in manag.ing diversity through man_programmes will not have an enduring effect, if these

are not accompanied with concomitant changes in other organizational andt discrimination. taining for valuinga deflection from a failure to success-_

and advancement. This could result in

Training for Glob al AssignmentsA large number of firms are competing in the global marketplace. As interna-tional boundaries become permeable-, organizations are ,"ttirrg up projectsoverseas' Firms are posting employees overseas to manage tliere pro;t.*.Individuals who are sent overseas need to have more thaniist technical skillsand a proven track record. I inindividuals need to have cul agof cultural values, customs, of


they are posted. i'&D programmes for international assignments havebecome very common today. This aspect will be discussed in greater detail inChapter 12.

Iiaining for Leadership S killsGlobalization, deregulation, e-commerce, and rapid technological change haveresulted in companies re-evaluating the way they operate. Approaches thathave worked for years are no longer effective. In an environment where firmsare competing for human resource talent in order to achieve a leadershipposition, the ultimate source of sustainable competitive advantage may be theleaders who continue to learn. Development of leaders who think strategi-cally is the new strategic reality and increasingly a source of sustainable com-petitive advantage.

Many companies today invest heavily in leadership development. Leader-ship development programmes focus on helping key executives learnleadership skills. As early as 1993, Business Week estimated that $17 billionwas being spent annually on helping managers develop decision-making andcompany-specific skills that could enable them to move up and lead theirbusiness areas. Tiaining maga/ne estimates that in 1998, U.S. companies spent$00 to 70 billion on training. FedEx founded its Leadership DevelopmentInstitute in 1984 to ensure development and understanding of, and commit-ment to, the immediate corporate strategic objectives. Godrej ConsumerProducts Limited (GCPL) has created a talent management system that helpsit to build leaders and plan for succession. Good performers are rated onleadership potential by superiors and an independent assessor. The shortlistedpeople get a career choice between general management and domain expertise.The person who chooses general management will 'rotate' in functions, whereasthe person who chooses to remain in a function, So/, marketing, gets exposedto cutting-edge technology and practices in it. These employees receive train-ing in foreign universities and their developmental needs are addressed bycoaches. Based on the talent management system's succession plan, GCPLgrooms a successor. Xerox, Eicher Group, Indian Rayon and Industries, TCS,and HCL Ltd are some other firms that have instituted formal leadershipdevelopment programmes. Ashok Leyland and Ramco use management gamesand outbound training exercises to identify leadership potential and buildleadership skills among their employees.

Apart from investing money in leadership development, top executives areinvesting significant amounts of their time personally guiding and mentoringfuture leaders. According to them, leadership development is not a luxury buta strategic necessity. Narayana Murthy, the non-executive chairman of Infosys,had changed his designation to 'chief mentor' to communicate the importance


of building leaders. Increasingly, programmes that focus on developing futureleaders are seen as providing firms with an edge over competitors.

- A study by Fulmer, Gibbs, and Gordsmith (t000) attempied to understandhow winning companies developed leaders. \fhat pro."rr'", transform man-agers into strong leaders ready fo organizationsknown for their leadership deve manage, anddeliver world-class programmes? rms tied lead_ership development closely to business strategy and invested financial resourcesin it. The cEos of these firms supported the leadership developmentprogrammes because they had a conviction that such programmes can assistin aligning functional areas with corporate strategy. Forlru-ple, JohnsonandJohnso" 0&, revised_succession planning and performance-managementsystems to reflect the qualities anticipated by a 'leider-of-the-future' &ercisein a leadership-development conference.

Leadership development has become too specialized to be relegated

ffr;:,",finlnusiness results, the

corporate leaders are more likely to offer support. Although firms known fortheir leadership development efforts differ in their emph.Ji, on making lead-ership developrnent strategic, there are some similarities across these firms.The leadership development programme of each of these firms includes thefollowing five critical steps:

o building atuareness of external challenges, emerging strategies, organiza-tional needs, and what leading firms do to meel the needf

o employing anticipatory learnins tools to recognize potential externalevents, envision the future, and focus on action the organization can taketo create its own future,

o taking action by tying leadership-development programmes to solvingimportant, challenging business issues,

o aligningleadership development with p erformance as se ssment, fe edb ack,coaching, and succession planning, and

o assusingthe impact of the leadership-development process on individualbehavioural changes and organizational sr'rCcerr.

Exhibit 6.4 presents some exarnples of leadership developmentprogrammes.

Orientation Trainingwhen new employees join an organization, they rack familiarity with theorganization, their supervisors, and co-workers- New employ""r are alsounsure of their work and the expectations that others have oi them. They aretherefore, likely to perform below their potential for the time it takes for ihem


Examples of Leodership

General Electric (GE) Tremendous growth,reductions in the number of its employees world-wide, and significant delayering of the organiza-

tion in the 1980s and 1990s caused an enormous

cultural shift in CE. With fewer layers of man-

agement, individuals received fer,t'er vertical pro-

motions and hence fewer opportunities topractice being leaders. A new approach was

called for. Today, in the human resourcedepartment's'Session C' meetings, senior execu-

tives assess key GE personnel. After an initialmeeting in March, there are two or three addi-tional meetings and a wrap-up session in June or

July to select employees who will attend the

executive development courses at Crotonville. Atthe end of the year, corporate leadershipdevelopment, like all corporate functions, is

measured by whether it was able to support GE

initiatives. Steve Kerr, GE's chief learning officer,

remarked jokingly, 'Crotonville is GE's onlyunbudgeted and unmeasured cost centre'. He

goes on to add seriously,'Everyone would knowif we weren't delivering strategic value.'

Hewlett-Packard (HP) HP, under the leadership

of CEO Carly Fiorina, is rushing to reclaim its

Source: Fulmer, Cibbs, and Coldsmith 2000

Develop ment Progra mmes

status as a top high-tech innovator. The CEO must

convince the public and HP employees that HP

is the hottest new company of the lnternet era,

and continues to have the same old-time com-mitmentto quality and integrity. Past HP glory led

many excellent engineers to focus on what used

to be important, instead of on the future. C)nce

HP started to improve leadership development,the company could make better business deci-sions. Today HP's senior executives actively par-

ticipate in leadership development. Fiorina uses

management meetings and leadership-develop-ment programmes to articulate her vision of mak-ing the company 'represent the next decaderather than the past one.' Her predecessor,Lewis E. Platt, showed his support for leadershipdevelopment by making personal appearancesat all HP Accelerated Development Programs,

opening and closing them with an opportunityfor participants to have a dialogue with him.Senior HP executives have served as faculty in

part of every core programme. Fiorina's early

commitment to communication with her man-

agement team has led to an expectation withinthe company that she will continue using lead-

ership development for strategic change.

to 'settle down' and adjust to their new environment. Left on their own tomake sense of their surroundings and carve out an identitv for themselves, the

new employees might take longer than if they are helped formally in this

adjustment process. Orientation training is the planned introduction of new

employees to the company, their job, and the work group to help them per--

form their johs satisfactorily. 'Orientation Programmes may range from brief,

informal intrc,,ductions to extended, formal sessions lasting a few days to few

months. New employees are informed about their roles and responsibilities(what is expected of them), performance expectations, the organization's

mission, goals and objectives, and policies and procedures of the organization.


The entire Programme is directed towards facilitating new employee transitionfrom being an outsider to being an insider. orie"ntation programmes areimportant for new employees atany level in the organizationai hie"rarchy. How_

ing key executives.orientation programmes serve the following main purposes:

o To have the new employee become productive on the job as quickly aspossible.

o To provide the new employee with information about company poriciesand procedures. This may include providing an employee handbook tothe newcomer.

o To provide information about the reward svstem.o To familiarize the newcomer about.o-purry culture and,the way things

are done here'.o To communicate what is expected of the newcomer and what is impor-

tant in the firm to advance in the job or for promotion.o To reduce the anxiety of the newcomer withrespect to job performance

and belongingness to the -fil* by taking -"urrrr"-, to integraie the person

into the formal aspecrs of the organization.

orientation training in_some organizations pricewaterhousecoopers(Pwc), IBM, and McDonald', ur"

""i,-ples of companies having extensiveformal and well-designed orientation programmes. At pwc, theie is a twoweek long orientation programme foi new employees. The programme isattended by employees around the world and focussls on topics ,.r.h u, team-building, ethics, benefits, etc. After the two week progr.--", the newemployees are assigned a coach who assists them in their- career within thefirm and their job assignments.

Every new recruit at Intel Technologies, India undergoes an intensive cultureintegration programme. Managers and team leaders get training on how tolead by example and uphold the value s. The learnin! at Intel il not just inclassrooms, employees are measured regularly on hor.,ithey are doingtn thecore values.

trxhibit 6.5 discusses the induction programme at Sapient corporation.Citibank has a well-designed orientationtraining progr.-L" whichls a com-bination ofôff-thejob and on-thejob methods. The iirst phase of orientationtraining at citibank for management associates (MAs) focusses on job rotation.


Induction at Sapient Corporation

Sapient Corporation, the global business consult-ing and lT services firm, inducts newcomers witha coaching programme. At Sapient, there is a

team called 'quality start'that ensures that everynew hire has an excellent on-boarding and inte-gration experience. The 'quality start' processbegins two weeks prior to the new bntrant's join-ing date and continues till about three monthspost joining. All new hires at Sapient have to gothrough the Sapient induction, called the Sapientreadiness programme, on the day they join thefirm. The programme manager helps the new-comer map out his/her career, and also clearlyspells out what the newcomer must deliver for

Source: Cuha 2006

the company. ln the first week itself, newcomersfrom different departments are grouped togetherand assigned to a project (called Sapient start),which will be eventually presented to the exist-ing employees of the firm. The newcomers,performance is closely monitored. lt is a great learn-ing experience since it gives the new entrants thefeel of an actual project as it is executed, just likea live proiect. At the end of the project, the new-comer is given feedback. Performance is linkedto promotion. Though instant feedback may beunnerving for newcomers, at Sapient it worksbecause the employees don't have to wait till theyear-end to be told if they have not performed.

This phase also includes active simulation through role plays. For example,trainees are made to role-play the clearance of an overdraft cheque. In thethird week of orientation training, the trainees at Citibank are given a specificjob or a long project. The trainees get the first feel of responsibility and i.ttpot-tance and are assigned mentors at this stage. Citibank reserves the theorelicalclass-room teaching to the end of the orientation programme since all inputscan now be related to the job by the trainee who has already been exposed tothe real.job.

It is of immense value if the top management of the firm takes part inorienting the new recruits, especially the entry-level employees. Informationabout the history, significant achievements, and key executives of the firm arebest'told' to newcomers by the top management. This serves a motivationalpurpose since this makes the newcomer feel important.

At Honeywell rechnolosr, the managing director meets all new employees,talks individually to all newcomers during the induction, and signs allcertificates given to the employees. Most orientation programmes consist ofthe following three stages:

L general introduction to the organization (given by HR department)2. specific orientation to the department and the job (given by new

employees' immediate superior)

Training and Development of Human Resources 4O7

. Higher employee job satisfaction

. Facilitate learning

. Lower costs of training

. Lower start-up cost for new employeeSource: Bohlander, Snell, and Sherman 2002

:*s$k\:+-\r-u j+s-!lwNsn4s!+!i@{s_E1r+&+g!ee

3. follow-up meeting to verify that the important issues have beenaddressed and employ-ee questions have been answered (meetingbetween newcomer and supervisor).

Exhibit 6.6 shows the benefits of a well-designed orientation programme.A well-integrated orientation prograand staff. The HR department is ractivities and for providing informatiobenefits, and other areas of general nrole is to prepare the work group to renewcomer's adjustment. The supervisor also gives information about thenew-comer's responsibilities, duties, the sub-culture of the work-group, co_workers, etc. Figure 6.13 presents the roles of HR and line managers in orien-tation training programmes.

Figure 6.13: Rotes of HR and Line in Orientation Training programmes

Benefits of a Well-designed 1rientation programme

o Lower turnover. lncreased productivity. lmproved employee Moraleo Lowering of employees anxiety

. Co-ordinate activities

. Provide information abouiconditions of employment

" Provide generalorganizational information

. Prepare the work group toreceive the new employee

. Provide information onnewcomer's responsibil jties

. Provide information aboutexpected performancestandards

. lntroduce newcomers toco-workers and subcultureof work group.

. Provide feedback andcoaching


a

a

a

a

a

a

Checklist of ToPics

Company historyOrganizations purpose and strategy

List of chain of commandWho are the key executiveslntroduction to other employeeExpectations for attendance, conduct,appearance

in an 0rientotion Programme

. Conditions of employmentr Explanation of job duties, standards, and

appraisal criteria. Safety regulations. Rules, policies, and procedures (standard

and operating procedures manual)

Orientation programmes have a significant impact on the newcomers'adjustment to the organization and their subsequent performance. Therefore

careful consideration needs to be given to the goals of the orientationprogramme, content, and method of presenting information to the new comer.

Generally speaking, the information that should be given as part of an orien-tation programme is listed in Exhibit 6.7.

Some organizations are using technology during orientation training. IBMhas eliminated paper in the classroom by giving instructions to students on

the web and facilitating their discussion of the material. This is in line withIBM's commitment to teach new employees the technology it sells. Technology

has, in fact, invaded most training programmes. In the following section, letus look at the impact of technology on the conduction of training programmes.

NEW DEVELOPMENTS IN TRAINING AND DEVELOPMENT

The growth of information technology (IT) in the past decade has revolution-ized the world of work. Developments in technology have also broug-ht about

changes in the way individuals are trained (Figure 6.14).

Technology and Thaining

taining is becoming a24/7 process, cutting acloss geographical boundariesand time restrictions. To deliver training on this scale and frequency,technology plays a key role. Computer-based training, computer-supportedsimulations, virtual training, and use of intranet and internet for training and

development are finding increased use in industry and academia. At Infosys,

300/o of training is now IT enabled. Apart from the use of high-technologytraining methods in delivering training, the design, administration, and supportof training has also incorporated new technology. For example, companies

allow employees to register online in some training Programmes, conduct

Training and Development of Human Resources 4Og

Figure 6.14: New Developments in Training and Devetopment

certain tests online, and may even monitor learning progress electronically.

fome of the ways in which technology is used to impart training are discussedbelow.

Computer-b ased Iiaining (CBT)

Organizations use computers to train employees especially in technical skills.Computer-based training is used more often by IT firms like Microsoft, IBM,oracle, SAP, etc. In cBT, the trainee uses computer-based and/or DVDsystems to interactively increase his/her knowledge and skills. Computer-basedtraining uses the speed, memory, and data manipulation capabilities ofcomputer systems to make instruction flexible and learning interactive andrealistic. When CBT is structured such that it is available to employees on thejobwhenever they need it, it is called Just-in-time' training. It may also utilizemultimedia, which is a computer application that enhances learning withaudio animation, graphics, and interactive videos and photos. Interactivemultimedia training produces a complex training environment with whichthe trainee interacts. For example, in training a medical student, an interactivemultimedia training system will present a hypothetical patient. The medicalstudent will then take the medical history of the hypothetical patient, conducta medical examination, and analyse lab tests. If the medical siudent wishes toconduct a chest examination, helshe can click on the 'examine chest' buttonand hear the sounds of the person's heart. The medical student will interpretthese sounds and draw conclusions on which to base the patient,s diagnosis.The student rnay then be given feedback about the accuracy of the conclu-sions drawn and diagnosis made. There are two types of techniques used inCBT. These are as follows:

Computer assisted instruction (CAI) CAI delivers trainingmaterial directlyto the trainee through a computer terminal in an interactive format. These areexpert systems that are used to tutol the trainee, monitor trainee knowledge,

41 0 Strategic Human Resource Management

and provide adaptive tutoring based on the responses of the trainee. Thus,computer assisted instructions are sophisticated forms of individualized tutorialinstructions provided through computers.

Computer managed instruction (CMI) Computer managed instruction is

normally used in conjunction with CAI. CMI uses the computer to managethe administrative functions of training, such as registration, record keeping,scoring, and grading. CMI helps determine the level of proficiency of thetrainee. CMI systems can also track the performance of trainees and guidethem to appropriate study material for improving performance. The computertakes up some routine aspects of training. This helps provide the instructorwith an opportunity to spend more time on course development or on indi-vidualized instruction. CMI, thus, is an efficient means of managing the train-ing function.

Virtual reality trainingtakes the realism of CtsT a step further. Virtual realityis an advanced form of computer simulation. It places the trainee in a simu-lated situation, which is'virtually'the same as the physical environment. Thus,the artificially simulated environment exactly simulates the events andsituations that might be experienced on the job. The trainee wears specialequipment such as goggles and auditory and sensory devices. The sensorydevices transmit how the trainee is responding to the computer and the traineesees, feels, and hears what is going on. The trainee learns by interacting withobjects in the electronic environment to achieve some goal. Motorola is an

example of a firm using virtual reality for training. The armed forces often use

simulation-based training programmes for soldiers and officers. For example,to train soldiers in combat skills, war-game simulations may emphasize real-time leadership and decision-making skills. Pilots also train through virtualreality simulation. This type of training is especially useful when it would betoo costly to impart skills through on-thejob training. Though virtual realitytraining and multimedia training are both interactive, the difference lies in thedegree to which the learning situation approximates reality. Multimedia train-ing is not a simulation of the actual job environment.

Multimedia is sometimes criticized for lack of 'human touch' in trainingdelivery. Even though the cost of software and hardware can be a disadvan-tage, when there is a large number of trainees, cost is not a major issue. Oneway to manage costs is by firms coming together in a consortium, like the one3M, GM, and Motorola have formed along with three universities. They havecombined resources to buy the multimedia equipment. Though in differentbusinesses, these firms have similar training needs. For example, diversitytraining needs are the same for each firm, whatever their business. Togetherthe cost of training is much less than if they were to go for it alone.

Training and Development of Human Resources 4,11

Distance Iiaining and Video ConferencingToday firms are using various forms of distance learning methods for training.Common distance learning methods include the traditional correspondenJecourses, video conferencing, and tele-training. Tile-training involves offeringtraining programmes over a satellite-based network. The trainer is in acentral location and teaches groups of employees at remote locations via tele-vision hookups. The heaviest users of tele-training are universities, but latelyorganizations are also using tele-training. For example, an IBM subsidiaryoffers training programmes over a satellite-based network. At each of the44 sites, there is a 25-inch monitor on the student desk, which is equippedwith a student response unit. These units allow inter-connection with otherclassrooms and the instructor. The response unit has a microphone thatallows the student to ask questions and answer questions from the instructor.Direcway and Reliance Infocomm offer courses from leading managementinstitutes. Reliance Infocomm offers connectivity across its network of 241outlets in 105 cities. Up to 60 locations can be hooked up simultaneouslyacross India. Recently, it held a virtual classroom for 750 people organized bythe Institute of Chartered Accountants of India. It has ulro li"d ,,p *ith th"Xavier Institute of Management, Bhubaneshwar (XIMB) and Xavier LabourResearch Institute (XLRI), Jamshedpur, for offering specialized managementeducation programmes to working executives. Videoconferencing is used fortraining employees who are geographically separated from each other or fromthe trainer. Through audiovisual equipment, videoconferencing allows peoplefrom geographically dispersed locations to communicate live with each other.Firms are using videoconferencing for conducting selection interviews too.Several firms such as AT&T, DuPont, Ford, GE, etc. have used distance learn-ing programmes for their employees. Gillette and HLL are using moderntechnology tools like videoconferencing and other satellite-based Communi-cation systems for conducting sales training on a new product or promotionfor its sales force spread across the country. Reliance Webwoild makesextensive use of video-conferencing for communicating with its retail teamabout tariff changes, or when new applications or services are launched.Videoconferencing helps communicate changes like new schemes and tariffsin the mobile services industry faster and more effectively. Typically, trainingfor tariff change is conducted over 4-5 days, during which sales people underg-assessment tests, are ranked, and, if necessary, re-tested. Recently, whenReliance Infocomm tied up with Air Deccan to sell tickets through its webworldoutlets, employees went through a series of training sessions and assessmenttests to ensure that they were up to the mark in the new area of airline ticketing.BPos and IT companies, however, are the ones which are the largest nr"r, ofvideo-conferencing for internal communication and training.


_ Global companies particularly benefit from this new technology. Sincefrequent travel to far-flung locations is expensive, distance learning progpammeshelp reduce the cost of delivering T&D programmes. Citigrouplndia has tied

1rp with Direcway for conducting induction programmes for new employees

from across its branches. The benefits are savings in terms of travel time'andcost. Use of technology also makes training mor-e accessible to employees andensures consistency of instruction. A great deal of training is beginning to takeplace using videoconferencing and satellite technology.

EirainingA new term is on the round, that is, cyber learning. The term cyber learningrefers to high-tech training methods. E-learning is a high-tech training methoJand is defined as the use of the Internet or the intranet of an organuation toconduct training online. Internet-based learning prograrnm". ui" becomingincreasingly popular with firms. Intranet is similar to the Internet, but is aprivate network of an organization which is behind a 'firewall' software thatrestricts access to authorized users. ds more numbers of employees haveaccess to the internet, firms are looking at the world wide web is a means ofPr_ovlding training to employees located in distant locations. According to theASTD, firms in America deliver 8.4010 of their training via the Internet. DeltaAirlines has achieved significant reductions in its training costs through theuse of e-training. This reduction has come about since training now takes lesswork_time and employees do not have to travel to centralized training facili-ties. Many organizations have full fledged 'learning portals' to satisiy theiremployees' training needs. Hewlett-Packard has developed such

" poit"l fo,

its,employees. FedEx has tied up with skillsoft, an e-learning portil, to pro-vide its employees a choice of 800 short courses on a tung" of topics, fiomcommunications to project rnanagement to strategic planning. All these coursesare specifically designed to fill all vacancies at FedEx from within. Theknowledge portal of ICICI is called 'Wise Guy' and is accessible to all em-ployees. 'My knowledge corner', one section of the portal, contains an inven-tory of employee skills, which helps share expertise across the group. Employeetraining is also managed online and e-learning is used for skill upgradation.The firm conducts 190 e-learning programmes annually. ICICI links traininghours completed to the performance score of the individual. E{raining, likeother forms of training, should also be tracked and evaluated for its effective-ness.,Thble 6.9 presents some advantages and disadvantages of technology-based training.


Tabte 6.9 Advantages and Disadvantages of Technotogy-based Training

Technology-based trainingmethod

Advantages

Computer basedtraining (CBT)

Self-p aced-allorvs differentindividuals to learn at their owncomfort levelAdaptive-can be customized fordifferent employeesEasy to deliver informationFlexibie-can be imparted at homeor at workTiainers and trainees need not bein the same physical spaceLess expensive when employeesare geographically dispersedCan be conducted wheneverconvenient to traineeCan be undertaken withoutadvance schedulingIncreased speed of presentationDecreased dependence oninstructorStandardize d-instructionalconsistencyMastery of learning-trainee cannotmove to next step if previous stephas not been learned

Learners should be self-motivated,take initiative, and responsibilityfor their learningHigh cost of producing online,interactive methodsContent becomes outdated veryquickly and requires redesignfrequentlyLack of two-way communicationand human touch may bedemotivating

E-learning(web basedtraining)

. Self-paced-trainees proceed attheir own pace

r Interactive-trainee is an activeparticipant

. Allows for consistency in thedelivery of training

. Easy for trainers to update content

. Can be used to enhance otherinstructor-led training methods

i Enables quick scoring ofquestionnaires and providesfeedback immediately

r Built-in guidance for employeeswhen needed

. Saves travel and classroom costs

r Tiainees unfamiliar with the Internetmay experience anxiety

r Not all trainees may haveuninterrupted access to computersand the internet; not appropriate forall types of skills, especiallybehavioural skills such as leadershipability, cultural change, etc.

r Requires significant cost andinvestment

r Has not demonstrated a significantincrease in learning over that oftraditional training methods

r Requires top management support

Contd


Table 6.9 Contd

tainees do not have to wait forsched uled training sessionsAnytime and anywhere trainingresults in employee assuminggreater responsibility for one'sown training

Internet users tend to 'surf', whichdistracts attention from training

source: Bohlander, snell, and Sherman 2002; Mathis andJackson 2003; Metto 2003

competency-Based Approach to Management DevelopmentIn a competitive corporate world, it has become very important to identifycharacteristics for successful performance. These tehaviours are called'competencies'. One comprehensive definition of competency is ,a cluster ofrelated krrowledge, skills, and attitudes that affects a major part of an indi-vidual job, that correlates with performance on the job, thlt cin be measuredagainst well-ac ds, and that can be improved via training anddevelopment' ( ne, Jtily lggg). A compeien cy rnay be comp-risedof knowledge, ability, a personal characteiistic, or a cluster oftwo or more of these attributes. The performance of most tasks requires thesim_ultaneous or sequenced demonstration of multiple competencies.

Knowledge is awareness, information, or understinding ibout facts, rules,principles, guidelines, concepts, theories, or processer n""d"d to successfullyperform a task. A skillis a capacity to perform mental or physical tasks with aspecified outcome. An abilityis a demonstrated cognitive or physical capabilityto successfully perform a task with a wide range of possible outcomes. Personalcharacteristics include attitudes and traits, values, work habits, ways of inter-acting with others, or manner of conducting oneself that contribute io effectivework performance.

Management competencies are used to build a framework for analysingthe resources available to achieve business strategies and to forecast areas ofrisk. Competencies form the foundation for many human resource functionsand are an integral part in maintaining a competitive edge. Organizationsdevelop competency frameworks as a basis for the design of their manage-ment development, appraisal, and recruitment programmes, and detailingthe technical and behavioural competencies requlred. Competencies are thecomponents of development programmes to supply shortfalls in managementcompetencies for the future. Effective management development programmes


identify common competencies and design approaches capable of deliveringfocussed common management competency iraining. paini computer Sysltems has a structured process called ieadership Excjlence at patni (LEA'P),which incorporates a competencyframework that begins right at thethe right professionals. The firm also dbased on LEAP such that every empstandard.

Competenq Assessment and Competency Modeltingcompetency based approach uses competency assessment and competencymodelling to determine the competency requirements for effective'perfor-mance.

competency assessmentis the process of identifying the competencies amonga group of employees, typically by d rpartm"nf, iob category, or hierarchicalstructure. There is a difference between competerr.y i.r"r.-ent and taskanalysis. Task analysis bases training on what petple do, whereas competencyassessment bases training on who th , ru..er*frrl performers are. taditionaljob analysis includes all employees and does not^differentiate between goodand

_excellent performers. Task analysis typically focuses on jobs witir anemphasis on psychomotor skills whereas competency assessment conductstraining for employees who perform decision-miking tasks and are knowledgeworkers such as managers and professionals.

A competency modelîs a-success profile created on the basis of competencyassessment. This profile describes the behaviour relevant to success at a firmand is called the 'competency model'. A competency model is an organizingframework that lists the.competencies required for eifective performance in ispecific job, job family (i.e., group of relaled jobs), organ izition, function, orprocess. These competencies are associated with exemplary performers andtied to the corporate culture. Individual competen.ie, ure organized intocompetencymodels to-enable people in an organization or piofession tounderstand, discuss, and apply the competencies to workforce performance.- The competencies in a mode rt"y L" organized in a variety of formatsbased on organizational needs. identifv several'core' or 'key' competencies that are ess ;J,# ;;;tseveral additional categories of compet only to specificsubgroups. some competency models are organized according to the iype ofcompetenc/, such as leadership nal effectiveness, or tecinical capacity.other models may employ afra 'k based on job level, with a basic set ofcompetencies for a given job family and additional competencies addedcumulatively for each higher job level ithin the job family.

416 Strategic Human Resource Managemenl

Competency assessment and modelling are used heavily in performancemanagement, selection, reward, training and development. The theory is thatif companies can identify the knowledge, skills, and behaviour of their mostsuccessful employees, they can train other employees to acquire and applythe same attributes to yield better results. Management development is a

priority at FedEx, and central to it is an initiative called SPEED, which standsfor succession planning executive education. SPEED is a fully automated,intranet-based competency assessment and succession planning system foruse by senior management at FedEx. SPEED allows vice-presidents andsenior vice presidents to regularly rate the competencies, readiness, andpromotability of their direct reports. These direct reports, in turn, create plansto strengthen their competencies through, among other things, formalizedexecutive education programmes.

With increasing competitive pressure, new business strategies that requiremanagement re-structuring emerge with increasing rapidity. Implementingan organizational re-structuring requires an assessment of the managementcompetencies needed and available to manage the business resources in a

different way. Hence, the competency approach has gained considerablepopularity in business and industry in recent years. There are several reasonsfor the increasing use of competency assessment by organizations:

o The speed of change in the business environment has led to an increasein interest in assessment because of the nature of task analysis. Com-pared to task analysis, competency assessment is much more flexibleand does not get dated quickly.

o The changing nature of work implies that workers rely less on psycho-motor skills. Workers are beginning to make more decisions these days.Employees are becoming empowered. Hence, competency assessment

is used more as job responsibilities include more of decision-making.o Widespread corporate downsizing requires training and development

professionals to move to more flexible definitions ofjobs, and away fromthe bureaucratic job definition.

o Competency assessment can become the basis for an entire corporateHR department's activities such as recruitment, selection, orientation,training, compensation, performance appraisal, career paths, etc.

The premise behind the use of the competency framework for manage-ment development is that if an organization's managers are equipped withthe right competencies to carry out their jobs effectively, corporate success

should, all things being equal, not only be improved, but accelerated.There are seven. steps to the successful development of a competency model(Exhibit 6.8).


Developing Competency Modelling Process

1.

The process has seven steps.

)

2.

Define objectives: The following questionsmust be answered-why is there a need todevelop a competency model? What prob-lems will be solved, benefits gained? Whatis the unit of analysis? ls it a specific job, jobfamily, a single work group, a function, oran entire organization? How will the modelbe applied, that is, for selection, strategicworkforce plann i ng, promotion, performancemanagement, and T&D?Obtain support of a sponsor A sponsor is aperson of some influence in the organiza-tion, such as a CEO. The sponsor helps gaincommitment and participation of emplbyeesand managers from whom data will be col-lected.Develop and implement a communicationand education plan: Success of the compe-tency model depends on convincing thosewho will participate of the value of themodel. A communication strategy must bedeveloped. All stakeholders should be in-formed of the initiative early in the process,and should be kept informed of the progressthrough communication at periodic intervals.Plan the Methodology; A methodology todevelop the competency model is designed.This involves selecting a sample and datacollection methods. The high performersare used to collect data in developing com-petency model. The goal is to identifycompetencies required for excellent job per-formance, not average or poor performance.Identify the competencies and create thecompetency model: This step involves threeinter-related tasks. (a) Developing a completeunderstanding of the job through JD and JS

7.

to acquire a job definition. The definition in-cludes job responsibilities, its place in theorganization and profession, and the educa-tion and experience required. (b) ldentifyingcompetencies for each elenrent of the job.(c) Assemble the competence model by clus-tering together similar KSAs and personalcharacteristics. Each competency is accom-panied with a definition and behaviouralexample. The same competency for differ-ent jobs will have different behaviouralexamples. The completed competencymodel includes a list of competencies orga-nized by type, with a definition and severalbehavioural examples at three or morelevels of proficiency.Apply the competency model: This is donefor purposes of selection, recruitment,training and development, and other HRpractices. With respect to 'training and de-velopment', the application involves the useof cornpetencies to design a curriculum fortraining and other developmental activities,developing a multi-rater feedback instrumentto assess employee needs for competencydevelopment, providing development plan-ning guides that provide employees with spe-cific suggestions on how to strengthen eachcompetency.Evaluate and update the competence model:The competency development process mustbe evaluated to determine the value of themodel.

Competency development is a continuous pro-cess. Required competencies rnust be revisedwith changes in job design, contextual condi-tions, etc.

6

4

5

Adapted from'. Nlarrelli, Tondora, and Hoge 2005


Strategic Approach to Competency Assessment

There is a need for a stronger link between management developmentprogrammes and corporate strategy. This link is growing these days forseveral reasons. For one, there is the emergence of new organizational struc-

tures to cope with competition. In such a scenario, the HR function is seen as

being able to understand business objectives and the actions that need to be

taken to achieve these objectives. Therefore, competency assessment is viewedas the bridge between strategy and MD. A strategic approach to competencyassessment was highlighted by Laura Tovey (1994) as one vehicle which man-

agement development practitioners can use to strengthen the managementdevelopment-corporate strategy link. This approach consists of five mainbuilding blocks.

The strategic review Stage one of the review process is concerned withgaining a full and clear understanding of the strategic requirements of thebusiness, business environment, corporate mission, and the business strategybeing pursued. This represents the starting-point for defining the strategic areas

of competence for the business. For competency identification, development,and assessment to be successful, that is, to have an impact on job and there-fore on business performance, it needs to be built around a sound strategicunderstanding of an organization's business. The first stage is the stage whencompetencies are assessed, and is therefore, also called the competencyassessment stage, At this stage the following questions are asked:

o What is the nature of the organization? Is it hierarchical, operating in astable industry, or is it fast-moving and high-tech?

o What is the objective of competency assessment? Will it be the basis ofall activities such as selection, etc.?

o For which levels do you want to identify competencies-supervisory,managerial, top-level, middle level, etc.?

o How will competencies be defined to be meaningful in the context of theorganization?

Strategic areas of competence In the next stage, critical success factors forbusiness strategy are clarified and confirmed so that areas of strategic compe-tence can be identified. A strategic area of competence is defined as an area inwhich the organization must be competent, if it is to succeed in its mission,and which has implications for individual capabilities. For the organization tosucceed, it is necessary for it to possess capabilities in each strategic area ofcompetence. Together they are sufficient to achieve the mission. The list musttherefore reflect the absolute minimum number of areas in which capabilitiesare required to accomplish the mission.

Determining competency requirements Common competencies are iden-tified by examining all competencies that managers possess and exercise to

Training and Development of Human Resources 4'lg

achieve business results. Competency requirements refer to the discretedimensions of behaviour which lie behind success or failure in a particularjob orjob category. Such dimensions may include knowledge, skills, behaviour,and other factors which can be precisely defined and assessed for manage-ment development Purposes and will be influenced by the organizational leveland culture. Competency requirements are derived from three sources:

o The requirements of the business, as reflected in the strategic areas ofcompetence.

o The job itself, in terms of business, professional, and technical require-ments as well as in terms of personal and managerial competencies.

o The organization, in terms of the culture and therefore, the behaviourrequired and the level at which the individual operates.

It is evident that the ideal scenario is to have specific and meaningful job-related competencies which are also related to the strategic needs of the business.These competencies are then classified under a number of cluster headings inorder to be tested and prioritized against the strategic areas of competence.

Assessing competency requirements By rneasuring the difference betweencompetency requirements and the extent to which these are possessed byemployees (whether by self assessment, peer/subordinate assessment, orthrough assessment centres), the size of the training and development gap canbe established and compared with the organization's current training provision.Assessment of requirements helps with developing training and developmentneeds. There are two forms of assessment,

o assessment of currentjob performance, which is an ongoing responsibilityand culminates in the formal annual appraisal; and

. assessment of the employee's potential, which guides career directionand planning.

Application The competencies are tested in the fourth stage--the 'application'stage. Every line manager should engage in at least four sequential activitieswhich relate to the performance of job holders under his/her supervision,selection, assessment, development, and succession. Selection will have animpact on job performance and relies on a clear definition of critical compe-tencies, which must be derived from the strategic requirements of the business.

Job performance too needs to be assessed. The next step is to design traininginterventions that develop common competencies. Development of individualsis based on the assessment of their performance and potential. It impactsdirectly on current job performance as well as preparing them for successionfor future positions. Finally, planned development leads to individuals beingready to occupy identified positions on a reasonable time-scale. Individual

42O Strategic Human Resource Managemenl

performance of the job impacts business performance and it is imperativethat the job and the organization's strategic goals are aligned.

The chapter discussed the role of training anddevelopment of human resources in organizationsfor attaining a competitive edge in an increasinglydynamic business environment. The meaning ofthe terms'training' and'development' and the dif-ferences between the two were explained. The im-portance of training and development activities forboth individual and organizational performanceimprovement was highlighted. Tiaining and devel-opment activities are important for upgrading skills,new employee orientation, solving performanceproblems, and for providing opportunities for per-sonal growth. The increasing significance of con-tinuous learning and training in organizations wastraced to several reasons such as technological ad-vances, work redesign, mergers and acquisitions,restructuring, workforce diversity, and employeemobility. The chapter also detailed the process oftraining. The activities within each of the fourphases of the training and development process,that is, needs assessment, programme design anddevelopment, programme implementation, andevaluation were explained. The discussion empha-sized that the training programme should be

Benchmarking is the process of evaluating one'sown practices against those ofrecognized leaders inorder to identify areas of improvement.

Competency Assessment is a process of identifying the competencies of successful performers,typically by department, job category, or hierar-chical structure.

Competency Model refers to an organizingframe-work that lists the competencies required for effec-tive performance in a specific job, job family (i.e.,group of related jobs), organization, function, orprocess. These competencies are associated withexemplary performers and tied to corporate culture.

Computer Assisted Instruction (CAI) refers toexpert systems that are used to tutor the trainee,monitor trainee knowledge, and provide adaptivetutoring based on the responses of the trainee bydelivering training material directly to the traineethrough a computer terminal in an interactiveformat.

Computer Based Training (CBT) involves theuse of computers to train employees especially ontechnical skills.

Computer Managed Instruction (CMI)uses thecomputer to manage the administrative functionsof training, such as registration, record keeping,

anchored in organizational goals and strategies.

The chapter presented a brief overview of themethods of training and development. Linkage be-tween training and development strategy and thebusiness strategy of the firm was examined. Milesand Snow's typology of business strategies was usedto illustrate the linkage. A discussion of specialforms of training focussed upon new skill demandswas also presented. These included team training,diversity training, training for global assignments,training for developing leadership skills, andorientation training for new employees. Technol-ogy has revolutionized the world of workwith hain-ing being no exception. The impact of technologyon the design, delivery, and administration of train-ing and development was discussed. The pros andcons of e-training and computer-based trainingwere also presented. In the end, the competency-based approach to training and development wasdiscussed. The discussion dwelt upon the impor-tance of competencies in determining effectivemanagerial performance, the steps in developinga competency modelling process, and the strategicapproach to competency assessment.

scoring, and grading. CMI is nor:rnally used in con-junction with CAI and helps determine the levelof proficiency of the trainee.

Development is a process designed to impartlearning experiences in order to help employeesacquire skills and competencies for future jobs.

E-learning refers to a high-tech training methodthat makes use of the Internet or intranet of anorganization to conduct training online.

Education prepares an individual to assess situa-tions and select the most appropriate response fromthe range of responses available by increasing therange of possible responses available to an indi-vidual.

Evaluation is the process of systematically collect-ing information and using the information todetermine the effects and value of a trainingprogramme.

General Traininghelps employees gain skills thatcan be used at most workplaces.

Learning is any relatively permanent change inbehaviour that results from practice or experience.Learning can be either formal or informal. Infor-mal leaming takes the form of 'learning' throughexperience. Formal learning occurs during a train-ing episode.

Multimedia Tlraining produces a complex train-ing environment with which the trainee interactsthrough the use of a computer application thatenhance s le arning with audio animation, graphic s,

and interactive videos.

Needs Assessment is a systematic and objectivedetermination of training needs based on data gath-ering that takes the form of comparison between'skills required' and 'skills available'. A trainingneed exists when more skills are required than areavailable.

Organizational Needs Analysis is an examina-tion of the environment, strategies, organizational

1. ,Define 'training' and 'development'. What isthe difference between training, development,education, experience, and learning?


goals, resources of the organization, personnelinventories, performance data, and climate andefficiency indices, in order to determine where thetraining emphasis should be placed in the organi-zation and what factors may affect training.

Orientation Training refers to a planned intro-duction of new employees to the company, theirjob, and the work group to help them perform theirjobs satisfactorily.

Person Analysis determines who needs trainingin the firm and the specific type of training needed.It involves comparing the actual performance ofindividuals, groups, or departments to the expectedperformance standards.

Return on Investment (ROI) is calculated by dividing the net benefits gained from training by thecost of training. Net benefits are obtained by sub-tracting the costs from the total benefits of the train-mg.

Specific Tfaining increases worker's productivityin the organization that is providing the training.

Tele-training refers to training programmes of-fered over a satellite-based network by trainers whoare in a central location and teach groups of em-ployees at remote locations via television hookups.

Training is a formal learning process that attemptsto improve employee performance on a currentlyheld job by providing the employee with theknowledge and skills needed for their presentjobs.

Videoconferencing uses audiovisual equipmentfor training employees who are geographically dis-persed. It allows trainees and trainers to commu-nicate live with each other.

Virtual Reality is an advanced form of computersimulation that places the trainee in an artificiallysimulated situation that exactly simulates the eventsand situations that might be experienced on thejob. The trainee learns by interacting with objectsin the electronic environment to achieve some goal.

2. Why is training a critical strategic issue fororganizations? What purposes are served bytraining and development programmes?

3


6.

Diagrammatically explain the four phases ofthe training process. Why is it important toalign training and development programmeswith the goals and strategies of the organization?

Explain why orientation training is importantfor new employees.

Discuss the advantages and disadvantages ofon-the j ob, off-the j ob, and e-training. For whatbypes of training is each most appropriate?

\Arhy is it important to evaluate training pro-grammes? How can training and developmentprogrammes be evaluated for results andeffectiveness?

Why has diversity training become animportant component of corporate trainingprogrammes? What are the benefits of diver-sity training?

\Ahat do you understand by competency as-

sessment and competency modelling? Discuss

why the competency-based approach is beingincreasingly used by organizations for manage-

ment development, and what advantages thisapproach has over the traditional managementdevelopment methods?

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84

5

L Do you agree with the statement, 'Tlaining is

the solution to all performance problems'?What factors other than skill or knowledgedeficiency may lead to a gap between expectedperformance and actual performance of anemployee? Within this context discuss thesignificance of training needs assessment.Explain the three types of analyses involvedin conducting training needs assessment andgive examples.

$:.. Simulation and

1. Assume thatyou are the HR director of a largesoftware firm with headquarters in Bangalore.The firm has offices in almost 15 countriesaround the world and is the top performingsoftware company in the industry. The employ-ees ofthe firm are routinely targeted for poach-ing by competitors. Yet, the firm has been ableto maintain the employee turnover rate al a

low of 100/o where the industry average is about200/0. This year when you conducted the an-

nual employee survey, you found that mostsoftware professionals wanted the firm to pro-vide them with more training than what was

currently provided. Since skills in software in-dustry become obsolete very quickly, the soft-

ware professionals also wanted regular training

2. Briefly discuss how changes in corporate strat-

egy over the years have been accompaniedwith changes in the training provided by firmsto their employees. Should training activitiesbe strategically aligned? What are the benefitsof strategic linkage of training activities?Explain the business strategy-training linkagewith respect to the business strategy typologygiven by Miles and Snow

Role Play i-.'''i".l

on continuously evolving skill sets. The sur-

vey therefore, suggested some dissatisfactionamong software professionals with respect totraining practices. You discuss the issue withthe CEO of the firm and both agree that theconcerns of software professionals should beaddressed by giving them greater opportunityfor training. Since the employees are geo-graphically dispersed, you believe that e-train-ing will be more cost-effective in the long-run.However, the CEO is not convinced. A dis-

cussion on the pros and cons of computer-based, distance training, and Internet trainingensues between the two of you.

Two students volunteer for role-play. Thestudent who plays the Director (HR) presents

arguments in support of e-training. The stu-dent playing the role of CEO is more con-cerned about the high cost. The discussionends with both agreeing to gather more infor-mation about the experience of other firmsalready using Internet-based training.

After the role play, the entire class is en-couraged to participate in the discussion onthe merits and demerits of e-training. Studentsare encouraged to share examples and expe-riences of firms using e-training. The instruc-tor further encourages the students to suggestalternative training approaches for this groupof employees.

2. Form groups of students and ask them todiscuss and anaVse the orientation programme

l. The purpose of this exercise is to understandthe significance of training and developmentactivities in the contemporary business envi-ronment. Ask half the students in the class totake Position I and the other half to take Posi-tion 2 with respect to the significance of train-ing in contemporary business environment:

Position /.' 'Investment in training and devel-opment activities by a firm is a wasteful ex-penditure given the high rate of employeeturnover'.

Position 2.' 'Investment in training and devel-opment is imperative for improved businessresults and for gaining competitive advantageover competitors'.

Each student should individually developand write ideas in support of the position taken.Divide all the students of the class into twogroups according to the position they took. Askmembers of each group to share their indi-vidual ideas and develop arguments in sup-port of their chosen position on the topic.Allow 15 minutes time for group discussion and10 minutes time for presentation to each group.An open discussion with the class follows high-Iighting the pros and cons of each position. The


they participated in when they joined their cur-rent college/business school. The discussionshould veer around the content, duration, de-gree to whichitwas formal, the extentto whichit satisfied their concerns as a newcomer, as

also the concerns it did not address. Eachgroup is asked to desigrr a model orientationprogramme that they believe the collegeshould adopt for future batches of students andmake a presentation. How is the suggested ori-entation programme better than the currentone? The instructor facilitates the group dis-cussion to identify the similarities in the sug-gestions of different groups to determine thecommon concerns faced by a majority of newstudents of the college.

students are also encouraged to cite examplesof firms that emphasize employee training anddevelopment.

Hint The discussion may incorporate the fol-lowing issues among others-nature of changesin business environment, organizational andwork structures, technological advancement,change in skill requirements, changing em-ployer-employee contract and the growth ofcontingent workforce, outsourcing, and gen-eral vs specific training.

2. This exercise will help students to gain an in-sight into the design and evaluation of the train-ing process. The focus is on facilitating anunderstanding of the linkages between train-ing objectives, training methods, and trainingevaluation. The exercise needs out-of-classpreparation time.

Steps:

Day 7

Divide the class into groups of four or five.

Introduce the exercise to the class by clari$ringthe objectives of the exercise. Present a briefoverview of the training process to the students.

a


. Distribute Fofm 1 to all the students. Each stu-

dent should complete form I individually be-fore coming to the class. The task for thestudents is to identify which training methodsare most appropriate for achieving each of thetraining objective(s) listed in Form 1.

Day 2

. Since each student would have different ideas

about the most appropriate method for eachtraining objective, allow the groups aboutl5 minutes to discuss and reach a consensus.Each group fills up Form I again basedon discussion by placing a 'x' to reflect themethod that is most appropriate for achievinga particular objective.

. Present the following situation to the students:Assume you are the training manager of aglobal retail chain. The chain has recentlyhired sales associates. You as the training man-ager have to design a training programme forthe recently hired sales associates for the retailchain.' (Instead of all the groups focus on sales

associates in a retail chain, encourage the

groups to choose different occupational groupsfrom different sectors).

Each group specifies the particular occupa-tional group they have chosen.

Ask each group to determine two or three im-portant training needs for the selected occu-pational group. Each group then chooses onlyone training need.

Groups now are asked to develop specific train-ing objective(s) for the identified training need.

Having determined the objectives, the groupsthen select a combination of training methods(from Form 1) that would be most appropriatefor meeting the training objectives. Tfainingobjectives are likely to fit into one of the ma-jor objectives listed in Form 1.

Now the groups must determine whatcriteria they will use to evaluate the trainingprogrammes. The criteria rr'ay be reaction,learning, behaviour change, or results.

Each group prepares and presents a reportfollowed by a general discussion led by theinstructor.

Form 1: Training Methods and their Effectiveness in Achieving Different Training 0bjectives

Adaptedfom: Nkomo, S.M., N[.D. Fottler, and R.B. McAfee 1992, Applications in Human Resource Management:Cases, Exercises, and Skill Builderg 2nd edn, PWS-KENT Publishing company, Boston, pp. 170-177.

Training.Methods

KnowledgeAcquisition

KnowledgeRetention

AttitudeChange

Problem-solvingSkills

InterpersonalSkills

ParticipantAcceptance

Lecture method

Seminars andconferences

Job instructiontraining

* See Figure 6.9 for a complete list of training and development methods.

i:tt]+.:; jrl::tri::::i!l::;t-:,.li:!,tFieId

1. Divide the class into groups of five each. Askeach group to select one industry, that is, BPO/ITeS, FMCG, travel and tourism, aviation, re-tail, automobile, etc. Each group makes a fieldvisit to two organizations from the chosenindustry. Group members conduct interviewswith HR managers as well as a few top-levelmanagers of the firms to obtain the followinginformation for each organization :

. Dominant business strategy of the firm us-ing Miles and Snow's typology.

. Tiaining practices of these firms withrespect to skill type and skill source.

. How the firms assess training needs.

. Whether training is aligned with organiza-tional goals and objectives.

. Average training hours per employee.

. Tiaining staff per employee.

. Cost of training per employee.

. taining methods used for different skillgroups.


Projects ;::,.{':;an:t: i?rr.s:#

. Criteria used for evaluating training effec-tiveness.

. Other training-related information that isavailable.

Each group prepares a report for class presen-tation as well as a written report for submission tothe instructor. Group presentations should high-light the similarities and differences between thetwo organizations visited, in respect of various as-

pects of training.

After all the groups have made their presenta-tions, the instructor should lead a class discussionon training needs assessment, training practices,linkage between business strategy and training, andevaluation of training. The discussion should re-volve around the business environment in whichthe particular industry operates, the impact (or lackofit) ofbusiness strategy on training strategy, andhow decisions related to training and developmentactivities are taken by otganizations. The instruc-tor should also encourage the class to examineindustry differences in various aspects of training.

McDonald's went public in 1965 with thecompany's first offering on the stock exchange. Ahundred shares of stock costing $2,250 dollars thatday would have multiplied into 74,360 shares,worth over $1.8 million on December 31, 2003. In1985, McDonald's was added to the 30-companyDowJones Industrial Average. It holds a leadingshare in the globally branded quick service restau-rant segment of the informal eating-out market invirtually every country in which it has a presence.As a 50 year old company, McDonald's today isone of the two most well-known, powerful, andvaluable brands in the world, the other being Coca-Cola, the only soft drink supplier to McDonald's.

McDonald's

McDonald's is a leading global foodservice retailerwith more than 30,000 local restaurants servingnearly 50 million people in more than 119 coun-tries each day. It is the world's largest restaurantchain with outlets in every continent and in almostevery country McDonald's serves the world someof its favorite food-French Fries, Big Mac, QgarterPounder, Chicken McNuggets, and Egg McMuffin.The first McDonald's restaurant opened by RayKroc was the Des Plaines restaurant at Illinois, USAin 1955 and the first day's revenues of the restau-rant were a whopping $366.12! No longer a func-tioning restaurant, the Des Plaines building is nowa museum containing McDonald's memorabiliaand artifacts.


Values of the Company

McDonald's has one agenda; providing 1000/o

total customer satisfaction. The formula throughwhich McDonald's seeks to achieve this goal in therestaurant operation is the long-standing commit-ment to Q, S, C, and V, that is, quality, service,cleanliness, and value. Well-trained crew and man-agers are the first step to achieving these standards.It is a company policy to provide career opportu-nities that allow employees to develop their fullpotential. This includes a comprehensive trainingprogramme for crew and career progression thatenables a '{irst job' employee to progress throughto a senior management position through merit-based promotions.

People at McDonald's

Each McDonald's restaurant is structured as an in-dependent business, with restaurant managementresponsible for accounting, operations, inventorycontrol, community relations, and training andhuman resources. McDonald's is a large-scaleemployer with a typical McDonald's restaurantemploying about 60 people. Most employees are

paid by the hour and are referred to as 'crew mem-bers'. Their primary responsibility is to prepare thefood, sewe customers, and carry out tasks for theefficient running of the restaurants. Crew membershave to work hard and learn quickly. Other hourly-paid employees who work alongside them includetraining squad members, dining area hosts, partyentertainers, administrative assistants, security co-ordinators, maintenance staff, night closers, floormanagers, and shift running floor managers.Although these employees caffy out more specificjob functions, their overall role is to ensure thatthe restaurant runs efficiently. McDonald's is rep-resentative of the wider growth in temporary, parttime service sector work. 550/o of McDonald'shourly paid staff are students, usually in further orhigher education. Many McDonald's employeeshave been recruited from both short and long-termunemployment. Most crew members have addi-tional demands on their time, whether throughstudying or caringresponsibilities. There are peoplewho don't last long amidst the intense demands

of the McDonald's workplace and developmentprograrnmes. But there are also many who see thesethrough and go on to have successful and reward-lng careers.

The remaining company employees are sala-

ried managers working in either the corporateor regional departments. It is their responsibilityto manage the restaurant's operations, crew, andbusiness performance. 20 of 50 top managersstarted in McDonald's restaurants, including theCE O, Jim Skinner. 67,000 McDonald's restaurantmanagers and assistant managers started as restau-rant staff. McDonald's was voted the 'best place towork for minorities' by Fortune Maga/ne in 2005,and 'one out of five best places to work in LatinAmerica'by America Economic Magalizain the sameyear.

Commitmmt to Training

McDonald's is an organization that demonstratesa strategic commitment to training'as the way wedo business around here'. From the very early days,Ray Kroc, the founder of McDonald's as we knowit today, was prepared to invest a great deal ofmoney (and way before McDonald's came closeto turning a profit) in training staff. The company'sattitude to training and development today can betraced straight back to Kroc's philosophies andbeliefs about learning and work. McDonald's, witha strong tradition of and belief in training, investsmore than $t bllhon annually in training. How-ever, it is not always training as we know or mightexpect it. McDonald's Hamburger University firstopened in the basement of a restaurant in ElkGrove, Chicago, in 1961. It was initially aimed atKroc's growing number of franchisees, a learningprocess through which he could assert control overhis cherished standards ofquality, service, cleanliness, and value. At the time, the idea of a univer-sity for the still fledgling industry of fast foodfranchising was scoffed at but Kroc didn't care.The first graduates were awarded a Bachelor ofhamburgerology degree with a minor in frenchfries. Hamburger University@ has more than275,000 graduates worldwide and, with training,eligible for college credits.

When Ray Kroc was initially expandingMcDonald's in the 1950s and 60s he avoided em-ployees or franchisees with direct experience orformal training in the food preparation, restaurant,or service business. They were the people whowanted to do it their way, the way that they hadlearned through their formal training in catering.But Kroc never saw that as the right preparationfor making McDonald's do well. Instead, he saw adifferent mix of dedication, entrepreneurship andwider skills in service and quality as the right typeof skills mix. He freely admitted to 'putting thehamburger on the assembly line'-a process wheretraditional catering and restaurant skills were ob-solete. This new fast food revolution could not beencumbered by traditional beliefs-rather Krocwas convinced that new abilities and a 'try anything'philosophy would better deliver the national brandthat he craved. But, in the 21st century service sec-tor, the skills process has changed. The companyinvests in its people and-these are all formal learn-ing processes that McDonald's utilises-they areperhaps a better reflection of Kroc's philosophythan existed in the US in the 1950s. However,despite this, McDonald's still sets great store byits training procedures. Just like Kroc in the1950s, they are always prepared to tear up theirown systems and start again with all of its develop-ment procedures. There is a major paradox thatexists at the heart of perceptions about the job atMcDonalds, called McJob. If it takes only a fewminutes to be fully up to speed in the deskilledenvironment that is a McDonald's kitchen, whydoes the company claim to invest so much timeand money in training and development? At crewlevel, there is considerable initial and ongoing train-ing that is consistently applied to everybody in thebusiness, whether part, full time, hourly paid staff,or salaried managers undergoing their compulsoryin-re staurant training.

Orientation and Induction

The first stage of training at McDonald's is atthe Welcome Meetings. All new employees areinducted into the business through a WelcomeMeeting, which they must attend. These set out the


company's standards and expectations. The Wel-come Meeting gives an overview of the company,including job role, food, hygiene and safety train-ing, policies and procedures, administration,benefits, and training and development.

Welcome Meetings are followed by a struc-tured development prograrnme that provides train-ing in all areas of business. Crew trainers workshoulder-to-shoulder with trainees while they learnthe operations skills necessary for the running ofeach of the 11 workstations in each restaurant, fromthe front counter to the grill area. All employeeslearn to operate state-of-the-art foodservice equip-ment, gaining knowledge of McDonald's opera-tional procedures. The majority of training is floorbased, or 'on-thejob' training because people aremore likely to retain information if they are able topractise as they learn. All new employees have aninitial training period. Here they are shown the ba-sics and allowed to develop their skills to a levelwhere they are competent in each area within therestaurant. The time sca-le for this depends on theirstatus, that is, full or part-time. They also attendclassroom-based training sessions where they com-plete workbooks for quality, service, and cleanli-ness. New employees also meet their trainer andtour the restaurant. The company operates a threeweek probationary period, after which employeesare rated on their performance and are either re-tained or have their employment terminated.

Training and Management Deaelopment

After inductions and team orientation sessions,every employee embarks on his/her individualtraining plans. All employees receive ongoing train-ing. There are no set timescales as there are manycrew working for a handful of shifts each week.

The leisure retailing industry is unique in thatthe customers know what they are looking for, thequality of service they received on their last visit,and what service they expect on this visit. In sucha situation, extreme variations in standards getsnoticed and 'punished'. McDonald's places greatemphasis on employee training to ensure the high-est standards of service across all outlets globally,


regardless of the restaurant or the continent. Thetightly controlled process is called the 'one bestway'. It covers all areas of business, from meetingand greeting, to food preparation, to cleaning thefloor. In order to relieve monotony, crew membersare rotated through a number of different roles. Ittakes an average oi 44 shifts to become competentin all areas.

taining is delivered and assessed through a

variety of methods. Much is done 'shoulder toshoulder' with a manager or training squad memberfrom the restaurant. However, training is also de-livered through attending classes in the crew roomor in the restaurant itself. Additionally, e-learningmodules can also be completed during allottedtimes in the crew rooms using the crew computerstation and by accessing the company intranet site.

Once in a restaurant manager position, em-ployees continue with further intensive develop-ment. All the development plans at McDonald'sstem from the same essential principles that Krocintroduced in the 1950s, i.e., quality, service, andcleanliness. Through a combination of time in res-taurants and at a management training centre,managers progress through hundreds of trainingdays. Courses for management development in-clude:

. Employee relations training

. Time management

. Staff retention and discipline

. Personal leadership and effective coaching

a

a

a

Employee communications

Learning to manage shifts

Community image

Managing staff development

Optimizing restaurant food cost

Accounting and fi nancial procedures

mischievous degree in Hamburgerolog'y that hefirst awarded in the early 1960s.

The restaurants also promote crew membersto hourly-paid management positions that carryaccountability for areas within the restaurant, orresponsibility for a shift. All members of therestaurant crew are trained on the job by a train-ing squad. The training approach at McDonald'sis based on developing competencies using aPersonal Development Plan (PDP). Training ismonitored by the use of 'Observation Checklists'(OCLs) for the station they are working at.Ratings from these checklists are used in apprais-als of employees. Successful completion of a rangeof OCRs across various job tasks leads to a smallpay rncrease.

In addition, the participants (crew members)attend regular development days. On successfulcompletion of a management entrance exam, em-ployees attend a training course held by the train-ing department at the regional office beforereturning to the restaurant in a management posi-tion. The McDonald's management developmentcurriculum takes new recruits from trainee man-ager to restaurant manager. This consists of on-the-job training and open learning developmentmodules, supported by courses and seminars at thecompany's national and regional training centres.The management development curriculum isaimed at persons aged 2l or over, either graduatesor individuals with some previous rnanagementexperience. It offers a direct route into restaurantmanagement, through an intensive structured train-rng proSTamme.

The management development curriculum isdivided into four key programmes:

Shifi Management: Developing trainee manag-ers in the skills and techniques required to be-come effective in all aspects of running a shift.

Systenu Management: Tar geting second assistantand newly promoted first assistant managers.This programme covers all areas of McDonald'ssystems, thus increasing the manager's busi-ness knowledge. It also develops individualtechniques.

The operations and training manual weighsjust over 4 kg and is more than 800 pages long.General Managers at McDonald's are expected tocomplete further programmes, such as a Diplomain Management from Nottingham Tient Univer-sity (in UK outlets), a far cry from Ray Kroc's partly

. Rxstaurant Leadzrship: Introducing managers tothe key skills needed to become effective res-taurant leaders, e.g., team-building, commu-nication, decision-making.

. Business Leadership: Focussingrestaurant/gen-eral managers on the need to develop a busi-ness strategy that encompasses both internaland external factors.

Most departments in the regional offices offerrestaurant managers opportunities to work in theregional office. This gives an experienced managerthe opportunity to develop and learn new skills, tosee a different side of the business, and to experi-ence how each department's strategies have a rolein achieving the company's goals.

McDonald's Diu ersily Initiatiu es

McDonald's is the world's community restaurant.It has a long-standing commitment to a diverseworkforce. Diversity at McDonald's is seen as un-derstanding, recognizing, and valuing the differ-ences that make each person unique. McDonald'sis committed to recognizing the talents and job per-formance of all employees and values the contri-butions that come from people with differentbackgrounds and perspectives. Some of the diver-sity initiatives at McDonald's have resulted in ithaving the largest number of minority and femalefranchisees in the quick service industry, with morethan 40.7010 of all McDonald's US owner/opera-tors being women and minorities. More than250loof company officers are minorities, more than24oloof company officers are women, 26010 of middle-management employees are minorities, and 460/o

of middle-management employees are women.

The company has employee networks such as

Women's Leadership Network, Asian EmployeeNetwork, McDonald's African American Council,etc. These networks help the company achieve itsdiversity vision by improving processes like per-formance feedback and employee development,recr-uitment and retention of excellent employees,and maintaining a better connection with the di-verse customer base. McDonald's is committed todiversit,' education and has developed a framework


to provide it throughout the organization throughformal presentations, workshops, and seminars.Seminars and workshops like Winning with Diver-sity and Inclusion, GenderSpeak, Asian CareerDevelopment, Black Career Development, andWomen: Enhancing Personal and ProfessionalEffectiveness, serve as the cornerstone for bringingdiversity to life in the organization. Presentationsand customized and informal training materials areprovided for integration into team and departmentprocesses. Diversity education is an ongoing pro-cess, creating awareness and building skills formanaging an inclusive and diverse workforce.

Evaluation of Training

The managers of each unit are responsible for train-ing and also for monitoring training effectivenessbased on OCLs through a computerized log. Theresults are used by the head office to track restau-rant performance, resulting in what is called a

'training grade'. This serves as a key indicatorin measuring the unit managers' performance.This linkage ensures that training is prioritized.Restaurant's performance with respect to trainingis measured by the following indicators:

. Overall training audit grade

. Proportion of fully trained staff

. Number of OCLs awaiting completion

. Employee satisfaction levels

To measure the quality, service, and cleanli-ness of restaurants McDonalds uses mystery shop-pers who pay a monthly visit to each site. Theresults from these visits indicate that restaurants inthe above average training category have higherscores across the board, especially on'service'. Thismeans that when staff are well trained and moti-vated, customer serwice improves, and long queuesand delays are less likely.

McDonald's provides a real justification fortraining, through real evidence that directly ex-

plains the impact of training investment on thebottom line. It has been observed that the restau-rants where the manager or their second-in-com-mand takes a hands-on approach to training tend


to perform better. Ye! the company does not lookfor immediate financial benefits from training, theimpact of which may be more medium to long-term. Fundamentally, though, McDonald's knowsthat skills do create better businesses and with it,better jobs and opportunities for their workers.Apart from measuring the success of training byits impact on bottom line or profits, McDonald'slinks a number of other benefits to ongoing train-ing. These include improved employee morale andproductivity.

Effective and regular training is seen as bring-ing cascading benefits, such as employee satisfac-tion, which in turn enhance customer ratings.McDonald's believes that the success of the res-taurants and the company is achieved through thepeople it employs. The company aims to recruitthe best people, to retain them by offering ongo-ing training relevant to their position, and to pro-mote them when they are ready. Tiaining isinherent in McDonald's work culture, and the linkbetlveen training and progression within the com-pany is explicitly communicated.

Restaurants with high levels of training alsohave lower staff turnover. A more consistent crew,in turn, delivers higher levels of service to the cus-tomer, resulting in more profits and so on. The staffturnover rate at McDonald's is low, with the aver-age length of service of a McDonald's managercurrently at over ten years.

Training and deveiopment at McDona-ld's re-ally works. According to McDonald's, some 700/o

of their current management team (in head andregional offices and in restaurants) began as crewmembers. These findings suggest that training playsa primary role in the delivery of the three majorbusiness objectives of quality, service, and cleanli-ness and also in achieving better employee andcustomer satisfaction and a drastically reduced staffturnover rate. All have direct impacts on the bot-tom lines of each restaurant and of the companyas a whole. McDonald's may be regarded as amodel employer keeping in view the importanceit attaches to employee training and the set of indi-cators it uses to measure training success.

This case has been constructed on the basis of secondary information from following sources:

http://www.mcdonalds.com (accessed on 18 August 2006); http://www.mcdonaldsindia.com, accessed on 18 August2006;hpt/ /mcdonalds.net.in/mcd/corp/index.htm, accessed on18 August 2006; http://www.thetimesl00.co.uk/case-study.php?cID:28&csID:194&pID:5, 06 July 2006; Christine 2002; Westwood 2003; http://www.theworkfoundation.com/Assets/PDFs/are we beingserved.pdf, accessed on 18 August 2006.

Questions

1. Do you think McDonald's training initiativesare aligned with business strategy? Explain thereasons for it. \44ey is it important to establishbusiness strategy-training linkage?

2. Discuss how McDonald's strategic commit-ment to training has contributed to its posi-tion as a'leading global foodservice retailer'.

3. Examine Ray Kroc's trainingphilosophy. Howhas McDonald's gained from this philosophy?

4. How relevant is training and development fora company like McDonald's which is seen as

'deskilled'?

5. Describe the orientation haining at McDonald's.What purposes does it serve?

Discuss the training and management develop-ment process at McDonald's with respect to itsdesign, purpose, methods, and content. Whatorganizational goals does it help McDonald'sachieve? Evaluate McDonald's T&D processbased on your understanding ofthe process oftraining.

What purposes are served by diversity train-ing for McDonald's? What initiatives doesMcDonald's take fbr diversity inclusion in itsworkforce and with what benefits?

\44rat criteria are used to evaluate training ef-fectiveness at McDonald's?

6.

8


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PerformanceManagement andDevelopment Systems

After studying this chapter, youwill be abfe to:

o define performance managementand explain its evaluative anddevelopmental objectives

e describe the steps in the designand implernentation ofperformance managementsystems

o recognlze common appraisalproblems

r gain an overview of rnajorperformance appraisal methods

. explain the characteristics of aneffective perforrnancemanagement system

o gain an insight into sornedevelopments in performancemanagernent

o understand the competency-based approach to performancemanagement

r appreciate the role of technologyin the performance managementprocess

r acquire an understanding of thestrategic linkage of performarrcemanaSement with the stages ofthe organizational life cycle

INTRODUCTION

Competition has become away of life for most organizations.To survive and be successful, it is important for organizationsto remain competitive. Since human resources are a unrqueand valuable source of competitive advantage, organizationsrnust ensure the most effective and efficient utilization ofthese resources. It is also important to ensure the continuedviability of human resources in the face of technologicalgrowth, changes in the nature of jobs, and changes in thedemands that jobs make of the employees. To ensure thatthe organization has competent and motivated employees,there should be a fair basis for rewarding employees.Employees should also have opportunities for growth anddevelopment. Employee performance management systemprovides one such mechanism for employee developmentas well as for making personnel decisions.

The present chapter begins with a conceptual overviewof the terms commonly used to refer to the performancemanagement process. The differences between the tradi-tional and contemporary performance appraisal systems arehighlighted. The objectives served by the performance man-agement process within an organizational context arediscussed. The chapter discusses the steps in the design anddevelopment of a performance management system. Thesteps include the identification of job performance dimen-sions; defining performance standards and sources ofappraisal; choice of performance appraisal methods; andcommunication of appraisals to the employees. The mainproblems and characteristics of performance managementare discussed. The chapter also discusses the special featuresand aspects of performance management such as the team


based approach, assessment centre approach, and the 360 degree appraisalfeedback. The significant role of technology in supporting various aspects ofperformance appraisal is also presented. In the end, the chapter examinesthe linkage between business strategy and performance management. It is

emphasized that for performance management to be strategic, it is importantto align performance management with organizational strategies at differentstages of the organizational life cycle.

PERFORMANCE MANAGEM ENT

A major concern of organizations centres on the performance of employees.

'Performance' refers to what an employee does or does not do on the job.Employee performance includes, for example, quantity of output and qualityof output. When employees do not perform according to expectations' orwhen they under perform, it is difficult for a firm to achieve its objectives.

Under such conditions, the firm will not be able to achieve competitiveadvantage. Therefore, organizations seek to determine and evaluate theperformance of all employees on a regular basis. Several terms such as perfor-

mance assessment, performance appraisal, performance eualuatiory and performance

management are used commonly and interchangeably to describe the process

of employee performance evaluation. Let us understand the meaning of each

of these terms.Performance assessment is the process by which data about an employee's

past and currentjob performance in the organization is collected and reviewed,

Assessment suggests a top-down judgmental approach where the manager

takes the role of ajudge who makes decisions about the adequacy of employee

performance. Performance appraisal is the system by which an organizationassigns some 'score' to indicate the level of current and/or past performanceof a target person or group. The individual's performance is compared to a set

of performance standards when assigning the score. The term performanceappraisal includes assessment too. Both the terms, that is, per{ormance appraisal

and assessment, are combined and are synonymous in many organizations.

Theterrn performance elaluationisused to describe the process used to determine

the extent to which an employee performs the work effectively. Some otherterms that have been used to connote the same meaning are performanceappraisal, merit rating, performance review, and employee evaluation.. Perfor-

mance managementis a broader term than performance appraisal, performanceevaluation, or performance assessment. It is defined as an integrated process

that consolidates goal setting, employee development, performance appraisal,

and rewarding performance into a single common system. The aim of perfor-mance managelnent is to ensule that employee performance suPports the

strategic goals of the organization. Thus, performance management includes

Performance Management and Development Systems 435

practices through which managers (superiors) work with their employees (sub-ordinates) to define the goals of the latter, develop employee capabilitiesthrough training, measure and review employee performance in order toreward performance, all with the ultimate aim of contributing to organiza-tional success. Performance management integrates management of organi-zational and employe e p erformance. B aron and Armstrong ( 1 9 g 8) emphasiz e dthe strategic and integrated nature of performance management by stressingthat it focuses on increasing the effectiveness of organizations by improvingthe performance of employees and by developing individual and teamcapabilities. Performance goals of each employee are linked with the strategicgoals of the firm. Performance management is a continuous process and notan annual event. It involves performance reviews focussing on the future ratherthan the past. An effective performance management system requires themanager to work together with the employees to set performance expecta-tions by defining excellent performance, reviewing performance, providingfeedback to employees, and planning for future perforrnance. Determiningwhat constitutes good performance and how different aspects of high achieve-ment can be measured is an important component of an effective performancemanagement process. Performance appraisal or evaluation is, therefore,an integral part of performance management process.

From Performance Appraisal to Performance ManagementPerformance management was first introduced by Michael Beer (Beer andRuh 1976) as an innovative appraisal and development system. It was intendedto be an improvement on the traditional performance appraisal system thatwas generally seen as subjective and plagued by rater problems. A compari-son of the traditional performance appraisal systems and the new performancemanagement systems is presented in Table 7.1.

Performance appraisal represents an isolated, mechanistic, and HR-drivenapproach. Performance management, on the other hand, is a comprehensive,integrated, business-driven system aimed at organizational and people devel-opment. The performance management process gained popularity in the 1980swith the advent of the total quality management (TQM) programme.Total quality management emphasized the use of all management tools,including training and performance appraisal, in order to achieve performancegoals.

As it stands today, performance management as a process recognizes that,in a globally competitive business environment, it is essential that the effortsof every employee of the firm are focussed on helping the firm achieve itsstrategic goals. Therefore, it is important to integrate individual goals withorganizational goals. It is easy to see that if employee performance does not

Table 7.1: comparison of Performance Management and Performance Appraisat

Tlpes of objectives Emphasis on integratingorganizational, team, andindividual objectives

Individual objectives

!'pes of performancemeasures

Competency requirementsas well as quantified measures

Qualitative and quantitative

Frequency Continuous review with one or moreformal reviews in a year

Annual appraisal

Rating system Joint or participative process, ratingsless common

Top-down system, with ratings

Reward linkage Does not have direct link to reward Often linked to pay

Ownership Owned by line management Owned by human resourcedepartment

Corporate alignment Integrated business-driven systemaimed at organizational and peopledevelopment

Isolated system not linkedto organizational goals

Focus of performancererriews

Future focussed Focus on past performance

Questions asked What can be done to help employeesperform as effectively as possible?

How well was the work done?

Source Spangenberg and Theron 2001; Armstrong and Baron 1998


help the firm accomplish its goals, then the very survival of the firm isthreatened. At Pfizer, the managing director defines the annual objectives,that is, the business performance measures. These objectives then get trans-lated down the hierarchy. The measures include, for example, budgeted sales,net profits, operating profits, etc. Managers set their own objectives to matchorganizational objectives and their superiors ensure that these are stretch targets.Employees also carry out self-assessment exercises every quarter to gaugewhere they stand with respect to their annual objectives. At the end of theyear, the employees are rated as outstanding, good, satisfactory, below average,or poor. The company's business performance is also calculated on the samepoor-to-outstanding scale. Thus, individual objectives and the business objec-tives of the organization are aligned.


Formal and Informal Performance Appraisal Systems

Performance appraisal is easily the oldest management tool available. In fact,performance appraisal is an inevitable part of any superior-subordinate rela-tionship, be it a teacher-student, master-servant, or father-children relation-ship. In each such relationship, the superior in the dyad forms opinions aboutthe 'worth' of the subordinate. This occurs even when a formal system ofperformance appraisal does not exist. When a formal appraisal sysiem doesnot exist, appraisal goes on informally. Thke the case of a household helper.The wages of the helper are fixed based on the quantum of work he/she isrequired to do. The master also expects a particular level of performancefrom the helper. When the helper 'performs' the work according io the expec-tations of the master, helshe is rewarded with a token money or gift over andabove the wage.

Performance appraisal as an informal process has existed in organizationssince time immemorial. Informal performance appraisal takes place whenmanagers frequently think about how well employees are perforrning on theirjobs, even when they are not officially required to do so. bay-to-day interac-tion of the manager with an employee allows the former an opportunity toappraise the employee's performance. Informal appraisals are ofien commu-nicated by the manager to the employee over coffee or immediately when hisperformance is observed. Informal appraisals have the following advantages:

o They help provide immediate feedback to employees, resulting in highmotivation.

o Frequent informal appraisals prevent surprises during the annual formalappraisal.

The formal Process of performance appraisal began to be increasingly usedin the 1940s. Formlal appraisalis systematic appraisal. It is a system set-up bythe organization to evaluate the performance of an employee. Almosi ailorganizations have some variation of formal appraisal in place. Infosys, LG,AV Birla group, ICICI, Gillette, Godrej, and HP ute ro-e of the companiesin India having a formal appraisal system. Today, almost all organizationshave two evaluation systems existing side by side-the formal system and theinformal system. In the present chapter, we are concerned with the formalProcess of evaluating employee performance. A formal system serves multiplepurposes or objectives for the organization.

OBJECTIVES OF PERFORMANCE MANAGEMENT SYSTEMSPerformance appraisal data is potentially viable for use in almost every HRMactivity. Figure 7.1 depicts the various uses and objectives of a performancemanagement system.


A well-designed formal performance management system helps accomplishthe following objectives.

Human resource planning Performance appraisal information provides avaluable input for skills inventories and human resource planning (HRP). Byproviding information about the human resource strengths and weaknesses ofthe organization, the performance appraisal system helps determine thepromotability and potential of all employees. It, therefore, constitutes animportant information base for developing succession plans, replacementcharts, and creating new positions in the organization.

Recruitment and selection Performance appraisals can be used to validateor evaluate decisions related to employee recruitment and selection. Bycomparing employees' performance appraisal with their test scores as jobapplicants, it is possible to determine the effectiveness of the recruitment andselection system. For instance, employees who received about the same scoreson the selection tests should perform similarly on the job. However, if theseemployees show a significant difference in their job performance after oneyear on the job, then the selection system is not considered successful.

Personnel decisions Apart from validating selection procedures, performanceappraisals also serve as a guide for other personnel decisions such as promo-tions, layoffs, etc. Performance data helps make rational personnel decisions. Inthe absence of this information, personnel decisions become subjective.Performance data also helps defend promotion decisions once the decision ismade.

Training and development Appraisal data helps an organization determinesp"ecific training and development needs based on an assessment of thedeficiencies in performance levels and skills. It helps to identify employeesand departments in need of training. However, not all performance deficienciesmay be overcome through training. Performance appraisal should clearlydetermine whether the reasons for performance deficiency are due to the lackof skills or because of low morale.

Fe edbaclq motivation, and personal development Performance appraisalshelp provide performance feedback to employees. They also help in thedevelopment of action plans for individual performance improvement andfacilitate learning of new behaviour. All employees want to know how theyare performing on the job, what their manager thinks of their performance,and where they need to improve. Performance feedback is a primary devel-opmental need and serves to motivate employees. Performance appraisals helpdetermine employee strengths, weaknesses, potentials, and training needs.When providing feedback to employees, the manager can inform employees


Figure 7.1: Uses and Objectives of Performance Management System

about their performance, discuss what aspects need improvement, and alsoidentify what direction employees should take to improve performance.

Career planning and development Appraisal data also helps in identifyingemployee potential and in planning future growth opportunities for theemployee. Information about the strengths, weaknesses, and potential ofemployees can be used to counsel and assist them in developing and imple-menting realistic career plans.

Compensation and reward A fair and objective performance appraisalsystem helps in making differential reward decisions, such that the most pro-ductive workers or teams are rer,varded accordingly. In the absence of peifor-mance data, everyone gets the same bonus, is rewarded equally, or rewardsare subjectively distributed. Such a situation results in perception of inequityon the part of high performers. When rewards and compensation are linkedto performance, it reinforces the belief that pay raises should be linked to


performance rather than seniority. Performance data provides a basis for

rational decisions about pay and rewards'

ons Performance appraisals can serve to maintain

ulture. Dissatisfactiot ot"t promotions or reward

by using Performance data'

C t as sift.c atio n of O bi e ctiu e s

Alltheobjectivesofperformancemanagementsystemcanbeclassifiedinto;; ;;#es (see Figure 7.2)-adrnrnistrative/evaluative and development'

EvaluativeobjectivesTheperformancemanagementsystemmeasurespastrse of making administrative decisions

be reflected in the incentives receive

get a higher bonus comPared to low Phas a variable pay system that is tie

each of the administrative decisio

artment, and the individual' Perfor-

high-flyers and theY are rewarded

with double-Promotions'

Figure 7.2: Ctassification of Performance Management 0bjectives

. Feedbacko Motivation. Training and

develoPment. Career Planning. Human resource

planning

Manager is a coach who

helps in Performanceimprovem€nt

. Valiclating selections

. Bonuses and incenlives

' Promotions. Salary increases

Manager is a judge andmakes reward decisions


Development objectives Another objective of performance managementis to facilitate the development of employee skills and motivation for futureperformance. Development objectives focus on employee career growth andpotential development.

American Express has a Performance Management Process (PMP) that isused to identify and facilitate career moves within the organization. NationalPanasonic, the Japanese white goods major, has developed a performanceassessment system that is based on key result areas (KRAs). Key result areasdescribe business, functional, and behavioural performance goals with a time-frame defined for each performance goal. The employee and the managerjointly decide the KRAs in the beginning of the year. These KRAs are thenused to map the employee's progress. Based on employee performance, theorganization identifies performance gaps and designs relevant training inputsto plug performance gaps. National Panasonic places a lot of emphasis on re-skilling its employees, hence the company focusses on developmental perfor-mance appraisal objectives. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips,GlaxoSmithKline (GSK), and Procter & Gamble (P&G) are some of the com-panies in India to have redesigned their systems shifting from pure perfor-mance orientation to a potential and performance-based appraisal system.Bangalore-based Silicon Automation Systems (SAS) has a comprehensiveperformance, planning, review, and development module. The companyclearly explains to its employees what their targets are, whether they haveachieved them, and based on the results, where they can expect their careerpaths to lead. At GSK, there is a small section on potential appraisal withinthe performance appraisal form that is to be filled in by the employee's superior.This section lists out certain attributes such as attitude, accountability, initia-tive, drive, etc. At Cadbury, the insights received on the potential of employ-ees are through the review system by immediate appraisers, departmentalheads, or the functional Vice Presidents. Godrej Consumer Products Limited(GCPL) has a talent management system that helps to develop leaders, facili-tates succession planning, and provides a clear career path to employees. Thesystem requires good performers to be rated on their leadership potentialby superiors and an independent assessor. The short-listed people get a ca-reer choice between general management and domain expertise.

Tiaditionally, performance appraisals primarily served evaluative oradministrative objectives. These objectives continue to be important reasonsfor conducting formal performance appraisals in organizations. A leadingfinancial institution in India has a system for spotting high performers throughits performance appraisal system. There is a performance appraisal form thatis filled by each employee and his/her immediate supervisor. A moderatingcommittee comprised of members of cross-functional teams takes the decisionon performance bonus. The score-sheet (performance appraisal form) is then


returned to the employee's immediate boss who then shares the appraisalfeedback with the employee and discusses career options with him/her. TheCentral Government of India recently outlined initiatives for re-orienting theperformance appraisal system for IAS officers. The performance appraisalsystem is designed to provide opportunity for mid-career exit for inefficientofficers and fast-track rewards for the high performers. The main purpose ofthe performance appraisal system is stated to make civil servants accountableand responsive. The system proposes an intensive review of the officer's per-formance at two stages in the career-after every 15 and 25 years of service.Those who receive high scores on evaluation measures will get promotionsand recognition. Those who do not qualify on these appraisal measures willnot be promoted and will have the option of choosing voluntary separationfrom service. The officers will be assessed by a group of eminent persons whowill be selected by a high-level committee. The annual confidential reports ofcivil servants are being replaced by the performance appraisal reports. Thelatter system is expected to provide a more objective evaluation.

In several organizations, performance appraisal these days is viewed as

being much broader in scope. Performance management serves both evalua-tive and the development purposes. However, the two purposes are oftenconflicting. Evaluative performance appraisal requires the manager to be a

judge of employee performance and make differential reward decisions. How-ever, in developmental performance appraisal, the manager assumes the roleof a coachor counsellor. A coach rewards good performance with recognition,explains where improvement is necessary, and shows employees how toimprove. Evaluative performance appraisal requires managers to make judg-ments that affect the future of employees. These decisions relate to promo-tions, bonus, rewards, etc. On the other hand, developmental appraisal requiresemployees to participate in their own appraisal in order to identify thoseaspects of their performance that need improvement. These two purposes havean inherent conflict with each other.

A major mistake that organizations commit while designing and imple-menting a performance management system is to seek to achieve both evalu-ative and developmental objectives at the same time. Providing feedback aboutperformance to employees and identifying areas of improvementwhile makingevaluative decisions at the same time leads to ambiguity and defensiveness onthe part of employees. This defeats the very objective of a performance man-agement system. Hence, it is important that organizations have at least twoformal appraisals, instead of only one, in a single year. One appraisal shouldfocus on developmental goals, while the other appraisal should focus onevaluative goals. It is important for an organization to strategize the mainpurpose for which performance management is being used-evaluativeor developmental. The organization should ensure that in a performance


management system that is designed to serve multiple purposes, these purposesdo not conflict with each other. Organizations are moving toward a system ofmore frequent and multiple formal appraisals in a year, though the appraisalsessentially remain evaluative in nature. Hewlett-Packard has a system of moni-toring and rewarding employee performance thrice a yeaL Samsung India,the consumer electronics company and Mantra, an internet service piovider

. and portal, have instituted quarterly performance reviews. Gillette India hasintroduced a Hall of Fame review system in its sales function whereby perfor-mance is measured against a given target every two months. The firm uses theperformance review to keep employee morale high and to recognize extlaor-dinary performance in the short run.

DEVELOPING PERFORMANCE MANAGEMENT SYSTEMS

The specific design and implementation of performance management differsfrom one organization to another. However, certain steps need to be followedin the development of a performance management system. These steps arecommon across all organizations (Figure 7.3). The steps that constitute theperformance management process include

f . identifying dimensions of job performance;2. defining and communicating performance standards;3. determining who will conduct the appraisal;4. choosing appropriate methods of performance appraisal; and5. communicating appraisals to employees.

The steps in the performance managernent process are summarized inExhibit 7.1.

It is important to remember that the performance management systemshould be aligned with organizational objectives. Therefore, the long-term aswell as short-term objectives of the firm should be identified first. This willhelp determine the type of jobs, skills (human resources), and nature ofemployee performance that the organization will require to achieve its objec-tives. This becomes the basis for specifying performance measures againstwhich ernployee performance will be assessed. Mindtee Consulting providesa good example of how organizational values and objectives can be integratedwith performance management systems. The core values at MindTlee arecalled CLASS (caring, learning, achieving, sharing, and social conscience).These values represent the firm's values and are the guiding principles for theemployees of the organization. The firm has tied CLASS to its employeeperformance appraisal system. Every employee is evaluated on 100 points.Out of a total of 100 points, 60 come from job objectives and 40 points arerelated to how an employee is doing with respect to CLASS. Employees are


Steps in Performance Monagement Process

2.

The following steps constitute the performancemanagement process in organizations:

1. Conducting job analysis and developing jobdescriptions and job specifications. Thesehelp define the broad performance dimen-sions or activities of an employee, ensuringthat each employee's goals are aligned toaccomplish organizational goals.Developing performance standards for eachperformance dimension. Performance stan-dards specify the expected levels of perfor-mance. Setting performance expectationsinvolves:. Checking individual or group perfor-

mance standards or goals against depart-ment and organizational goals to ensurethat they suppoft tlre latter.

r Specifying measures for appraising howwell an employee accomplished each

objective or goal. Measures may be re-lated to quality'of performance, cosVbud-get, and time taken to accomplish theobjectiVe. For instance, a measure forevaluating sales persons' performancemay be reaching a particular sales targetwithin a six month period.

r Developing a plan to monitor employeeperformance. This helps in tracking em-ployee performance and taking correctiveaction at the right time.

Appraising employee performance and hold-ing performance review discussions with theemployee.Using performance management i nformationto make administrative decisions, identifyand solve problems, and develop actionplans for performance improvement.

3.

4

required to fill a self-appraisal form and demonstrate through anecdotes andpersonal experiences how they acted on some of the values. The immediatesuperior adds his/her input to the self-appraisal. Let us now discuss each ofthese steps of the perfolmance management system.

Dimensions ofJob Performance

Before conducting any appraisal, the important elements in a given job, thatis, the job criteria, should be identified.Job criteria are also called the evalua-tion criteria or dimensions ofjob performance. These are the factors for whichthe employee is paid by the organization. At Escotel, the telecom company,

e, company goals, country performance,tisfaction are woven into senior managers'performance, volume growth, and market

share to calculate incentives for senior level executives.Some performance dimensions are common to most jobs, for example,

quantity of output. Beyond these general dimensions there are other dimensionsofjob performance too. For example, important evaluation criteria in a collegeprofessor's job are-teaching and research. A college professor is paid to do


Determinconduct

(sou

e who willappraisalrces)

Conductappratsals

Figure 7.3: Process of Performance Management System

research and teaching and therefore, the performance of college professors onthese job criteria should be measured. It is quite possible for anlndividual todernonstrate better performance on some job criterion than others. A collegeprofessor may be a good researcher but not a good teacher or vice versa. Itlsalso possible that some criteria are considered more important than others bythe organization. One department of a university rri,ay consider teaching to bLa more important job criterion when compared to research. Another depart-ment may place higher value on research as a job criterion. By assigningweightages to differentjob criteria, it is possible to show the relative importanceof several criteria in one job. Going back to the college professor's example, ina particular teaching institution, teaching may be given a higher weightage of500/o-, research a weightage of 300/0, organizing seminars 100/0, and piesentingconference papers l0o/0.


An important characteristic of evaluation criteria is that they should be

'relevant' to the job in question. For example, 'volume of sales' may be morerelevant than 'attitude' for appraising the performance of a direct sales person.Important job criteria should be identified on the basis of an employee's jobdescriptions. At Amtrex, the functional objectives of the HR manager are

filling key positions and improving employee satisfaction levels.Job criteria,that is, the performance measures, may be objective or subjective. Objectiveperformance measures or dimensions can be directly measured or counted.

'Qyantity of performance' stated in terms of 'number of cars sold between

January 2005 and December 2005' can be measured directly. On the other' hand, subjective measures require the evaluator to make judgments and there-

fore are more difficult to measure. For example, at American Express tavelRelated Services (TRS) a leader is appraised on thought or idea leadership,result leadership, relationship leadership, customer focus, and people leader-

ship. Rating a subordinate on'customer focus'or 'attitude towards customer'

is a subjective measure of performance evaluation.

Types of Eualuation CriteriaPerformance dimensions or evaluation criteria can be classified into three

types based on the type of information obtained about employee performance(Figure 7.4). These three types of performance dimensions are as follows:

Trait-based criteria These seek information that identifies a subjective char-

acteristic of the employee, such as attitude, creativity, initiative, etc. In the

performance appraisal form of Glaxo, a section lists out certain attributes likeattitude, accountability, initiative, drive, etc. to identify employee potential.Often, the traits used are subjective, difficult to define, and may be altogether

unrelated to job performance. Performance evaluations based on traits are

vague and are not the best for making performance-related HR decisions.

Behaviour-based criteria Such perfolmance measules focus on specific

behaviours that lead to success on the job. For example, for a manager an

appropriate behaviour to evaluate might be 'developing others', or for a sales-

person it could be 'customer service orientation'. Behaviour-based information

Figure 7.4: Types of Performance Evaluation Criteria


helps to clearly specify the type of behaviour that is considered desirable orappropriate in an organization. When using behavioural information as criteria

zes emplpyeesthe repetition

outcomes or goals t " #nilffijn:

a couese teacher's job since the outcom"tjil;yt:ilifi:nT;:*"Ti'r:ffiiIn such a case, it is-more appropriate to evaluate an employee's task-relatedbehaviour' The teacher's performance may be evaluated # the basis of criteriasuch as, whether a teacher is regular in taking classes, conducts regular testsfor students, etc. sometimes, however, .",r"r""1 different types of behaviourmay all lead to successful performance in a given job. For instance, differentsalespersons may use different types of behavioursuccessful sales. It may then become difficult or inapparticular task-related behaviour as leading to desired

riate for jobs in which mea_is a tangible output. When

u,"-proffiffiTt::*::tiffi;'results'. To emphasize the importance of outcomes, large tasks are divided

ound projects. Criticality of processesAV Birla group rates perfor-"rr.e o.,

of information occurs when the resmultiplicity of factors and are not withia case, an employee may work very hard, 1problem arises because of emphasizing results at the cost of quality. Employeesmay use unethical means to achieve results. Fo, e"ampie, if a teacher isevaluated on the basis of the total nuthe teacher may not take regular claslenient in grading to ensure that all stucomes may result in low quality and evegoals.

On the other hand, overempha.sizing behaviours may lead to very goodquality products but the product delivery may overshoot deadlines and resultin lost business for the firm. It is, therefore, important to balance both behaviour(quality

-or do.ing it the right way) and results (accomplishing goals and meet-

ing deadlines).


The three evaluation criteria for evaluating employee performance shouldnot be considered mutually exclusive. In fact, most appraisal systems incor-porate all three types of criteria (information) in various degrees. At ICIIndia, performance ratings are decided by individual performance as well as

business performance and gauged against budget compliance, profit maximi-zatton, volume growth, and innovation. Whirlpool's performance excellenceplan assesses performance using shareholder value, customer value, andemployee value to fit the employees on a salary grid. Appraisals of top man-agement at HP take into account the business performance as well.

For each job, therefore, there exist multiple criteria in order to measure

performance completely. As already mentioned, some criteria may be moreimportant than others for successful job performance. For example, Godrej &Boyce is structured around business divisions such as, office equipment, locks,machine tools, etc. Each business division is a team. Performance measures

used for each team (business division) are volume of business growth, netcontribution of the division, and net working capital returns. For supportservices such as finance, HRD, etc. the parameters for achievement includestaying within budgets, company profits, manpower costs, success at meetingdeadlines, and internal customer satisfaction. The company measures the per-formance of its teams on these parameters using three benchmarks-levels 1,

2, and3. Level 3 refers to minimum acceptable performance on the parameter.The other two levels represent stretch targets, with level I signifying extraor-dinary performance that surpasses all expectations. At the beginning of each

year, the quantifiable indices corresponding to each of the three levels are set,

but only level I targets are actually communicated. Unless a division reaches

level3, there is neither a team reward nor an individual one. Thus, achievingthe benchmark of level 1 is more important at Godrej. The top performers ofeach division are determined by the divisional head and they get additionalrewards for their individual performance. Employees also have their annual

bonuses tied to performance. Members of business divisions receive 20010 oftheir consolidated basic salary as bonus if both the company and the divisionmake a profit. If either does not, the bonus drops to 100/0. The support services

earn bonus if the organrzation makes profits.Multiple criteria must be judiciously combined to obtain a single perfor-

mance measure. One must also be careful to evaluate both behaviour and

results.

Performance Standards

Identifying job or evaluation criteria is only the first step in performance man-agement. We still need to know the expected level of performance on each ofthese criteria. To specify teaching and research publications as the evaluation


or job criteria for college teachers is not enough. It is important to specify the'standards' by which performance on these two job criteria will be evaluated.Performance standards define the expected levels of performance, goals, ortargets. The performance standard with respect to the research publicationcriterion for college teachers may be defined as, 'publish two research papersin referred journals in a year'. Thus, performance standards, simply stated,define what constitutes satisfactory job performance. Performance standardsshould be determined before the work is performed and communicated tothe employee. This ensures that employees know what level of performanceis expected from them. At Reckitt and Coleman, all managers have a well-defined job description listing all the key result areas (KRAs) that their jobprofile requires them to achieve. Each KRA is a parameter for productivityreview. Key result areas are broken down into micro-activities and perfor-mance standards are set for each actir.ity. A manager's record on each of theseactivities is measured. Typical KRAs for a manager in the sales departmentinclude, for example, simplifying a customer oriented process, maintainingsales expenditure at 50lo of total sales volurne, etc. However, sales volume isnot considered in isolation when measuring a sales manager's productivity.The aggregate of the achievements under each parameter is presented in aperformance development and review document filed by the manager andhis/her immediate superior. This system helps the organization achievecorporate objectives while enabling individuals to set and meet the KRAsduring the course of the year.

Standards or performance goals should be real stic, specific, and clearlystated in quantifiable, measurable terms. For example, resolving customercomplaints is not a clearly stated performance standard. When stated as'resolving customer complaints in first instance 980/o of the time', it presents aclear picture of the standard that an employee is expected to demonstrate injob performance. For example, at Hinduja Finance, the manager in thecorporate finance department has a target to bring Rs 15 crore worth ofunderwriting assignments a year. However, bringing in the business is notenough, the decision to accept an underwriting offer must be cleared by acommittee since the business carries some risk. Thus, the manager's produc-tivity is actually determined by whether the business he/she has broug'ht in isof acceptable quality.

However, for certain jobs, it is not always possible to specify performancestandards in quantifiable terms. For example, one performance criteriafor teachers may be to evaluate students objectively and without bias. Theperformance standard in this case will be non-numerical and may be stated as

'a teacher will be considered to be unbiased and objective in evaluating astudent when all the guidelines for evaluation have been followed,.


Determining who will conduct performance EvaluationIn-performing the job, an employee has to interact with several other indi-viduals in the organizatiotr. Ther" include peers, subordinates, superiors,customers, and employees from other departments. The nature of int6ractionof an employee with each of these passume that one person can observeperformance. The performance of anwho is familiar with his/her work. Theperformance may include superior,customers, and self (Figure 7.s).Each of these sources provides unique infor-mation about the performance of an employee. Ne.reriheless, each source isfraught with advantagesâ.nd disadvantage, (t"ut" 7.2). Abrief description ofthese appraisal sources follows.

This is the traditional approachThe immediate superior has the

sibility to evaluate the performance

emploveeconcerned.often,however,-J["X''T.T":,r*:T]ffi : j:"rT

to fully observe the performance of the employee they are evaluating.

Figure 7.5: Sources of AppraisaI Information


Self-appraisal Most organizations require employees to evaluate themselveson the performance appraisal form prior to the performance interview. Thisleads to greater involvement of the employee in his/her own performance.The employee is also encouraged to think about his/her strengths and weak-nesses as well as the barriers to effective performance. Self-appraisals are bestused for development purposes rather than evaluative purposes. Used withother sources of appraisal, self-appraisals provide important performancerelated information.

Subordinate appraisal This type of appraisal is also called upward appraisal.It involves performance appraisal of a superior by his/her subordinate. Evalu-ation of a teacher by students is an example of upward appraisal. Certaindimensions of a manager's job, such as planning and organizing, analyticalability, etc. are not usually considered appropriate for subordinate appraisal.Performance dimensions that are considered most appropriate for subordinateappraisals include leadership, oral communication, delegation of authority,etc. Subordinate appraisals serve the purpose of giving feedback to managerson how they are perceived by their subordinates. These are, therefore, appro-priate for developmental purposes rather than for administrative purposes.Pepsi has devised the People Engagement Index through which employeescan evaluate their superiors on 15 parameters every quarter. The firm essen-tially uses upward appraisal to recognize junior and midlevel managers andto give them an opportunity to be a part of the decision-making process. AtFedEx, employees rate their managers through a voluntary survey called the'survey-feedback-action'. The survey has only two parameters, satisfied or notsatisfied. Any manager rated as unsatisfactory by his employees is put onnotice. The management and the HR constantly evaluate these managers overthe next quarter. The managers are expected to improve during this time.However, if they continue to fair poorly on their appraisals over the next fewquarters, they are asked to leave the organization. Upward appraisal at FedEx,therefore, combines developmental and evaluative purposes.

Peer appraisal Peers are individuals who work together and are of equalrank. Peer appraisal is an employee's appraisal done by fellow employees.Information obtained from peer appraisal is different to some extent fromappraisals done by superiors, subordinates, etc. Peers see different dimensionsof performance of their co-workers, such as leadership skills, interpersonalskills, and their strengths and weaknesses. Peer appraisals are better used fordevelopmental rather than for evaluative purposes. This source, however, hasnot been used very frequently because it has the potential of negativelyimpacting the interpersonal relations among co-workers, resulting in rivalries,hostility, and retaliation.


Team appraisal Such an appraisal is an extension of peer appraisal. whilepeers are individuals in the same rank, they may not be working together veryclosely. A team consists of employees who work together in pursuit of a specifictask or project assigned to the team. In a team it is difficult to isolate theindividual contribution of an employee. Team performance is usually linkedwith team incentives or group variable pay.

Customer appraisal Internal and external customer appraisals are used as asource of performance appraisal information. External customer feedback isoften used in the service industry, for example, banking services and restau-rants. However, companies such as Maruti Udyog Ltd and AT&T have alsobegun utilizing feedback from external customers. Managers establishperformance measures related to customer service and specify goals for theemployee. These individual goals are linked with company goals. For example,one performance dimension is to treat customers with courtesy and prompt-ness. A performance standard or goal related to this performance measuremay read, 'attends to the customer within two minutes of his/her arrival'. Aquestionnaire survey is conducted on customers. The survey items reflectvarious performance measures related to customer service. The feedbackobtained from customers becomes part of employee appraisals and is used toenhance employe e effe ctivene s s and organ izational p erformance.

Internal customers are employees within the organization who depend onthe work output of the employee being evaluated. For instance, for the humanresource department of a firm, employees belonging to other departments areits internal customers. These employees depend on the HR department fortheir training and, therefore, evaluate the training services provided by theHR department.

Multisource feedback Many companies combine the above appraisal sourcesto provide multisource feedback or rating. When all sources of appraisal arecombined together it is called 360 degree appraisal. As mentioned earlier,different people see different facets of an employee's performance. Thus, anindividual employee's performance is appraised by his/her superior, peer,subordinate, and customer. It may also include self-appraisals. Hence, a com-prehensive view of an employee's performance is obtained by combininginputs from all those with whom the employee interacts in performing thejob. Multisource feedback is useful for both evaluative and developmerrtalfeedback. However, most firms prefer to use it only for developmentalpurposes. The AV Birla Group, Gillette, and Ballarpur Industries have360 degree feedback for senior level managers. A more detailed discussion of360 degree feedback is discussed in a later section in this chapter.


Table 7.2: Advantages and Disadvantages of AppraisaL sources

AppraisalSoulce


Supervisors Are often in best position toevaluate employees directly underthemCan observe improvements inemployee performance over timeAre in a position to provideimmediate feedback about aspectsof performance

Often do not have time to fullyobserve the performance of employeesVery little opportunity for feedback orinput from the employeeOften do not have appropriateinformation to provide informedfeedbackNot the best source for evaluatingsubordinates on technical dimensionsof work since supervisors may notnecessarily be up to date on thoseaspects

View it as an administrative burdenSeveral biases and errors are inherentAppraisal may have negative impacton supervisor-subordinate relationshipMay manipulate evaluations to justifytheir decisions concerning payincreases and promotions

Peer/Team Useful for developmental purposesProvide more valid and accurateinformation compared to superiorsPeer/team members have a morerealistic picture on fellowemployee's per{ormancePeer pressure is a powerfulmotivator for team membersNot dependent on one individual'svrews

Can be very political and self-servingin organizations where employeescompete with each other formally orinformallyPeers are often reluctant to appraiseeach otherSince peers are in competition, peerappraisals are preferably not used foradministrative decisionsThose receiving low ratings mayretaliate against peersMay lack objectivity when there ispersonal loss or gain at stakeMay lead to lower moraleMay negatively affect teamwork andfuture work relationshipsOften end up as popularity contest

Subordinates r In frequent contact with theirsuperiors and hence in goodposition to evaluate superiors

. Employees avoid appraisal bysubordinates, especially when it is usedas a basis for compensation decisions

Contd


Table 7.2 Contd

AppraisalSource

Disadvantages

r Brings power into more favourablebalance as employees get powerover their superiors

r Provides insight into interpersonaland managerial styles andIeadership potential of employees

. Helps organization addressdevelopmental needs of high-potential employees

. Help in identifying competentmanagers

r Manager becomes moreresponsive to subordinates

r Suffer from political problems as

subordinates may use it for retaliationr Managers may focus on 'being nice'

to subordinates in order to get goodfeedback, especially if it is linked topersonnel decisions such as

promotions. Subordinates fearing reprisals from

managers may not give objectivefeedback

. Managers may get caught in apopularity contest

Customers r Provide feedback that is most freefrom bias

. Feedback is critical for facilitatingemployee development anddetermining rewards

May not know important demandswithin the organizationMay have unrealistically highexpectations and hence give poorevaluation

I

I

Self r Encourages employees to thinkabout their strengths andweaknesses

r Leads employees to set goals forthemselves

r Employees with unique skills maybe the only ones qualified to ratethemselves

r Increases employee's involvementin review process

. May try to present oneself in highlyfavourable light

Choosing Methods of Performance AppraisalWhen designing a performance management system, an important strateg'icdecision relates to the choice of appraisal methods. Performance appraisalmethods have evolved over time and today there are several methods to mea-sure it. They have been variously classified and a brief overview of threeclassification approaches is presented in Table 7.3. For our discussion, we willfollow the trait, behaviour, and results classification of performance appraisalmethods (Figure 7.6). This approach classifies performance appraisal methodson the basis on 'what' is measured, that is, traits, behaviour, or results.

S, No. Classifi cation Approaches

I Ab s olu te me asures evahtate employeesrelative to performance standards ofthe job

Graphic rating scales, forced-choicemethod, critical incident technique,checklists, and BARS

Relatiae measures evaluate employees incomparison to co-workers

Ranking, paired comparison, and forced-distribution method

II Category rating methods evaluate employeesagainst a standard

Graphic rating scales and checklists

Comparatiue methods evahtate employees bycomparing the performance of employeesagainst one another

Ranking and forced-distribution

Narratiae methods assess employees bydescribing their actions or behaviour

Critical incident techniques and essays

B e hauioural me tho ds evaluate employees'behaviour instead of their characteristics

BARS

III Tiait-based methods measure the extentto which an employee possesses certaincharacteristics viewed as important for thejob in particular and the organization ingeneral

Graphic rating scale, forced-choicemethod, essay method, ranking method,and forced-distribution method

Behauiour-based methods describe whichactions or behaviour should (or shouldnot) be exhibited on the job

Critical incident techniques, checklists,and BARS

Results - b as e d me tho ds ev aluateemployees' accomplishments, that is, theresults they achieve through their work

Productivity measures, 1VIB O


Table 7.3: Ctassification Approaches of Performance AppraisaI Methods

Figure 7.6: Methods of Performance Appraisal

. Graphic rating scales

. Forced-choice method

. Essay method

. Ranking methodo Forced-distribution method

o Critical-ineident method. Checklists. Behaviourally anchored

rating scales

. Productivity measur€sr Management by objectives


Trait-Based Methods

These appraisal methods are designed to measure the extent to which anemployee possesses certain characteristics that are important for performingthe job successfully.

Graphic rating scales This is the oldest, simplest, and perhaps the mostwidely used appraisal method. The rating scale allows the rater to representeach trait, characteristic, or judgment about performance on a continuum or ascale. The scale is divided into categories-usually five to seven in number.These points or categories on the scale are defined by adjectives such as out-standing, average, or poor. The rating scale requires the rater to indicate the

degree to which an employee possesses a particular trait, characteristic, ordemonstrates a type of performance, by circling the point on the scale thatbest describes the employee being evaluated. The values assigned by the rateron each trait or characteristics are added to obtain an overall evaluation score

for an employee. The method allows for the use of more than one performancedimension. However, an overall rating may be provided. Two types of factorsare typically included in rating scales:

o Job-related factors such as quantity and quality of work, attendance, etc.o Personal characteristics such as initiative, dependability, etc.

Rating scales differ in the degree to which various performance dimensions(such as quality of work, initiative) are defined for the rater. Some scales maybe anchored simply by 'initiative', while others may provide a definition ofthe term for the rater. Rating scales also differ in the degree to which each

point on the scale is defined. For example, point five in a five-point scale maybe stated only as a number or it may be labelled as 'outstanding', or the termoutstanding may be defined as 'consistently maintains good quality'.

Forced-choice method This is an alternative form of rating method. Forced-choice method requires the appraiser to choose from a set of descriptive state-

ments about an employee. These statements are often given in pairs. Bothstatements of the pair appear equally favourable or equally unfavourable. Therater selects one statement from the pair which is more typical of theemployee. The rater does not know which of the two statements of a pairdescribes successful performance on the job. Only one statement in the pair isrelated to effective job performance.

Essay method It is also called the 'free form' appraisal method. Theappraiser is required to write an essay or a brief narrative that best describes the

performance of the employee being appraised. Sometimes, the essay methoduses prepared questions that must be answered by the rnanager or appraiser.The appraiser is presented with guidelines and the purpose of the essay.

Usually, the appraiser is asked to describe employee strengths and weaknesses.


Managers also provide feedback to the employees and suggest per.fbrmanceimprovement plans.

Ranking method This method requires the manager to rank or list allemployees from highest to lowest on a trait or dimensiJn of performance. Forexample, on thehighest standardsnumber one thatmance. At rank ten will be the empworst relative to the rest of the employees.

two more employees who demonstrate the same quality of performance, theyare assigned a lower grade. several firms such

", GE, sun i4icrosystems, etc.use forcedranking of their employees. At LG, employee performance is evalu-ated based on the performance of the company, ihe hepartment, and theindividual. About 15 to 20010 of employees get i soootobonus, while a minimumof 50/o are given zero bonus. Even though an employee may have met thetargets, he/she will get zero bonus if everyone else-exteeds their targets.

B ehauiour-B as ed M etho dsThese methods obtain descriptions of employee behaviour and place themalong a scale. This helps identify those actions which need to be improved.Critical-incident method Critical incidents are descriptions of job-relatedbehaviours that represent either effective or ineffective performance for eachemployemanagereffectiveobserveseffective (favourable) and ineffective (

the employee when performing the jomental purposes and for developing o

Checklists A checklist is a set of descriptive statements. Each statementdescribes a job-related behaviour. It is prepared on the basis of the criticalincident method. The-behaviour descriptions on a checklist range from thosethat are related with effective job performance to those related with ineffectivejob performance. The rater is required to check those statements that are most


representative of the characteristics or performance of the employee. A varia-tion of checklists are the 'weighted' checklists. These assign weightages to eachstatement on the checklist. The weightage reflects the degree to which a state-ment is related with effective job performance. High weightage signifies thatthe behaviour is very effective for job performance. The weightages of thestatements that are checked by the rater to describe the employee are summedto obtain a numerical score of the employee's job performance. The raterdoes not know the weight assigned to a particular statement. Checklists alsoserve developmental goals of performance appraisal.

Behaviourally anchored rating scales (BARS) These are a combinationof traditional rating scales and the critical incident method. A BARS ratingform consists of a certain number of dimensions relevant to job performance,usually six to ten. These performance dimensions include salesmanshipskills, customer service skills, job knowledge, etc. A BARS is constructed foreach performance dimension. Each BARS is typically a seven or nine pointvertical scale. Each point on the scale is anchored in behavioural terms. Pointone on the scale represents unfavourable job performance and the highestscale point represents favorable job performance. The rater reads the behaviouranchors on each scale and checks on the point that is most descriptive ofthe employee. BARS is very useful for providing developmental feedbackand identifying training needs.

Result-Based Methods

These methods focus on the accomplishments of the employees, that is, theresults they achieve through their work. Measures such as sales figures,production output, etc. are more objective criteria for assessment.

Productivity measures A number of results-related measures are availablethat can be the basis for performance evaluation. For example, sales peopleare evaluated on the basis of volume or value of sales and production workersare evaluated for the number of units produced. The functional objectives ofthe HR manager at Amtrex are, not keeping key positions vacant and im-proving the employee-satisfaction level. At Amtrex, company profits or growthrate frequently become the criteria for measuring the productivity of execu-tives. Productivity measures directly link employee goals and accomplishmentswith the results that are significant for the organization. Several firms likePepsiCo, Escotel, ICI, \Mhirlpool, and HP use measures such as profit maxi-rr'ization, shareholder value, custorner value, business performance, etc.

Management by objectives (MBo) This concept was proposed by peterDrucker in 1954. The managementby objectives approach requires employeesto establish objectives for themselves. It involves developing a cascading setof objectives beginning with the organization, then for departments, individual

performance Management and Development Systems 4Sg

managers, and employees' This is a participative process and objectives aretime-bound and set by employees in .o.rrr,ltution with their superiors. Thegoals are realistic but challenging. Frequent reviews are conducted to assessthe progress towards objectives

"trd to make any modifications in the original

objectives. There is a linkage between the objeitives at each level such that ifeach employee' manager. or,department achieves their objective, the organi-zational objectives too will be met. Several firms such a's pricewaterhouse

Young, etc. use MBO for c_nce management system, y.

;,t",t:::tL il"i$:n l" p.o,,ia"d with reedback uuo,ltheir progress' their motivation is enhanced. Though objectives may be set forsix months

9r f9r ayeat, it does not mean that peiformance feedback shouldbe provided only at the end of this time period. Rather, informal feedbackshouldbe given on a regular basis immediately following a particular behaviour.Immediate knowledge of results enhances motivation-to u high", extent thana formal feedback provided annually.

An .objectives-based performance management system results in higher

commitment and motivation rn the part of employees due to the folloiingIeasons:

o Ernployees participate in setting goals for themselves rather than havingobjectives determined fo them by the organization.

o Employees discuss important organizational goals and clearly perceivehow they contribute to these goals.

Table 7.4 presents the pros and cons of the three performance appraisalmethods discussed here. It is i nportant to know whicir method or combina-tion of methods to use in conducting performance appraisal.

Table 7.4: Pros and Cons of performance Appraisat Methods

Methods Pros Cons

Ilait-Based Methods

Graphic RatingScale

r Simpler Most widely usedr Easy to developr Provides numerical score for

performance. Allows comparison of scores

between individuals

' Each point on the scale may havedifferent meaning for different raters

. May result in subjectivity

. When combining ratings on variouscharacteristics into a total score, highscores on one characteristic maycompensate for low score on another,resulting in an average performancescore

Contd


Table 7.4 Contd

Methods Pros Cons

Forced-choiceMethod

. Helps discriminate between goodand poor performers

. Reduces bias and subjectivity

. Mole objective

. Difficult to construct pairs offavourable or unfavourable items

Essav Method r Provides opportunity tohighlight unique characteristicsof the employee being appraised

. Allows for more flexibility forthe rater

r Most effective when combinedwith other methods

r Time consuming. Quality of performance appraisal is

influenced by the writing skills of themanager

. Tends to be subjective since managermay not focus on relevant aspects ofjob performance

Ranking Method r Simple and uncomplicated r Size of difference between two ranksis not well-defined. Differencebetween ranks one and two may notbe the same as difference betweenranks three and four

. Difficult to use with large groups ofemployees

r Employee's rank is relative to otherswith whom helshe is compared. Anemployee ranked at one in one groupmay be at rank ten in another

r Employees ranked at number one inrespective groups may show widevariation in perforrnance

Forced-distributionMethod

Reduces rater biases and errors Assumption that the bell-shapednormal curve of performance exists :

every group does not always hold indistribution of performance ratingsForces some employees to be placedin lowest group even if they do notbelong there

Behaaiour-BasedMethods

Critical Incidents . Covers the entire appraisalperiod and therefore guardsagainst errors related tobehaviour sampling or focussingon last few weeks ofperformance only

. Difficult for the evaluator to observeand note down all instances offavourable and unfavourableemployee performance

r Managers must be trained observersin order to be objective

Contd


Table 7.4 Contd

Methods Pros Cons

. Focus on specific incidents helpin employee feedback anddevelopment

r Contributes to the developmentof checklists and bars

r Process is time-consuming for theevaluator

Checklists andWeightedChecklists

r Minimizes biases and errorsr Facilitates comparison of

performance betweenemployees

. Helps in identifying trainingneeds of employees

r Require time and effort to developr Checklist items have to be changed as

the nature ofjobs change over timer Raters do not know the weights

assigned to each statement, creating abarrier to effective performancefeedback

BehaviourallyAnchored RatingScales (BARS)

r Describe specific examples ofjob behaviours

. Less biased

. Based on observable behaviourrather than subjectiveperceptions

. Help give specific behaviour-based feedback to employees

. Help in identifyingperformance improvement areas

r Time and effort required to developand maintain BARS

. Different appraisal forms are neededfor different types ofjobs in anorganization

Resulh-BasedMethods

ProductivityMeasures

Directly align individual goalswith organizational goals

Employee results such as productivitymay be influenced by factors beyondthe control of the employeeMay encourage employees to focuson short-term results to get goodappraisals, thus ignoring long-termobjectivesEmployees would focus on thoseperformance aspects which are the

.

focus of appraisals\Atrhen focus is on productivitymeasures, important factors such as

initiative, cooperation, etc. may beignored

Conld


Table 7.4 Contd

Methods Pros Cons

Managementby Objectives(MBo)

r Participative goal-settingenhances employee commitment

. Ongoing feedback andcoaching results in highermotivation

r Employees know how they arecontributing to overallorganizational performance

. Time-consumingr Superior and subordinate may

collude to set easy targetsr Fails in an autocratic systemr May lead to emphasis on short-term

objectives

Communication of AppraisalsA good performance management system is one that allows the employee(appraisee or ratee) to participate and contribute in his/her own performanceevaluation, in partnership with the manager (appraiser or rater). Once theinformation about an employee's performance has been obtained, it is theresponsibility of the manager to communicate the evaluation to the employee.This is done by holding an evaluation or appraisal interview with each subor-dinate. The appraisal interview is the most important part of the appraisalprocess. It serves the following basic purposes:

o discussing the subordinate's performance recorde exploring areas of possible improvement and growtho determining subordinate's feelings and attitudes about the appraisalo assisting the subordinate in setting objectives and personal development

planso providing positive feedback on accomplishments as well as help to over-

come shortcomingso rewarding good performance so that it will be maintained

The manner in which the appraisal interview is conducted depends uponthe specific purpose of the interview. Exhibit 7.2 explains the characteristics ofan effective appraisal interview. Appraisal interviews are typically of threet1pes. These are discussed below.

One-way communication (tell and sell approach) The supervisor is in adominant position and communicates the appraisal as well as the action planfor improvements to the subordinate. The subordinate must accept both theappraisal and the developmental plan. The subordinate can neither disagreewith the supervisor nor express his/her feelings about the appraisal. There-fore, this type of interview results in lowered motivation and high defensive-ness on the part of subordinate. It also threatens the supervisor-subordinate

ln addition to one formal appraisal, supervi-sor should provide ongoing, continuous feed-back to subordinates on an informal basis.Should be structured so that it is viewed byboth the superior and the subordinate as aproblem-solving session.Schedule interview soon alier the end of theappraisal period. Delaying the interview re-sults in heightened anxiety on the part of em-ployees.Conduct two separate interviews-one for dis-cussing employee performance and develop-ment, the other for making evaluative orpersonal decisions.


Focus the d,iscussion of performance problemson the performance deficiency itself, not onthe person.Minimize threats to self-esteem of the personHandle employee mistakes or problems re-lated to job performance on an ongoing ba-sis. Do not defer them for appraisal interviewat a later date.Clearly outline specific plans for improvementof the employee's future performance in dis-cussion with the employee.Allow employees an opportunity to presenttheir ideas and feelings during the interview.

I

I

Charocteristics of an Effective Appraisol Interview

relationship. These outcomes are more likely to emerge when both develop-mental and evaluative purposes are being served by the same appraisal andthe ongoing supervisor-subordinate relationship is not very good.

Tlvo-way communication (tell and listen approach) The supervisorcommunicates appraisals and developmental plans to the employee. Subse-quently, the subordinate has the opportunity to express his/her feelings aboutthe information provided. The subordinate may also express disagreementwith the appraisal. The supervisor lends a sympathetic ear to the subordinate.However, expression of feelings by the subordinate does not result in changein the appraisal and developmental action plan of the subordinates. This typeof post-appraisal interview results in lowered defensiveness since the subordi-nate gets a chance to disclose true feelings about appraisal feedback. Thoughit maintains supervisor-subordinate relationship it does not lead to perfor-mance improvement. At Reckitt and Coleman, appraisals are conducted oncea year. Appraisals include both self-appraisal by the employee and appraisalby a superior. The average ratings of both appraisals yield a measure of theproductivity over the year. In case there is a discrepancy between self-ratingsand that of the supervisor, the employee and the supervisor meet. However,in case of a deadlock, the superior's opinion prevails.

Mutual problem-solving This approach also involves two-way communi-cation, but it is more effective than the former type of interview discussedearlier. Subordinate performance is defined as a mutual problem. The


subordinate plays an active role in appraising his/her own performance as

well as in developing action plans for performance improvement. The super-visor assumes the role of a helper and encourages the subordinate in reachinga realistic evaluation of self-performance by asking exploratory questions. Thismethod reduces defensiveness and improves subordinate motivation as wellas the supervisor-subordinate relationship. At ICICI, for example, based onthe performance appraisal, the immediate supervisor discusses the careeroptions with the appraisee. For different purposes, different types of inter-views are considered effective. Choice of interviews will also depend on thematurity of the employees and skills of the supervisor.

PROBLEMS IN PERFORMANCE MANAGEMENT

It is important that the employee's experience of the perforrnance managementprocess is positive. However, in practice, it often turns out to be negative.Majority of employees are usually dissatisfied with their evaluations. Themanner in which evaluations are communicated to employees is an importantdeterminant of how subordinates experience the performance managementprocess. Problems in performance management arise due to three sets offactors (Figure 7.7). These are discussed in detail in this section.

Ambivalence The appraisal process is an emotional experience for both themanager and the subordinate. The manager (superior) is responsible for theperformance of his/her subordinates. Helshe must ensure that employeeperformance contributes to the achievement of organizational goals andtargets. Therefore, it is part of a manager's job to appraise subordinate perfor-mance, provide feedback, make decisions about pay increase and promotionbased on performance appraisal, and facilitate empioyee performanceimprovement. When employee performance has been satisfactory and rewardsare in abundance the superior has no difficulty in appraising the subordinate.Problems arise when subordinate performance has been less than satisfactory.No individual likes to be the harbinger of bad news) especially when it is

ambivalence towards performance evaluationon the part of appraiser and appraisee

problems in design and implementation ofperformance management system

rater biases and errors

Figure 7.7: Factors Leading to Problems in Performance Management Systems


likely to significantly impact 'he career growth of the individual. The manager(appraiser) feels uncomfortable whe.r communicating negative feedback.Moreover, managers may find it diffisituation that may arise when negativvisor-subordinate relationship can beback. Since the superiors must workmay be reluctant to engage in performance evaluation and discussion. Thesupervisor's ambivalence is thus a resuthe two roles of ajudge and a coach. peto assume both the roles simultaneomake evaluative decisions about the suthey_ encourage subordinates to discuss their performance problems. Thisresults in ambivalence because it is difficult for tle two roles to co-exist simul-taneously.

The subordinates too are ambivalent about performance appraisals. onone hand, all employees would like to get an objective feedback about theirperformance so that they can improve their p"rfor''un.e. on the other hand,when performance feedback is negative,

"-ploy"". find it difficult to accept iisince it leads to a sense of failure an I lowering of self-esteem. Moreo.rer, ifperformance appraisal is tied to valued organizational rewards such aspromotions, pay increases, and incentives, subordinates would not like theirappraisals to be negative and hence would like to avoid appraisals. Undersuch circumstances, negative feedback results in defensiv"rr"r, o1 the part ofsubordinates and this may get manifested in several ways. These include, forexample, blaming others for their own poor performance, casting doubt onthe source of performance data, and ,ralidity of the performance appraisarmethod.

If both the superior and the subordmance evaluation and performance feein the process. Therefore, superiors mby routinely filling the evaluation forperformance with the employee. As long as the subordinate perceives theappraisal process as not affecting his/her career or rewards in any significantway, helshe is quite agreeable to go aperformance appraisal in a routine andinterviews in such cases get reduced tofor which they were conducted.

system design and implementation problems often, problems inconducting performance appraisal can be tiaced to poorly ,p".ifi"d perfor-mance criteria, use of inappropriate performance appraisal ippioaches, poorlyconstructed performance appraisal methods, oi iuck of iop management


support to the Process. For instance, a per-formance evaluation system mayfocus only on personality traits. This may result in dissatisfaction because whenthis performance appraisal data is used, actual job performance gets ignored.Some supervisors and even subordinates may resent the time it takes to carryout formal appraisals. It is thus important to institutionalize the performanceappraisal Process as an ongoing system. The formal appraisal is then less likelyto be viewed as a cumbersome process.

Rater biases and errors Even the most well-designed system can fail if thepeople using the system are not well trained in its use. They may deliberatelydistort appraisals or hold negative attitudes about the performance appraisalprocess. This may render performance appraisals as highly subjective. A briefdescription of performance appraisal problems that may arise due to raterbiases and errors is presented in Table 7.5. One of the major sources of ratererrors is the mistakes made by the appraiser. It is not possible to completelyeliminate rater errors, but training raters to make them aware of these errors ishelpful. Rater biases occur when the values and prejudices that the appraiserholds distort the ratings. Biases may be either unconscious or intentional. Forinstance, an appraiser may deliberately give high scores to an employeebelonging to his/her own domicile state or region.

Table 7.5: Rater Errors and Biases

Rater Errors Brief Description

Varying Standards Managers appraise different employees by using different standards andexpectations. This often results when performance criteria are ambiguousand standards are not clearly specified.

Recencv Effect Manager gives higher weightagegood or bad, when appraising an

to most recent instances of performance,individual's performance.

Primacv Effect Information about individual performance obtained first gets the highestweightage in appraisal. This is the opposite of recency effect.

Central Tendencv/Error

When the appraiser avoids using high or low ratings and rates allemployees as falling in a narrow range, that is, everyone is average.the poor performers receive an average rating.

Even

Leniencv Error Appraiser rates all employees at the higher end of the scale as goodperformers. Low performers also receive high ratings even though theydo not deserve that.

Strictness Error All employees are assigned low ratings. The rater is unduly critical ofemployee performance.

Personal Bias Error A manager may have a personal bias against a particular caste, nationality,or region and assign low ratings to an employee belonging to that group.

Contd

Halo Effect A manager rates an employee high on all performance criteria because ofhigh performance on a single criterion. For example, an employee who isvery punctual may be rated higher in team participation as well.

Contrast Error Employees are rated relative to others rather than to an objective standard.If other employees are average, a slightly better employee (as comparedto the employee just evaluated) may be rated as excellent because of thecontrast effect.

Similar to ordifferent to me

Managers compare the employees against their own characteristics. Thoseemployees who are seen as similar to themselves by managers are ratedhigher.

Sampling Error The rater sometimes observes only a small sample of an employee's work.If 95Vo of the work of the employee has been very good, but the boss sawonly the 50/o that was unsatisfactory, the supervisor is likely to rate theemployee as a poor performer.


Thble 7.5 Contd

EFFECTIYE PERFORMANCE MANAGEMENT SYSTEMS

The problems inherent in a performance management system can be dealtwith if the system is designed to possess certain characteristics. The character-istics that help reduce subjectivity in implementation of performance man-agement system and rnake it more effective are explained in this section.

Separate evaluation and development appraisals Problems are likely toemerge w{ren the same performance appraisal is used for making evaluativedecisions {s well as for identifying development needs. Problems of defen-siveness and avoidance can be minimized by having two separate formalperformance appraisals in a year-one that focusses on evaluation and theother that focusses on development. Decisions about pay increase, rewards,and promotions should be scheduled at a different time of the year ratherthan in the meeting that engages the subordinate in a dialogue for identifyingperformance problems and developing plans for performance improvement.The performance appraisal should not require the manager to be simulta-neously a judge as well as a helper.

Use job-related performance criteria To ensure that the criteria used inappraising performance is job related, it should be determined through jobanalysis. Even subjective criteria such as loyalty, initiative, etc. should be usedonly when they can be clearly shown to be related to the job.


Specifying performance standards It is important to specify performancestandards for each criteria of performance. These performance standards orexpectations must be mutually agreed upon by managers and subordinatesbefore the beginning of the appraisal period. If subordinates do not knowwhat they are supposed to accomplish on the job, they are not likely to getthere.

Use appropriate performance data Appraisals that use behavioural dataresult in greater acceptance on the part of the subordinate of his/herperformance evaluation. For instance, rating a person low on 'customerorientation' is likely to send the subordinate on the defensive. However,presenting the subordinate with specific instances of behaviour that suggest a

lack of customer orientation is likely to be accepted more readily by him/her.This feedback also helps the subordinates in improving their performance.Performance appraisal methods such as BARS and critical incidents methodsuse behaviour-based performance measures.

Improving superrrisor-subordinate relationship The outcomes and qualityof appraisal process depends on the ongoing supervisor-subordinaterelationship. If the relationship is good the supervisor will provide feedback

and coaching to the subordinates on an informal ongoing basis. The formalappraisal interview in this situation will only be a review of issues alreadydiscussed. There will be no surprises in store for the subordinate. Moreover,the subordinate will not be defensive and will be more open to discussing

performance problems.

Provide ongoing feedback All employees like to know how well they are

performing their jobs. Principles of learning suggest that immediate feedback

is more effective than delayed feedback. When delayed, the subordinate maynot be able to associate the feedback with a specific behaviour. Hence, regularperformance discussions conducted on an informal basis provide thesubordinate with an opportunity to improve performance before the scheduled

formal appraisal. Ongoing feedback is inherent to the MBO approach.

Upward appraisals One factor that contributes to subordinate defensiveness

in performance appraisal is that the supervisor has authority and controlsrewards such as promotions. This results in submissiveness on the part of the

subordinate in order to gain rewards. Moreover, subordinates are reluctant todiscuss performance problems with superiors who have the power to decide

their career. In order to manage this unequal power distribution between the

managers and their subordinates, the latter may be asked to appraise theirsupervisor. This brings power into a more favourable balance and results inhigher participation of the subordinate in the appraisal process.

Performance Management and Development Systerns 469

Separation of evaluative and development appraisals

Use of job-related performance criteria

Specifying performance standards for each criteria

Using appropriate pedormance data

lmproving superior-subordinate relationship

Providing on-going feedback

Upward appraisals

Using multiple raters

Training raters

Appeal process

Top management support and fit with organizational culture

Figure 7.8: Characteristics of Effective Performance Management Systems

Use multiple raters To manage rater errors and biases in the appraisal process,multiple raters should be used. Use of multiple raters involves ont"i"i"g ratingson the same individual from more than one rater, such as peers, customers,superiors, and self. When multiple raters are used to evaluate an individual'sperformance, it is called the 360 degree appraisal or multi-source feedback.This concept will be discussed in detail later in the chapter.

Thain aPPraisers By extending training to raters, it is possible to minimizeerrors such as halo, leniency, strictness, etc. if not eliminate them entirely. APoor aPPraisal is worse than no appraisal since it can demoralize employees,leading to reduced productivity. Training should focus on ur"", ,rr.h as howto conduct appraisal interviews, how to rate, purposes of performance appraisal,' ethics of performance appraisal, etc.

Appeal Process Each organization should ensure that subordinates get anopportunity to appeal against appraisal results if they see them as inaccurateor unfair.

A performance appraisal, no matter how well-designed, will be unsuccessfulif it does not fit with the prevailing culture of the organization, lacks supportfrom top management, or if the employees do not hold positive attitudes iboutthe process and its effectiveness.

DEVELOPMENTS IN PERFORMANCE MANAGEMENTWhen discussing the performance management process, it is the individualemployee's performance that is generally referred to. This reflects the historicalbelief that employees are the building blocks of an organization and henceare the basic unit of analysis in performance management systems. Moreover,


the supervisor is viewed as the only individual having the mandate toappraise subordinates and make personnel decisions about them. Organiza-tions have traditionally used target-oriented performance appraisals and linkedincentives to the degree to which targets have been accomplished by the individual employee. As discussed earlier, the traditional conceptions of perfor-mance management have several limitations. However, the performancemanagement process has evolved over the years. Contemporary organizations

are experimenting with a variety of approaches. These include, for instance'

team-based appraisals, assessment centres, 360 degree appraisals, and com-

petency-based appraisals (Figure 7.9). These are discussed in the followingsection.

Team or Work Group Appraisals

Though literature on performance appraisal has focussed largely on appraisal

of an individual employee's performance, there has been an emergence ofinterest for evaluating grouP or team performance. It was in the early 1990s

that there was a movement toward team-based structures. A large number oforganizations began to restructure themselves around teams. A team consists

of individuals who work collaboratively and take the responsibility for the

performance of the team rather than just their own individual performance. Aleam is more than the sum of the individual members. Members of the team

are assigned a specific role depending on their skills for the benefit of the

team perfofmance. The primary focus is on the team and not the individual.A team is different from other groups in an organization because of the

following distinctive characteristics.

o Teams have a common purPose.o They have agreed norms and values that regulate behaviour.o Team members have interdependent functions'o Each member has a team identity (specific role).o Members possess complementary skills.

Figure 7.9: Developments in Performance Management Systems


o Teams have shared leadership roles.o Teams have mutual accountability.

There are different types of teams.

tional are antheir func onhas both ctEmployees in TCS also work in project teams, when one projectfinishes, the team working on thatproject disbands, and each indivijualthen gets attached to a new project as per the organizational and indi-vidual needs. Some teams in certain departments zuch as prod.uction arepermanent teams. Permanent teams are ongoing and do not disband.

2. Teams may also differ on the basis of types of skills required ofmembers. Some teams require each member to learn all relevant skills.This results in interchangeability of skills. production teams work on theinterchangeability principle. This suggests that each member of theproduction team will be able to take on the role of some other teammember should the latter quit. some teams, however, have members whobring their specialist skills for the benefit of the team. These are cross-functional teams, for example, surgical teams, new product develop-ment teams, etc. otis Elevators has self-managed cross-functionalm€rnagement teams at senior levels. The teams deal with matters relatingto people, customers, and the organization.

3. Teams may also be intact or virtual. An intact team attends to the corework in an organization and is also called a work team. A work team isa well-developed social system, where task interaction between mem-

geo graphically or or ganizaplex tasks. Network teamsis not constrained by timeprimarily through telecommunications and IT, rather than face-to-face.contingent workers, customers, consultants, and employees becomepart of the network teams.


The same otganization may have a diversity of team forms. This trend hasaccelerated with the shift from a manufacturing to a knowledge-based economy.The ernergence of team-based structures has raised new questions aboutthe efficacy of traditional appraisal systems. Questions relate to, for example,whether individuals or teams should be appraised in a team-structured orga-nization. Should appraisals focus on measuring specified outcomes, onbehaviours to achieve outcomes, or on acquiring competencies and skills?From whom should the data about team performance be obtained-fromteam members, customers, or from other teams? How should organizationsevaluate team performance?

Several firms have begun to use team appraisal systems. Hindustan LeverLtd has a team-based assessment and compensation system. Amtrex linksindividual assessments to the company's team appraisal system. Moreover,each functional team assesses the other teams as a customer (for instance, themanufacturing department is the materials department's customer). Only oneteam is ranked as the top performer. Then the departmental head rates themanagers within his/her team individually. Hence, an employee's finalassessment and reward is on the basis of his/her individual appraisal, teamrating, and individual rating within the team.

Since different forms or types of teams possess different characteristics, eachpresents a different challenge to the performance management system. It isimportant to ensure that the performance appraisal characteristics built intothe performance management system are appropriate to the specific type ofteam, such as work team, project team, or network team. Employee perfor-mance appraisal has become more challengng today than in the past due tothe pervasive use of teams in today's organizations. Extrapolating the indi-vidual performance management process to evaluate team performance maynot be the right approach. Many performance appraisal systems do not leadto anticipated benefits when applied to team-structured organizations. Thereis no single performance-appraisal system that is applicable across all types oforganizations or work units. Ageneric system, when applied across the entireorganization, ignores important differences between teams.

Designing effective performance appraisal systems for teams requirescareful consideration of differences in team characteristics such as team mem-bership configuration, team task complexity, and the nature of the interde-pendencies among the team and external groups. A brief description of thesedimensions is presented in Exhibit 7.3.

As the complexity of interdependence increases, it is important for teamsto manage extensive interactions with others inside the organization. It isimportant to ensure that performance measurement systems focussed on teamperformance do not result in teams trying to optimize their own performanceat the expense of other teams. Team-focussed outcome measures serve

Performance Management and Development Systems 47J

Dimensions of Team Charocteristics

MembershipConfiguration

r Expected tenure of a team, stabirity of its membership, and ailocation ofwork-time of team members.

. Varies from static to dynamic.

. static teams have full-time team members, constant membership throughoutthe existence of a team, and common level of involvement of membersthroughout the life of the team. Dynamicteams have shorter tenure and floatingmembership since members come and go depending on the task demands.Members of dynamic teams arso work on other teams siinu rtan".r,,sry. Membersof a college governing body are an example of a dynamic team.

Task Complexity . Refers to the fact that organizational teams engage in a wide u"ri"tylf *orkthat varies from the routine to the non_routine.

t Routine tasks are those that are well defined, the required time needed tofinish one complete unit of work (cycle time) is speciiied in

"Ju"n.", .y.t"time is of short duration, there are weil-defined quantifiable criteria, andoutcomes are easily assessed soon after task compretion against these criteria.Non-Routine tasks are not well-defined. The outcome"and the means toaccomplish these are notdefined in advance: lt requires application of multipleskill sets acquired through training or education; cycle'time is longer anddifficult to derermine.

Externallnterdependencies

lnterdependencies exist when a team is dependent ori contributions andnon-members to complete tasks and goals.May range from high to low. High interdependence exists when teams aredependent on several outsiders for information and support. Low interdepen-dence implies that teams are dependent on only a few outsiders.

Source: Scott and Einstein 2001

important purposes when team-development is a major objective. However,when team interdependencies become high, there is" a neJd to balance out_come measures.

Based on membershipconfiguration and task complexity dimensions, threetypes of teams can be identified-work teams, project teams, and networkteams (s-de Table 7.6). Though the three types of teams do not cover the entirerang: of teams possible in organizations,lhey do indicate the importance ofmatching performance appraisal with team characteristics.


Table 7.6: Fjt between Team Characteristics and Performance Appraisal Characteristics

Work or ServiceTeams

Low on bothmembershipconfiguration andtask complexity

. Engage in routine manufacturingor service tasks,

r Been in existence for a long timeand membership stability is high

r Members have similar skill sets

r Cross-training of members. Team tasks are standardized, there

is short cycle time and multipletask cycles in each performanceappraisal period

r Team output is easily andobjectively evaluated

. Feedback on performanceprovided by task itself

. Well-developed social systemand interpersonal trust

r Needs, preferences, and goals ofall members are similar

r Engages in team-building andtraining as an intact unit

Both individual and teamappraisals are recommendedPeer ratings useful as supplementto manager's evaluationsFeedback from peer ratings usedonly for development purposesFeedback provides for a dialogueamong members on how toimprove team functioningOutcome-based performanceappraisal for the team but not forindividual members of the teamTeams held accountable formonitoring their own performanceagainst standard goals, team goals,and for resultsFeedback to individual teammembers on their own taskaccomplishment to help themregulate their own performanceIndividual performanceinformation used for identi!'ingtraining and development needs,planned development exercisesfor each member360 degree feedback sometimesused for team as a unit (not forindividual members)

Project Teams

Medium on bothmembershipconfig-uration andtask complexity

Engage in work that is less routinethan that of work or service teamsAssemble for a specific project anddisband after project completionNot permanent or intact like workteams

r Limited usefulness of outcome-based assessment becauseproject cycle and appraisal cycleare different. Team is dissolvedby the time outcomes arereached

Contd


Table 7.6 Contd

Type ofTeam andDimensions of TeamCharacteristics

Tbam Characteristics Per{ormance AppraisalCharacteristics

Difficulty and pace of team tasksvaries across the life ofthe projectFocus more on tasks than on teammembersHigh goal interdependenceamong members for achievingproject goalsTiaining of members does nottake place as an intact unitMembers apply and integrateindividual training with teamexPerlence

IJse measures related to variousstages of a project so that teamscan self-correct before things gotoo far off-course. These measuresinclude continuous tracking oftime, cost, and return oninvestment (ROI)Multisource performanceappraisal most appropriate herebecause members of projectteams are working simultaneouslyin more than one team and/orprojects. Therefore, no singlemanager, set of peers, or teamleaders have observed employeebehaviour across all work sifuationsFeedback from peers and projectleaders used by functionalrnanagers to identifydevelopmental needs andschedule trainingtaining focusses on developmentof behaviours and competenciesthat are transferable from oneteam assignment to anotherMembers rated on the employee'sindividual performance andhis/her contribution to team role

Network Teams

High on bothmembershipconfiguration andtask complexity

. Work is extremely non-routiner Team engages in one task cycle

that is not repeated again. Membership is dynamic and

shilting in response to changingtask needs

r Timing and intensity of members'participation, nature ofinteraction, and level ofexchangeamong members is not fixed.It depends on task needs

. Per{ormance cycle is differentfrom annual performanceappraisal systems

r Performance of the team as awhole is not assessed in anyformal way

r Emphasis of performance for teammembers shifts from what theydid in the past to what they arewilling and capable of doing infuture

Contd


Tabk 7.6 Contd

Tlpe of Team andDimensions of TeamCharacteristics

Team Characteristics Performance AppraisalCharacteristics

Primary competency is the abilityto rapidly select and assemblethe most appropriate memberconfiguration for the task athand

Appraisal focusses on developingindividual capacity to initiate,participate, and lead improvementplans, rather than on assessmentof past outcomesCompetency-based appraisalsystems are most appropriate forassessing potential of networkteam membersCompetencies appraised andused for evaluation as well as

development purposesBehaviour-based appraisals canbe used to assess employeeparticipation in learning activitiesduring performance cycles (self-

paced programme or in-housetraining). involvement incollaborative communication,and teamwork behaviour whenparticipating in network teamsMulti rater behaviouralassessment since members workin multiple performance setlingsduring any given performancecycle

Source Scott and Einstein 2001

As teams move from the stable and routine end of the continuurn to thedynamic, emergent, and interdependent end, performance appraisal systemsmust also move from outcome-based (work teams) to competency-based (net-

work teams). Performance management systems are more effective if designedwith careful attention to the characteristics of the team as well as the charac-teristics of performance appraisal (type, source, and purpose). Such anapproach towards performance management results in employee behaviourthat leads to organizational goal attainment. This by far suggests a strategicapproach to performance appraisal design. It also ensures that team structureswill lead to greater organizational effectiveness. Some firms following thisapproach are Xerox, HP, etc.


ance suggests that performance ratios

il:t'JT:11':Puts orthe work unit) can

number of clients served, etc. Inputs [t1[ li,ffi 'capital,-energy, etc) the work uniCconsumes to produce a product or service]To establish these performance ratios or performanc" ,,,"urrrr", for a workunit, it is important to begin with the mission or goals of the work unit. subse_quently, the main customers of the unit are deterlined along with identifyingthe products and services produced by this work group 1."tp'"t.1 that are r|osivalued by these customers. performince measures of thesl outputs becomepart of performance criteria (indicators) of the work group. An exhaustive listof performance measures is created for each *ork gr"or.p.'For the HR depart_ment, for-example,_the performance measures may-include the ratio ofnumber of individuals trained to total training costs, grievances settled satis-factorily, or the total number of grievar."r. Fo, the Larketing department,the performance measure may inirude ratio of market share to total promo-tional expenditures.

Yh:" specifying output performance measures of the work group, ananalysis of the transformation process of the work group (those that transform -

inputs into outputs) is also undertaken. This helps" determine what the workgroup should be doing and what it is actually d9ing. The use of input-outputstatistical ratios as measures of work-groop (t""ir) performance resurt ingeltail advantages over the traditional performance appraisal focussed onindividual employee performance. These are as follows.

^

o Issues related to rater biases and errors (for exampre, leniency, halo, etc.)are rendered irrelevant. Even deliberate distoition is unlikely sirr."

"rr"lrrlation is based on objective data.o Focus on work "ft ng1{ormance helps avoid judgmental problems arising

out of the necessity of identifzing degrees of plrfJ.-arr."Lt the individuallevel for making performance iompariso.r, u-o.rg employees.o Since evaluation is at the work unit level, indivftual'def'ensiveness isgreatly reduced. This is because no single individual is singled out forpoor performance.

o Feedback focusses on task-related information. The quality of feedbackisindependent of supervisory interpersgnal skills.

o wglk qroup appraisals can be conducted with higher frequency thanindividual appraisals.

o Members are rewarded or punished collectively basecl on unit perfor-mance. This encourages work group members io think of achievementof the unit's missiol "ld objectives instead of focussing on tasks thatresult in individual level rewards.


o Since work group goals are set in consultation with the group members,it results in high levels of intrinsic satisfaction among members.

o Work group evaluation enhances group cohesion.

However, use of work group or team performance indicators may raisecertain concerns. For one, these pointers tend to ignore individual perfor-mance. High performers of a work group may get demotivated because theirefforts go unrewarded in an average performing work unit. Thus, vrork unitperformance measurement fails to reward individuals in proportion to theircontribution. This raises the question-is it the individual or the team/workgroup which is the elementary unit of an organization? An organization hiresindiaiduak, not work groups or teams. Yet, the success of the firm depends onthe performance of teams. Individuals see themselves as contributors distinctfrom the work unit. A high performing employee cannot single-handedly steerthe organization or department to its goals. Therefore, it is important thatinstead of the employee, the organization must make the work-group centralto its rewards system. Under this system, high performers need to focus notonly on their own accomplishments but also on helping others perform well.

Secondly, problems regarding dissatisfaction with appraisal of individualperformance emerge at the group level too. Certain teams may complain aboutthe differences in the difficulty levels of targets between work groups.

Some unintended consequences occur when work group level performancemeasures are used. For example, if the performance measure for employeesin a five-star hotel is the ratio of rupee amount of food served/number ofemployees per shift, then employees may find ways to encourage customersto order more dishes and more expensive dishes.

Adopting an individual performance appraisal or a work-group appraisal is

notmutually exclusive. An organization should develop a system that combinesthe individual and the group appraisal, since both serve useful purposes. Sys-

tems having both individual rewards and group rewards linked to performanceoften create confusion and conflict. Hence, it is important for firms to care-fully manage the situation and also ensure the compatibility cf work-groupappraisals with organizational culture and employee expectations. A gradualand complete transition to work-group appraisals facilitates team-building.

Assessment Centres

The discussion on the purposes of the performance management systempresented earlier in the chapter emphasized that performance appraisal serveboth evaluative and developmental purposes. Thus, performance appraisalsystems evaluate not only an employee's past performance but also his/herpotential for career advancement. Some organizations have developed anindependent approach designed for exclusively assessing employee potential.

Performance Management and Development Systems 47g

This approach is called the 'assessment centre' approach. Some firms useassessment centres for selection purposes too.

The term 'assessment centre'refers to an approach and does not refer to aphysical place. Assessment centres require the pirticipants to complete a rangeof tests and exercises which simulate the activiiies they might encounter in thetarget job. Each assessment centre consists of approximately six to twelveparticipants. Participants engage in a combination of group and individualexercises over a period of two or three days spent away from the job. Theseexercises may include case discussions, in-basket exercises, group discussions,psychological tests, management games, role-play, etc.

Assessment centres are simulations because the exercises used representsituations that require the use of managerial skills and behaviours that theparticipants will actually need for performing the job assigned to them. Thefundamental idea trehind the assessment centre approach is that the best wayto predict future jobperformance is to get the individual to actually perfo.mthe set of tasks which sample and resemble those required in the iot.Â teamof trained assessors observe,the employees as they participate and engage invarious situational tests and activities. Assessors evaluate employee p"itor_mance. They are usually experienced line managers from the orgaizationwho have volunteered to be observers and have been specially tiained forobservation and evaluation of employees. They are ,rsualiy at a higher levelin the organization than the candidates being assessed. Assessors can also beindependent consultants or outsiders who have been trained to conductassessments. Each assessor compiles judgments from all the exercises to forma summary evaluation report for each candidate or participant of the assess-ment centre. All the assessors pool their evaluations and assign a rating toeach participant. Assessment centres provide information about a variety ofjob-related skills, such as_planning, as well as, more generalized skills in deaiirrgwith others (for example, oral communication), in addition to informationabout values and preferences of examinees. Assessment centres evaluate indi-viduals along a number of dimensions, such as personal style, ability to handlestress, decision-making, flexibility, leadership potential, etc. These dimensionsrefer to those behaviours that are specific, observable, and are drawn fromjob analysis information. Hence dimensions assessed in an assessment centrewill depend on the targetjob. However, certain dimensions, such as commu-nication and leadership, are common across jobs. Assessment centreprogrammes vary in purpose and use. Assessment centres serve the purposes of

o determining management potential of employees;o assessing promotability of employees; ando identifying training and development needs for improving employee job

performance.


Assessment centres help an organization arrive at an informed decision onthe strengths and weaknesses of its employees in relation to specific jobs fordetermining employee suitability as well as for employees' carecr develop-ment. Assessment centres have been found to be a more effective way ofpredicting performance than the traditional performance appraisal interviews.Exhibit 7.4 shows the historical perspective of the assessment centre approach.There is no such thing as a'standard' assessment centre. Assessment centresvary aqross organizations with respect to the length of the assessment process(which may vary from one day to one week), the ratio of assessors tt thosebeing assessed, the number, and the type of assessment instruments andexercises that are used for assessing participants. One of the exercises com-monly used in assessment centres is the leaderless group discussionwhich is usedto evaluate an individual's emergent leadership and social skills. In thisactivity, participants first consider an issue individually and make specificrecommendations. Subsequently, they assemble together in a group to dis-cuss the issue or assigned topic. No one is designated as the leader of thegroup. However, a leader usually emerges in the course of the group interac-tion. The participants are given no instructions on how to approach the topicor what decision to reach. TWo or more assessors observe the group as mem-bers attempt to reach a consensus. Participants are evaluated on leadershipskills, initiative, communication, and ability to work in a group.

Several organizations such as AT&T, IBM, Ford, Crompton Greaves, Eicher,HLL, Xerox, and P&G use assessment centres for various purposes. Theassessment centre scores are taken into consideration during promotions byGAIL and the organization has mapped the potential of several senior officersthrough the process. Though more effective than traditional performanceappraisals, well-designed assessment centres are very expensive. For small

History of Assessment Centres

Assessment centres were first used by the Cermanmilitary forces in World War ll. ln the US, theOffice of Strategic Services (OSS) of the Centrallntelligence Agency began to use the assessmentcentre approach in the mid 1940s. The CIA usedassessment centres to select spies for World Warll. The first industrial application of assessmentcentres can be traced to 1956, when psychologistDouglas Bray implemented assessment centresas part of a research study involving AT&T. The

study was longitudinal and demonstrated thatassessments done early in a manager's careerwere a valid predictor of performance eventwenty years later. ln the UK, assessment centrescan be traced ro 1942 when they were f irst usedby war office selection boards. Several firms todayuse assessment centres for identifying highpotential employees who can be groomed forfuture leadership responsibi I ities.

Performance Management and Development Systems 4g1

organizations the cost of developing an assessment centre may be prohibitive.Developing an assessment centre that serves the purpose of s",rerul organiza-tions provides a potential solution.

The assessment centre data helps the organization to plan, acquire, anddevelop the competencies that it will need in the future. with orgurrizationsgoing multinational, it has become important that assessment centres reflectthe global work culture practices. Hence, it is not appropriate to have a universalleadership competency model or to design assessment centres around thosebehaviours and competencies that are representative of the culture where theorganization has its headquarters.

In recent times, some distinction is being suggested between assessmentcentres and development centres. Assessment centres are seen as formal pro-cesses where the individuals being as ressed have the feedback in the coniext

centres stress the developmentalhas been a rise in the use of ,pure'

,",1,'" Tl"":l',i: ;*:T:T: ?i,i.'1i1"'o to prevent the demoralizing effect on those individuals who were pro-

nounced unsuccessful based on assessments in the centre that had anelement of selection decision-making

o the importance of continuously investing in employee developrnent toequip them to respond to an uncertain envirorrrr"rri

o growth of the idea of 'behavioural competencies, in the practice ofHRM-development centres provide for an effective means of assessingemployee competencies because they use simulations

The main points of difference between assessment centres and developmentcentres are g-iven in Table 7.7. since assessment centres and developmentcentres focus on the assessment of employees, it is good to think about Lssess-ment centres as being applied to both selection and development.

Lately, assessment centres have become competency-based. \Arhen assess-ments are competency-based, the information available on individuals can beaggregated. This aggregated information provides data on the overall level ofcompetencies or capabilities available in the organization. This data can becompared with the future competency requirements of the firms relative tothe business needs of the organization

o to make managerial selection and decisions;o to assess how individuals function in a group; ando to provide feedback to employees on specific behavioural dimensions

such as communication skills, interpersonal skills, etc.Software companies with an emphasis on speed and quality use compe-

tency assessment centres. Assessment centres are most effectively used io,

Development Centres

. Used purely for selection purposesr Have a pass/fail cril.eriar Focussed on immediate need of the

organizationr Have fewer assessors than participantsr Involve line managers as assessorsr Focus on candidate's performance here

and now. Focus on meeting organizational needs. Assessors take on role ofjudge. No departmental feedback or follow up

with participants. Used with external candidates

. Primary purpose is developmentr Do not have a pass/fail criteriar Focussed on longtermneeds ofthe

organizationr 1:1 ratio of assessor to participantsr Do not involve line managers as assessors. Focus on candidate's potential. Focus on meeting both individual and

organizational needsr Assessors take on role of facilitatorsr Provide developmental feedback and follow

up to participants. Used with internal candidates


Table 7.7: Differences between Assessment Centres and Devetopment Centres

Sour ce http: / /www.psychometrics. co.uk /adc.htm, accessed on 2 1 April 200 6

succession planning and filling up functional head positions. Companies suchas Infosys, Wipro, Cognizant, and Satyam have assessment centres. CognizantTechnologies has been using the assessment centre approach since 1998 forthe purpose of objectively identifying leaders from within the organization. Ithas also used assessment centres to assign these leaders with the roles andresponsibilities that fit with their leadership competencies. In Cognizant'sassessment centre programme, employees are put through a series of indi-vidual and group exercises designed to measure proficiency in distinct leader-ship competencies and dimensions using abattery of tools. Assessment centresmeasure an individual's current and future potential in each competency. AtSatyam Computer Services, competency assessment is an integral part of theannual appraisal system for employees. All the approximately 22,000 associ-ates, irrespective of hierarch/, at Satyam are assessed on the basis of threecritical parameters of thinking, doing, and communicating. If the score ofpresent employees on assessment centres is below 83 out of 100, Satyam ex-ternally recruits people who are above this score.

Multisource Feedback and 360 degree Appraisals

Many firms have combined the different sources of performance appraisalinto a 'multisource' appraisal and feedback system, popularly called the360 degree appraisal. The use of 360 degree performance appraisal systemsgained popularity in the 1990s. The process implies that an employeeis appraised and receives feedback from supervisors, subordinates, peers,


and/or customers (see Figure 7.5). The feedback is generally provided anony-mously to the appraisee (the employee whose performance is being appraised).

one of the main purposes served by the 360 degree appraisal system is toobtain information

"Uo"t an employee's performance in -ultiple roles and

from different perspectives. In traditional top-down performance appraisals,superiors evaluate their subordinates, i.e., performance is evaluated from onlyone perspective. An employee may be performing well when viewed by his/her supervisor. However, the same individual may receive a very differentevaluation when evaluated from the perspective of his/her subordinate. Simi-larly, the employee's peers may also have a different evaluation. For example,Amway, a direct selling organization, practices a group appraisal system wherea manager is appraised by his management team as well as customers. At LupinLaboratories, self-evaluation and colleague evaluation is used to assess severalcharacteristics such as ability to recall, concept retention, seriousness, etc.

Each job is multi-faceted and an individual assumes different roles at differenttimes when performing the job. The 360 degree feedback approach seeks toprovide employees with as accurate a view of their performance as possibleby obtaining feedback from all angles-subordinates, peers, customers,supervisors, etc. Feedback from multiple sources may reinforce and supportthe feedback provided from the supervisor, thus making it harder to discountnegative feedback from the supervisor (manager) as one person's feedbackthat is perhaps biased.

The traditional top-down appraisal systems appear to be increasinglyinconsistent with recent developments in management thought and practice.For example, as organizations eliminate boundaries vertically across hierar-chies, horizontally across departments, and organizationally between firmsand their customers, 'the boundary-less appraisal', that is, 360 degree appraisal,has emerged as a more viable alternative to traditional appraisals. Severalfirms such as Shell, Exxon Mobil,IBM, AT&T, Levi Strauss, FedEx, etc. havestarted using 360 degree appraisal and feedback systems. The AV Birla Group,Gillette, and Ballarpur Industries have 360 degree feedback systems forsenior level managers. It is expected that the 360 degree system will result in amore comprehensive picture of an employee's performance and developmentalneeds and since ratings are anonymous, a more honest evaluation is possible.

The 360 degree appraisal approach is more appropriate for developmentalpurposes than for evaluative purposes. Feedback from multiple sourceshelps employees in self-development. It may also reduce prejudice sinceperformance feedback comes from multiple sources. Though 360 degreeappraisals may serve both developmental and evaluative purposes, mostorganizations begin by using 360 degree appraisals exclusively for develop-mental purposes, focussing on management and career development. How-ever, 360 degree appraisals have also begun to be used for making evaluative


or administrative decisions. For instance, an employee's incentives may belinked to customer feedback. Reliance Industries Ltd, Crompton Greaves,Godrej Soaps, Wipro, and Infosys all use 360 degree feedback primarily forself-correction and fact-finding purposes. However, it is also being used forpromotion and reward decisions. For example, American Express uses tar-get-based performance appraisal to award a performance bonus at the year-end. The leadership rating of the 360 degree assessment at American Expressis linked to promotions and increments. When used for evaluative decisions(pay increases, promotions, etc.) 360 degree appraisals may lead to certainproblems (see Exhibit 7.5).

It is more appropriate to use 360 degree feedback for developmental pur-poses at first. When managers and all others participating in the process havebecome comfortable with the system, when employees and managers feelthat the information from the 360 degree system is helpful, they will graduallylower their apprehensions about the use of 360 degree feedback for makingevaluative decisions. Some firms like GE have become disenchanted with360 degree appraisals and discontinued its use.

Any firm that seeks to implement the 360 degree system should foilowcertain general guidelines, such as

o determine the potential cost of the programme;o focus feedback on specific goals;o train employees giving and receiving feedback; ando ensure that the feedback is productive, unbiased, and development

oriented.

Potential Problems of 360 Degree Appraisal Feedback

Considerable anxiety for the employee(appraisee) when appraisals are negative. Theemployee may get a feeling that everyone is

'ganging up' against him/her.Customers, subordinates, and peers can alsobe biased. Their lack of accountabiiity canfurther affect appraisals.Anonymity and breach of privacy can becomea major issue. Since several employeesare involved in 360 degree appraisal systems,it is likely that evaluators may discuss an

Source: Creer 2O02

employee's appraisals and violate privacy.Peers may deliberately evaluate a managerlower than he/she should be in order to in-crease their own chances of promotion. Thistendency is enhanced because the 360 degreeappraisal system is anonymous.There is greater likelihood that rater biases willi nfluence evaluations because mu ltiple eval u-ators are involved. lt is important to train allevaluators to provide valid evaluations.


pect of 360 degre s to the ,acceptability'is, what factors i people are willing io360 degree feedb bility is defined u. th"ide unbiased feed ack by raters, or to receive and utilize

360 degree data by the appraisee. when the purpose of 360 degree feedbackis development, and when the feedback is shired only with the ippraisee, theappraisee may have little interest in using the feedback for self-improvement.Since pay and promotions do not get affected, the appraisee may also perceivelittle accountability for using the results. when the appraiser feels that theappraisee or the organization will not make use of the appraisals, there will belittle incentive to take time to do the appraisal or to provide accurate or com-plete information. Thus, acceptability is an importint factor in the effectiveimplementation of 360 degree appraisals.

Factors impacting 360 degree appraisalSome factors may impact the acceotability of 360 degree appraisals by boththe appraiser and the appraisee. These are as follows.

Organizational cynicism when employees in an organization hold thecommon belief that potentially fixable problems .unnoib" resolved due tofactors beyond the control of the employees, it results in ,organizationalcynicism'. Cynicism with regard to new initiatives results from past imple-mentation failures or incompetence ( rr both) resulting from lack

-of commit-

ment of leaders. Both the appraiser and appraisee may nurture cynicism aboutthe 360 degree appraisal system. Appiaisees may be unsure about themanagement's intention in adopting 360 degree appraisal. The appraiser mayfeel that it will result in no changes. To manage .ytriii.-, it is important to firstimplement 360 degree as a pilot project and allow organization members toexperience the process.

Purpose of appraisal Employees who are evaluated by peers andmanagers who are evaluated by subordinates, all prefer that feeclback from360 degree appraisals should be used solely for development and feedback.But, if upward appraisals (by subordinates) have an evaluative component,managers (appraisees) prefer the appraisals to be kept urroryrrorrs. Thiscontroversy pertains to the age-old issue regarding the use of performanceappraisal for evaluative as opposed to developmental purposes. Those whoappraise may find the 360 degree appraisal system more acceptable whenratings are used for evaluative purposes, but the appraisee may not find thisacceptable. The latter would like to use 360 degree for only developmentalfeedback. Organizations are moving in the direition of making 360 degreeappraisals more evaluative in nature. However, too hasty a movementtowards evaluation may compromise acceptability. When appraisals are used


for making administrative decisions, appraisers are likely to manipulate ratingsof appraisees,,such that they are different from the ratings they would give ina purely developmental appraisal. Bias in ratings reduces the acceptability ofthe 360 degree system. Hence, evaluative processes should be implementedgradually to increase acceptability.

Anonymity This becomes an issue in 360 degree appraisals. With traditionalappraisals, anonymity is not an issue. The supervisor evaluates and showsthe written appraisal to the subordinate, only to file it in personnel records.360 degree appraisals, on the other hand, incorporates upward appraisals,that is, appraisals of employees by those who are lower than them in theorganizational hierarchy. This may result in power differentials and hence it isimportant that appraisals are anonymous. This is to protect subordinates whoProvide appraisals from backlash from the superiors whom they appraise.Peers or external customers also may fear repercussions if their appraisalsare identified. For example, a customer service executive may disrupl or with-draw the service to an external customer.

Acceptability Acceptability of 360 degree appraisals is also affected by theextent to which work is designed around teams. Tiaditionally, performanceappraisals are designed around the jobs that are not related or dlpendent onother jobs or tasks. Since co-workers are at the same organizational level,within the same group, they are likely to have closer interpersonal relation-ships and to be in direct competition for organizational rewards. Generallyspeaking, co-workers are not comfortable appraising each other. However,acceptability of co-worker appraisals increases when the group tasks andactivities are highly interrelated and the group is operating as a team forsolving problems and improving performance. The interrelated nature of thework situation makes it possible to observe co-workers or their cooperative-ness and helpfulness. This increases the likelihood that co-worker appraisalsare seen to be fair.

Competency of aPpraisers Appraisees may find it difficult to accept ratingsor feedback when they perceive that the appraiser does not have the compe-tence to appraise and hence any ratings provided by them will be perceivedas biased or unfair. Appraisees may perceive the appraiser to be iacking incompetence when

o the appraiser is not familiar with the work of the appraisee, as in the caseof external customers who may not be aware of various work-relatedPressures of the appraisee-moreover, appraisees may also believe thatthe appraisers do not observe their performance frequently enough andhence are not competent to rate them; and

o aPPraisees are unwilling to be appraised by those who they believe cannotthemselves perform the task.


The issue of acceptability of appraisals has generally been overlooked inthe design and implementation of appraisal processes. \fhile 360 degreeappraisal and feedback is based on the premise that it will lead to positivebehavioural change, this expectation is not always fulfilled. Rather, it is

accompanied by potential risks such as negative reactions, reduced effort,dissatisfaction with raters, etc. It is important to give careful consideration tothe 'how' of the implementation of the 360 degree feedback process in order tomaximize its benefits. An organization can make multisoulce and 360 degree

appraisals more effective by following certain guidelines (Exhibit 7.6)' Thus,

360 degree appraisal provides a valuable approach to performance appraisal,

but its success depends on how the system is introduced, how information is

used, and how fairly employees are treated.

Competency-based Performance Management System

Tiaditionally, the emphasis in performance management systems has been onperformance-the 'what' of behaviour, that is, the specific quantitativemonetary or productivity results achieved in the past. The appraisals were

used to make decisions about rewards such as performance-based bonuses,

merit awards, etc. Recent years have seen greater efforts directed towards

devising more effective ways of managing the performance of keymanagerial employees (Exhibit 7.7). Several organizations are becoming

360 Degree Approisol-Some Suggestions to Maximize Benefits and Minimize Risks

. Provide training to employees to enhanceself-awareness. This minimizes inflation in

ratings and also results in more accurate self-

rati ngs.

r Provide orientation to allemployees abouttheimplementation of the 360 degree appraisalprocess.

r Assess degree of organizational cynicismamong bmployees prior to implementing360 degree appraisal. Take steps to reducecynicism to make employees more inclinedto embrace feedback and personal change.

r Follow-up negative feedback with encourage-ment and coaching.

Source: Atwater, Waldman, and Brett 2002

lntegrate 360 degree feedback with other train-ing and development efforts. Providing feed-back to suggest changes, without providingtraining or assistance, will result in lower mo-tivation on the part of recipients of feedback.lnstitutionalize 360 degree appraisal as part

of the organizational culture. This requiresmultiple administrations before the results willbe fully realized. Over time, employees adaptto the process and organizations tailor the pro-

cess to fit their needs.


corporate Examples of competency-bosed performonce Management System

Larsen and Toubro, the engineering major, hasdeveloped a competency matrix which lists Z3competencies to measure performance and as-sess the developmental needs of its employees.These competencies vary across managerial lev-els. Each competency has associated knowledge,skills, and attributes. lndividual employees areappraised on the listed competencies. Based onthis assessment, functional, managerial, andbehavioural skill gaps are identified. The com-petency matrix is linked to business strategy onone hand and training needs on the other. Thedevelopment policies are driven by the strategicneeds of the organization ensuring that the pro-cess of re-skilling is focussed.

Source: http://www.themanagementor.com/kuniverse/kmailers_universe/hr_kmailers/perf_best.htm, accessedon 26 September 2006

interested in the management and appraisal of competence-the ,how' ofperformance. The assessments are qualitative, developmental, and futurefocussed. Competency assessment has been adopted as an increasinglypowerful tool in the implementation of many contemporary HRM practices.Competency assessments help determine job-related characteristics anddesired levels of performance, thereby providing a basis for many HRMpractices. Levi Strauss, one of the most famous names in the clothing business,focusses on paying the person, not the job. Hence, across-the-board payincreases are smaller than the pay increases given to employees with criticalskills sets. Competency-based performance management systems offer orga-nizations the ability to manage performance from a quantitative output-basedperspective as well as from a process-based perspective, that is, how the outputgets generated.

The traditional performance appraisal systems appraised managers againsta ran$'e of technical job function requirements and in relation to quantifiableperformance criteria or metrics. They focussed on the performanie require-ments (standards) of job positions and not on the job-holders themselves. Itwas assumed that the job-holders possessed the characteristics required toperform the job. In competency-based approaches, on the other hand, it is theobservable and measurable characteristics of managers that are used as the

Hughes Escorts, the subsidiary of US head-quartered telecom company, Hughes, uses acompetency-based performance enhancementmodel. Each position in the organization is de-fined in terms of 23 key competencies. Thesecompetencies are categorized into four groups:attitude-based, knowledge driven, skill centred,and value-based. These competencies are usedto measure gaps. Relevant training inputs aregiven based on the competency gaps identified.The objective is to maximize productivity as wellas to help individual employees understand theirprofessional status with respect to these compe-tencies.

Performance Management and Development Systems 4Bg

basis of performance management activities. This approach focuses on theperson-related variables that the individual brings to aioU. One problem withtraditional performance management systems thai focus exclusively onperformance or outcomes is-that they do not consider the fact that employees'ability to achieve job-specific outcomes are not always within their control.Factors such as economic changes, changes in the organizational strucfure,and market-related changes, all impact an employe"'. ibility to perform andproduce desired results.'The competency-based approach helps the organiza-tion overcome this problem by increasing the importance of the ,proceis' andrewards employees for skills (skill-based pay) rather than outcom"r. Thi, systemhelps employees to know how to improve current performance if their perfor-mance is not meeting expected standards. For instance, Cadbury rites itsmanagers on six generic competencies which must manifest in a high per-

lormlng manager. Several public sector undertakings (pSUs) ,rr.h ui Ibc,GAIL, BPCL, etc. have instituted competency--uppitrg of employe", unjdevised development programmes based on a competency gap analysis. BPCLhas identified competencies for all levels ofjobs i" it, m"".glmeni cadre andruns its own development centre for competency profiling. competencyassessments are used by the company to make decisions about strategicassignments.

Approaches to Measuring Managerial performance

Performance management is a core strategic HRM activity where bothperformance standards and competency based approaches can be applied. Amanager's performance can be reviewed against both the performanCe criteria(that is, performance standards) and competencies or desired behaviours fordetermining rewards and developmental needs. It is important to recognizethat performance takes place in a unique social and cultural context.lhiscontext should be understood since it may affect the evaluation of the manager'sperformance.

Holmes andJoyce (1993) suggested three approaches to measuring mana-gerial performance. These are as follows:

l. Job-focussed approach2. Person-focussed approach3. Role-focussed approach

Job-focussed approach rhis is the traditional approach to performanceappraisal that concentrates on identifying the key tasks of a managerialposition. The job is viewed as independent of the job-holder. This reprJsentsthe competence-based (not competency) upprou.h to performance appraisal.competence is a 'description of something which u p"rron who woiks in a


given occupational area should be able to do, it is a description of an action,behaviour, or outcome which a person should demonstrat"; lTruirrirrg Agency1988). competence is expressed in terms of the purpose of the ioi aid ttlestandards of performance expected to be achieved. This has beln .ujl"d ,micro-competence' (Elkin 1990). This approach has been criticized on the followinggrounds.

1. It promotes inappropriate and inflexible performance standards formanagement positions and does not take into account the complexand dynamic context in which managerial performance takes place,

2. Managerial performance is a process of implementation of knowledge.It is not limited to the practice of measurable skills.

3. Several soft skills like leadership, creativity, etc. are important forsuccess in a managerial job.

4. The job-focussed approach is not helpful in the face of new jobdemands that emerge in managerial positions.

5. The approach is focussed only on past performance.

Person-focussed approach This approach focuses on person-related com-petencies that employees bring to a job, thus relying mainly on input-basedcriteria for performance evaluation. This is the competency-based approachto performance management. It considers a manager's performance in termsof how it relates to his/her personal background, personality, values, motiva-tion, etc. This approach views competencies as 'macro' in nature and distinctfrom the task-specific'micro'competences of the job-focussed approach. Macrocompetencies are important in the performance of managerial work, whichinvolves non-routine and complex situations. Moreover, certain generalabilities are common for different managerial jobs. These are requied forperforming managerial work across all jobs. Hence competencies are not seenas the functional tasks of the job, rather they refer to those actions andbehaviours which help managers to carry out their jobs effectively. Personalqualities are central to this approach. It focusses on identifying characteristicsthat distinguish superior from average managerial performance.

Role-focussed approach This approach is one that focusses on the socialcontext in which performance occurs. When performing a job, an employeeenacts a role. This role emerges out of the interaction between the employee(role holder) and the others in the social situation (colleagues, boss, and sub-ordinate) with their varying perceptions and expectations. The role approachis more realistic since it relates to managers' situations, rather than whatany manager shouldbe doing. The approach focusses on examiningthe variousdemands made on the manager by others and the extent to which Ih" -urrug",accepts them. It also examines the extent to which managers' performance


meets the demands imposed by themselves as well as by others in the multipleroles occupied by them. It also acknowledges the factors that impact on jobperformance (for example, leader behaviour, co-workers, organizationalvalues, etc.). This approach goes further than either the job or person-focusperspectives. This perspective is particularly appropriate for managers whoseperformance is contingent on the particular circumstances of the project ortask at hand.

Hybrid approach The three performance management approaches discussedin this chapter should be viewed as complementary rather than mutuallyexclusive. Thus, there should be a systematic combination of both microcompetencies and macro competencies within a new framework and under-pinned by role-focussed measures. This leads to a holistic managerial perfor-mance perspective, which may be labelled as the hybrid approach. Thehybrid approach uses the following measures to assess job performance of anindividual:

o A clear description of the work tasks managers should be competent in(micro competencies)

o Factors enabling them to complete those tasks effectively (macrocompetencies)

o Specific.role-focussed criteria for performance excellence (social context)

The hybrid approach represents a radical departure from the performanceappraisal strategies currently dominating several project-based sectors such asthe IT industry. The traditional approaches to performance appraisal areappropriate for an organization operating in a slowly changing environment.However, project-based organizations are faced with higher rates of change intheir external environments. A single focus-job or person-performance man-agement approach is not appropriate for such an environment. The hybridapproach is both past and fufure oriented, and combines quantitative andqualitative assessments of performance. It aligns employee competencies withthe performance improvement requirements in the social context of the orga-nization and the job demands. The multifaceted approach is useful for a rangeof HR functions including recruitment, training, promotion, rewards, etc. Itresults in a more participative, developmental approach to the HRM functionand leads to sustained performance improvements in the future. The multi-dimensional competency-based performance management or the hybridapproach is most appropriate for the following organizations and teams:

o Organizations operating in an uncertain and changing environment.when results (outcomes) are not under the control of the manager and aredifficult to measure. Evaluation is, therefore, based on whether they


demonstrated the rightbehaviours rather than on achievement of specifictargets.

o Team-based environments where work is team based and it is not possibleto identify individual contributions. Contribution to group processes ismore important than individual results.

o Dynamic environment and organizations in which managers'potentialto contribute to the company in the future is more important than theirpast performance.

o Jobs which have no measurable outcomes. For example, service-orientedjobs are not easily measured in terms of outcomes. In this case, anemployee's performance may be measured in terms of competencies.

o Future and development-oriented organizations must evaluate anddevelop relevant competencies.

o When workforce is highly variable and dynamic. For example, project-based work requires continually changing skill sets. When workforce isdynamic, employees are required to assume multiple competency-basedroles in their work.

Different jobs are best managed by different performance managementapproaches. For service jobs, the competency-based approach may be moreappropriate, and therefore, a higher weightage would be assigned to the com-petencies rather than to the output.

TECHNOLOGY AND PERFORMANCE MANAGEMENTWe have discussed in an earlier chapter, the important role that technologyhas played in revolutionizing the workplace as well ad the significant impact ithas had on HRM. Like other HR practices, technolog'y can support perfor-mance appraisal in aspects such as providing ongoing feedback, annualappraisals, and employee development. Technology can be used to enhance

. the positrve outcomes of a well-administered performance management system.Technology-supported performance appraisal will not be successful if employ-ees are not satisfied with the appraisal process. In discussing how technologyinteracts with performance management systems, the role of appraisal satis-faction is important for organizations. Satisfaction with the appraisal processhas an impact on productivity, motivation, and organizational commitment.Technology may contribute to the performance appraisal process in two ways:

o Technolo gy rnay perform the function of measuring an individual'sperformance through computer performance monitoring (CPM)activities. These activities are mechanical and do not require any inputfrom employees except task performance. Jobs for which such anappraisal technology is used are the ones that are repetitive and involvelittle personal judgment or discretion.


o Technology may be used as an aid by managers to write performancereviews or for generating performance feedback. For example, supervi-sors or team members can generate multi-rater appraisals online o.readymade appraisal software packages may be ,r"d ti .orrstruct an evalu-ation.Jobs for which this kind of technology is used involve discretion,personal judgment, and are open-ended.

C omputer Perfonnance Monitortng GpM)The cPM technology helps in colrecting performance data by counting thenumber of work units completed in a time period, error rates, time spent onvarious tasks, etc. The organization cevaluating worker performance, conperformance feedback to employees.positive aspects as well as drawbacks

Online Eualuation and Appraisal SofiwareWhile CPM helps generate the actual content or data, online evaluation andl

ffi'"!J:?::iiH:1i: :Lx,1:Hx[:Tfl:ilili#T:,,'n:Intranet of the organi : used for administering the performancemanagement process. Indian oil corporation (Ioc) has instituted an onlineperformance management system. tn GAtt, another pSU, the key perfor-mance areas (KPAs) and key performance indicators (KpIs) are captured elec-tronically.

Increasingly, Intranets are preferred by organizations for implementingmulti-rater or 360 degree feedback. For examfle, a performance evaluation

to all employees giving themin a multi-rater system employ-from whom they want to obtain

s go to a central e_mail where they areof employees theythan several indi-be rated by them.

questionnaires online. It allows raters to click buttons ." ,ilXt:j:":#:XTf,rating and if the rating is high or low on a factor, the programme prompts therater to review the rating and to add his/her own comments to the evaluation.Feedback from multiple raters is then centrally collected and a report is gen-erated. This report is sent electrorrically to tire employee being evalua-ted.Pepsico India has developed an e-HR software called connect Sri*"y, whichenables employees to rate their bosses on parameters like whether they


Benefits and Drawbacks of CpM

Benefitsr Provides objective and timely feedback to

employeesr Enhances fairness of a performance evalua-

tion system. Feedback is seen as more clearly related to

work output (and hence fair) and less associ-ated with the biased impressions of the supre-norOne way t by

makingitap byobjectives'(M ar-ticipate in goa ithgreater trust to an appraisal system.

Drawbacksr Reduced face-to-face interaction within an

organization lowers interpersonal trust. Re-duced trust leads to lower productivity, whichhas negative implications for performancemanagement. Computer performance moni_toring results in diminished trust whenit occurs in a telecommuting or distance

environment that reduces face-to-face in_teraction; and

- when an individual believes that the pur-pose of CPM is to monitor and controlperformance rather than to coach anddevelop.Fo

shouldformanof trustperformance data and feedback based on thedata generated by CpM.

Source: Miller 2003

r Computerized monitoring may lead to a de_humanizing work environment and becomea cause of stress and health problems.

r Acceptability of computer-generated perfor-mance and feedback is reduced when it issupervisor-generated. lt tends to be moreeffective and is received positively by anindividual when it is self-generated.

r lndividuals who lack computer literacy aremore I i kel y to reject com puter-generated feed-back.

r lt is restricted to delivery of performancedata. This falls short of a truly developmentalapproach that includes devising a plan formonitoring progress and achieving high per-formance.

r CPM raises concerns about how to measurequality of performance. When the CpM pro-cess provides for acknowledging the situ-ational constraints on performance, it is likelyto enhance employee satisfaction with the ap-praisal process.

r A CPM system overemphasizes quantitativeperformance measures. These measures do nottake into account various contextual factorsthat potentially influence an individual,s per-formance. For example, CpM may track the'number of customer calls, made in a day fora customer service representative. However,it will not be able to track the difficulty levelof each customer call. An employee with moredifficult calls may not be able to meet the tar-getof totalnumberof calls in aday. This maylead to negative evaluation of this employee,sperformance.

recognize the efforts of subordinates, enable them to strike a good work-lifebalance, or interact with them beyond day-to-day work. Web-iased appraisaltechnology has certain benefits as illustraied in Exhibit 7.g.


Benefits of Web-based Appraisal Technology

r Organizations can evaluate more employeessimu ltaneously.

. Employees can track their own progress oversuccessive evaluations.

r lt allows performance managementto becomepaperless thus simpl ifyi ng the admi n istrationof the process.

r Some software may include a coaching util_ity that provides information to raters iboutcoaching the individuals whom they evaluate.

r The process becomes less daunting forscientists, engineers, and others who some_times have little background in evaluatingothers, and resist spending time and effort on

Source: Miller 2003

performance eval uations.r Appraisee satisfaction with the appraisal

process increases when the use of appraisalsoftware leads to a rise in coaching and de_

. veloPment efforts'

their ratings with ag-d by other appraisersThis helps in reduc-

r Appraisers can also compare their ratings withindependent feedback provided by each oftheother individual raters (appraisers). This allows

losely the appraisers.agreeof an employee. This helpsof reference resulting inevaluations.

. Makes the appraisal process less tedious, easyto administer, results in ongoing feedback, andrncreases accuracy.

All organizations cannot replace the traditional performance appraisal sys-t9m1 yrth online performance management. An organization must evaluatethe following factors prior to implementing technolJgy-based appraisals:

o organization must have a curture which supports technology.o organization must have appropriate technological sophistication and

adequate IT resources.

-una91s_lnaably then, the earliest adopters of technologv to enhance thevalue ofHR delivery in organizations have been organizati#s in the IT, Bpo,and retail banking sectors where employee numbersirun into several thousands.These organizations implement their e-HR systems for all human resourcepractices. For instance, at Infosys, use of technoiogy has ensured that appraisalsare not a one-time event. Appraisals are ongoing as the appraiseeis perfor-

ctronically onthroughoutth

s are availablethe appraisee to discuss. The entire appthe work processes.


Satyam Computers Limited is a firm where HR professionals have come torely on IT for almost all HR activities, be it recruitment, retention, perfor-mance management, or other administrative tasks. The performance appraisalprocess at Satyam Computers has been automated. Each associate from aparticular strategic business unit (SBU) has two assessors who fill the appraisalform online. The online performance management system at Satyam drawson the concept called numeric management. At a very fundamental level allbusiness concerns can be expressed in numbers. The manager's role is tomanipulate 'reality' to achieve the 'desired' state on the specified number.Vision Compass is a software product developed and marketed by Satyam.This software draws upon the philosophy of numeric management and pro-vides a framework for implementing numeric management within an organi-zatton. Numeric management helps Vision Compass to capture performancethrough performance dashboards, and handle specific management frame-works such as MBO, balanced scorecard, etc. Vision Compass allows the userto generate various types of predefined reports. It makes it possible for a man-ager to access his/her subordinate's performance sheets and get an instantinsight into the major work of their subordinates, as well as the major con-cerns that they were facing. The software also helps managers to clarify jobexpectations and roles to their subordinates and helps minimize ambiguity inthat respect. Additionally, the software also enables associates to manage theirown performance with facts and data. It provides information and feedbackon performance or efforts of people throughout the organization, on a day-to-day basis. This allows the manager to make necessary interventions to changethe course of performance in the desirable direction. Vision Compass helps intranslating the vision, mission, and strategy of an organization into a compre-hensive set of performance and action plans. Performance is measured at thebusiness unit level, team level, and individual level. It also aligns individualand team goals with those of the organization. This provides for a compre-hensive approach to HR solutions.

As with other HR practices, performance management should also bealigned with the strategic goals of the organization.

STRATEGIC LINKAGE OF PERFORMANCE MANAGEMENT

In earlier chapters we discussed the relationship between business strategyand HR strategy. The best-fit approach emphasized the importance of linkingHR strategies with business strategies. The 'fit'perspective suggested that HRstrategies should match the stages of development of the firm, namely, start-

up, growth, maturity, and decline. Different dimensions of HR practices are

important at various stages of the organizational life cycle. Since performanceappraisal is an HR activity, it should also be aligned with business strategies.


Figure 7'10: Linkage Between Organization Life cycl.e, competitive status, organizationaL strategy,and HR Strategy

appraisals should therefore be aligned with organizational strategies. Deter_mining organizational strategies req.ires an assessment of the strengths andweaknesses of the organization.

The strategic performance management system includes the following steps:o Identify competitive status of the firmo D. etermine organizational and HR strategieso Align the performance management system

, .hl each stage of the organizational life cycle, these three steps are likely tohelp determine the appropriate performance appraisar strategy (rigure. z.ir).

CompetitiveStatus of the

Firm(CompetitiveAdvantage)

lnception(Start-up)

Growth

Maturity

Value creation

Valueaccumulation

Valuemaintenance

o lnnovativeo Bisk{akingo Long-term

orientation

o Flexibility. Co-operative

. Efficiencyo Results with

low level ofrisk

Focus onexploratoryknowledge

of employees

Focus onexploitativeknowledge

Harveststrategy tomaintain

competitivestatus

Qualitativemethods

Quantitativemethods

Qualitativemethods


Step 1

Figure 7.11: Strategic Performance Management System

A brief description of the iompetitive status based performance appraisal isgiven in this section.

Inception stage (start up) This is the stage when the organization has justbeen established. The competitive status of the firm is weak and sales are low.Hence organizational strategy should be directed towards emphasizing R&Dand product development. Since competitive advantage resulL from cieatingvalue, the organizational strategy focusses on aalue meation. This can be achievedthrough employees. The employees, at this stage, should have an innovativeapproach, be focussed on long-term goals, and be open to risks if required.Performance criteria should incorporate these characteristics. It is importantthat those knowledge and skills of employees that are easy to develop andassess are included in performance appraisal and also continually measured.Since employee performance on the characteristics important at the incep-tion stage are easy to measure, qualitative performance appraisal methods aremore appropriate for employee appraisals.

Growth stage This stage is characterized by a very strong status of competi-tive advantage. The organization follows the strategy of value accumulationand placing higher emphasis on production and support service. Employeesat this stage should be flexible to change, look for short-term survival, andwork in close co-operation with each other. The HR strategy should focus onutilizing employee competencies. The performance criteria measure thedegree to which employee competencies appear and convert to actualbehavioural performance on the job. At this stage quantitative performanceappraisal methods are more appropriate for appraisals.

Maturity stage The competitive advantage status of the firm becomes stableat this stage. Sales, though stable, are at low level at this stage. The organiza-tional strategy moves towards value maintenance by attempting to maintainits market in a highly competitive scenario. Desirable employee characteris-tics at this stage are efficiency, an ability to yield results, and take on tasks thatinvolve a low level of risk. The HR strategy should focus on 'harvesting' inorder to maintain its competitive status through its employees. This strategy

lnternal analysis ofstrengths and weaknessesof the organization

. Setting corporate strategy

. Setting HR strategyr Determine needed

employee behaviours

Performance Management and Development Systems

encourages low-risk and highly repetitive behaviour. The performance out-put criteria measure employee performance, that is, whether work behaviouris converted into performance. Qualitative performance appraisal methodsare likely to be more appropriate,

The life-cycle typology suggests a helpful approach on the basis of whichHR managers may decide the appropriate strategy for more effective perfor-mance appraisal.

':i:t!:i'lil:i::;:.i:\i!14..,iJ:.t SUmmafy

499

Performance appraisal is an inevitable aspect of or-ganizational life. All organizations without excep-tion have a system for evaluating employeeperformance. However, performance appraisalsystems across organizations differ in the degreeto which they are formal, objective, or participa-tive, how they are implemented, and the purposesthey are designed to serve. The chapter clarifiedthe terms that are used interchangeably when de-scribing the process of employee performanceevaluation and also examined the differences be-tween the traditional performance appraisal andthe contemporary performance management sys-tem. The uses and objectives of the performancemanagement system were outlined. The steps inthe design and implementation of the performancemanagement system were discussed. These in-cluded-identifi cation of performance dimensions,defining and communicating performance stan-dards, determining the sources of appraisal infor-mation, choice of selection methods, andcommunicating performance feedback to employ-ees. Often employees experience performanceevaluation as a negative process. Problems in per-formance appraisal may result from several factors.

360 Degree Appraisal takes place when allsources of appraisal are combined together. A 360degree appraisal system helps obtain informationabout an employee's performance in multiple rolesand from different perspectives.

Assessment Centre is an approach that requiresthe participants to complete a range of group and

The chapter discussed three sets of factors that maylead to problems in performance appraisal-am-bivalence on the part of manager and subordinatetowards appraisal, system design and implemen-tation problems, and rater biases and errors. Thecharacteristics of effective performance manage-ment system were highlighted. Developments inthe approach to performance management werealso discussed. These included team orwork-groupappraisal, assessment centre approach to perfor-mance management, multisource and 360 degreeappraisals, and competency-based approach to per-formance management. The advantages and ar-eas of concem of team appraisals are discussed.The chapter suggests that careful attention shouldbe given to the characteristics of the team whendesigning the performance appraisal system. Thechapter also dwelt upon how technology can sup-port various aspects of performance appraisal. Twoways in which technology may contribute to theperformance appraisal process were presented.These include computer performance monitoringand online evaluation and appraisal software. Thechapter ended by providing an overview of the stra-tegic linkage of performance appraisal.

individual tests and exercises which simulate theactivities they might encounter in the target job.Each assessment centre consists of approximatelysix to twelve participants and may extend over aperiod of two or three days.

Behaviour-based Methods of performance ap-praisal obtain descriptions of employee behaviour


and place them along a scale to identify those ac-

tions which lead to good performance as well as

actions which need to be improved.

Competence describes what a person who worksin a given occupational area should be able to do

and is expressed in terms of the purpose of the

job, and the standards of performance, expected

to be achieved. It is a description of an action,

behaviour, or outcome which aperson should dem-

onstrate. It is different from competency'

Computer Performance Monitoring helps incollecting performance data by counting the num-ber of work units completed in a time period, er-

ror rates, time spent on various tasks, etc. The data

can be used for workforce planning, evaluatingworker perfonnarlce, controlling performance, and

in providing performance feedback to employees.

Formal Appraisal is a system of appraisal set upby the organization to evaluate employee's perfor-mance systematically. All organizations have some

variation of formal appraisal in place.

Informal Performance Appraisal takes place

when day-to-day interaction of the manager withan employee allows the former an opportunity toappraise the emplovee's performance on his/herjobs, even when the manager is not'required' to

do so. Informal performance appraisal providesimmediate feedback, and results in high motiva-tion.

Multisource Feedback takes place when an or-

ganization combines two, more, or all of the avail-

able appraisal sources for providing an individual'sperformance information.

Online Evaluation and/or appraisal software helpgenerate appraisals and the accompanying narra-tive, and also facilitate the delivery of performancefeedback. The Internet or the Intranet of the orga-

nization can be used for administering the perfor-mance management Process.

Performance Appraisal is the system by whichan individual's performance is compared to a set

of performance standards to assign a 'score'. Thescore indicates the level of current and/or past per-

formance of the individual. The term includes as-

sessment.

Performance Assessment is the process by whichdata about an individual employees' past and cur-rent job performance are collected and reviewed.The manager adopts a judgmental approachand makes decisions about the adequacy of the

ernployee's performance.

Performance Dimensions are the job criteria orevaluation criteria that are the most important fac-

tors of the job. These are the factors for which the

employee is paid by the organization.

Performance Evaluation is the Process that de-

termines the extent to which an employee performsthe work effectively. Other terms that connote the

same meaning are performance appraisal, meritrating, perfbrmance review, and employee evalu-ation.

Performance Management (PM) is anintegratedprocess that consolidates goal-setting, employeedevelopment, performance appraisal, and reward-ing performance, into a single common system.

Performance management aims to integrate em-

ployee performance with the strategic goals of the

organization. It is a broader term than perforrnanceappraisal, performance evaluation, or performanceassessment.

Performance Standards define the expected lev-

els of performance, goals, or targets by which per-formance on job criteria is evaluated.

Rater Biases occur when the values and prejudicesthat the appraiser holds distort the ratings of the

appraisee, either unintentionally or intentionally.

Rater Errors are the mistakes made by the ap-

praiser when appraising an employee.

Result-based Methods of performance appraisalfocus on the accomplishments of the employees,that is, the results they achieve through their work,such as sales figures, production output, etc.

Teams are made up of individuals who are assigned

to a specific role depending on their skills. Teams

work collaboratively, and take responsibility for the

performance of the whole team rather than justindividual performances.

Trait-based Methods of performance appraisalare designed to measure the extent to which an

,. r ri i',r : . r... j. ': COnCgpt ReVieW QUeStiOnS .,ij:-iir":-j.i:;r.i).;n,.ri!::lri:,ir:jr:,i.:r:r: rirri.i.i.,!::.rii'1];ili]i+.:irir:

1. Explain the term performance management.Identif' the major points of difference betweentraditional performance appraisal and the newperformance management system.

2. What are the major objectives of performancemanagement? Why are performance manage-ment objectives often contradictory?

3. Describe the general guidelines for the devel-opment of a performance management system.\4trat decisions must be taken by the organi-zation at each step?

4. \\rtrat are the characteristics of an effective per-formance management systern? What majorproblems are inherent in most performancemanagement systems?

5. Describe the assessment centre approach to

employee possesses certain characteristics that areimportant for performing the job successfully.

Work Team is a well-developed social system,where task interaction between members is

1. \Atrhy have team appraisals become significantsince the 1990s? Is it appropriate to apply theindividual performance management processto evaluate team performance? What advan-tages do team-based appraisals have over thetraditional individual performance appraisal ?

What are some of the limitations of team-basedappraisals? What factors must be consideredin the design of an effective team performancemanagement system?

2. What is 360 degree appraisal? What advantagesdoes it have ovei the traditional performance

.;.-..\'\:.: i:a;i,.::::;i.;i':."ii"-:i,i,tt;:l.i:..:;r.t:,:::::,u.,:.:.t:,+l: $imUlatiOn and

l. The objective of this role-play exercise is tocompare the three types of appraisal feedbackinterviews for their effectiveness. The three


predictable. These teams engage in routine manu-facturing or service jobs and have static member-ship. These teams are also called intact teams.

performance management.

6. Are behaviour-based methods more effectivethan trait-based methods? Describe any twomethods of each type, citing their advantagesand disadvantages.

7. \Mhat are the diff'erent sources of appraisal in-formation? Discuss the pros and cons of eachsource.

8. Discuss the advantages of competency-basedperformance management over traditionalappraisals. Under what conditions are compe-tency-based performance management sys-tems most appropriate?

9. Explain how the performance managementsystem can be aligned with the business strat-egy of the organization.

appraisal systems that use only downwardappraisals? What factors may impact theacceptability of360 degree appraisals by boththe appraiser and the appraisee?

3. Think of two teachers who have taught you-one whom you consider very good and onewhom you consider a poor teacher. What spe-cific behaviours distinguish the two teachers?In your opinion what is the best source of ob-taining performance data for appraising per-formance of teachers? What are the merits anddemerits of appraisal of teachers by students?

Role Play i,:,+:

tvpes of appraisal feedback interviews are one-way communication, two-way communication,and mutual problem-solving.


Sihtation: The subordinate (appraisee) has notbeen able to meet the performance targets.Hence the appraisee is neither going to receiveincentives nor will be considered for a promo-tion. The task of the appraiser is to communi-cate the appraisal to the appraisee.

Exercise: The exercise requires some out-of-class preparation by participants. Six studentshave to volunteer for the role-play. These stu-dents are to be formed into 3 dyads. In eachdyad, one student has to play the role of theappraiser and the other student has to play therole ofthe appraisee. Each dyad is assigned torole-play one type of appraisal feedback inter-view. The instructor should brief each dyadabout the manner in which the feedback in-terview is to be conducted.

Each dyad role has to play the assigned typeof appraisal interview in front of the entireclass. No discussion or questions should be per-mitted when the role-play is in progress. Theclass is encouraged to make notes about theirobservations on each type of appraisal inter-view. After all the three role-plays are over,the instructor has to invite observations andquestions from the class. The students whoplayed the appraisee in each dyad share theirfeelings during the course ofthe feedback ses-

sion. The instructor leads the discussion on therelative merits and demerits of each type ofappraisal interview. The discussion ends byoutlining the characteristics of effective ap-praisal interviews.

Assume you are the General Manager (HR)of a reputed IT services firm with business inseveral countries. The organization operatesin a dynamic business environment. The or-ganizational structure is relatively flatwith onlyfour hierarchical levels. Almost all employeesare required to work in project-based teams.The rate of employee turnover of the Iirm isnot very high by industry standards. However,there have been times when a member of theproject team has quit before the completionof the project. The firm on such occasionsfound it difficult to replace the team member.The firm presently has a results-based perfor-mance management system in place. You, as

the GM (HR), recently attended a workshopon the competency-based performance man-agement system. You are convinced that yourfirm should change over to a multi-dimensionalcompetency-based performance managementsystem. As GM (HR) your responsibilities arethe following:

To convince the top management of theimportance of adopting the multi-dimen-sional competency-based performancemanagement system.

To suggest how the development of com-petency profiles of employees will help inquickly replacing a member of the projectteam if the person leaves in the middle of aproject.

sitting on the right side will take the 'con'position.

Students have to form groups of five or sixand develop arguments in support of theirposition. The instructor should allow fifteenminutes time for group discussion.

Both the sides should then develop a mas-ter list of arguments supporting their posi-tions. The master list is developed by having

2

L The purpose of this activity is to debate thefollowing proposition:

'Performance management is an importantHR activity and plays a significant role in theachievement of individual and organizationalobjectives'.

Steps:

. All students sitting on the left side of theroom will take the 'pro' position; those

a

a representative from each subgroup meetwith one another and compare lists. Thusthere will be two master lists.

The subgroup representatives from eachside will become the debate teams.

Each team will get ten minutes time topresent its arguments. At this stage thearguments of each team should focus onlyon supporting its own position (not to rebutthe arguments of the other team).

The 'pro' team goes first.

Each team gets five minutes to rebut thearguments given by the other side andreconstruct and re-emphasize its own argu-ments, as needed. The rebuttal should directly address the arguments of the oppositeside. The purpose of rebuttal is to questionand cast doubt on the arguments of the op-posite team. The 'con' side has to presentits arguments first.

The rest of the students are given ten min-utes to cross-examine members of eitherteam. The students are also encouraged tocite experiences of organizations with theirperformance management systems.

. The class ends with a vote on which position they hold.


. The instructor has to then close the discus-' sion with comments and observations.

2. The objective of this exercise is to help the stu-dents gain an insight into the design and imple-mentation of the performance managementprocess. Introduce the exercise to the class byclarifying the objectives of the exercise. Theinstructor presents a briefoverview ofthe stepsin the design and implementation of the per-lbrmance managernent process. Divide theclass into groups offour or five. Each group isasked to select one occupation from the fol-lowing suggestive list and design a perfor-mance management system for this position.. University professor. Software engineer

. Customer relations executive

. HR manager of a firm

. Sales executive of an FMCG firmEach group has to prepare and present a

report followed by a general discussion led bythe instructor. The discussion centres on thesteps in the design and implementation ofperformance management process, the deci-sions that need to be made at each stage, po-tential implementation issues, and differencesin appraisal criteria across different occupa-tional groups.

l. The objective of this field project is to help thestudents appreciate the role of technology insupporting performance management systems.The instructor should divide the class intogroups of five each. Each group is asked tovisit any two organizations. Group membershave to conduct interviews with HR manag-ers as well as a few middle-level managersof the firms to obtain the following informa-tion:

. Whether the organizations have incorpo-rated technology in any aspect oftheir per-formance management process.

. When was technology introduced in imple-mentation of performance management?

. For what aspects of performance manage-ment do these firms use technological sup-port (for example, feedback, online fillingof appraisal forms, identifying trainingneeds, etc.)?

. Benefits that have resulted for the firm as aresult of use of technology-based perfor-mance management.

Each group has to prepare a report for classpresentation as well as a written report for

504 Strategic Humdn Resource Management

submission to the instructor. The groups haveto make presentations in the class highlight-ing the trends in the use of technology sup-

ported performance management systems.When all groups have made their presenta-tions, the instructor should engage the entireclass in a discussion about the importance oftechnology supported performance manage-ment and web-based appraisal technology. The

discussion should also focus on industry dit:ferences in the use of technology for perfor-mance management, aspects of perforrnancemanagement for which use of technology ismore pervasive, degree of satisfaction of em-ployees with the web-basedappraisal technol-ogy, and potential problems of technologysupported appraisals.

' C?se StudY "':r't"ri+

Performance Appraisal at Amber Limited

Amber Limited is a multinational pharmaceutical 'Best Employers' based on survey conducted byfirm with its headquarters in Mumbai. Incorporated top management consultants. It was also voted as

in the year 1940 as a family-owned firm, it is today the 'Most Preferred Employer for Women'in 2001

a professionally managed firm. However, Mr Naik, based on an Economic Times suwey. From the verythe President of the company, comes from the fam- beginning the promoters of the company haveily of the founders. The first manufacturing unit of demonstrated a people-oriented and humane ap-

the organization was set up at Ankleshwara. At proach. This philosophy continues to govern the

present, the firm has ten such units across India. organizational functioning even today. The HumanThe company started by manufacturing ready-to- Resource (HR) department is a strategic functionuse surgical dressings. Gradually it expanded into at Amber Ltd. The function is headed by the Ex-pharmaceuticals (1950s) and medical devices ecutive Director (HR), Mr Seshadhiri, who is also

(1960s). In recent years Amber Ltd has expanded a member of the organization's strategic planninginto toiletries (1990s), personal healthcare products, team. Mr Seshadhiri is positioned at the companyand consumer products (2002). The consumer di- headquarters in Mumbai. The HR team at thevision of the company is located in Pune. Amber headquarters consists of, apart from Mr Seshadhiri,has 50 subsidiaries with operations in about 20 Director, organizational development group,countries across three continents, that is, Europe, Director, performance and career managementNorth America, and South Asia. The company is groupr and Director, human resource planning andlisted on the National Stock Exchange and recently, administration $oup. The total strength of staff init was also listed in the New York Stock Exchange. the HR department at headquarters is 70. The HRWith an annual turnover of Rs 250 crore, it is a function at each manufacturing unit is headed byFortune 700 company. Today, manybrands of Am- a General Manager (HR). The total staff strength

ber Ltd are household names. of HR department ranges from eight to twelve em-

The employee strength of the company stands ployees in each unit'

at 6000 employees, with about 500 employees Mr Patel was appointed as the Director, per-

located at the company headquarters in Mumbai. formance and career managemeDt group, at the

Of the total 1800 executive and managerial headquarters in 1996. He was an alumnus of one

employees in Amber Ltd, approximately 300/o are of the top business schools in India, having gradu-

women. There are about 300 executives and man- ated in the same year. He contributed substantiallyagers in the consumer division at Pune. Since the in transforming the HR policies and practices at

yeat 2002, Amber Ltd has consistently figured in headquarters. When Patel joined Amber Ltd inthe top 20 companies in the Business Worldlisl of 1996, he found that the firm continued to use a

traditional performance appraisal system at theheadquarters. The appraisal form consisted of arating scale to obtain performance scores on em-ployees. There were two sets of factors on therating scale, the job factors and the behavioural fac-tors. These factors were determined on the basisofjob analysis information. An example of the rat-ing scale used for the performance appraisal of themarketing manager at the headquarters is given inThble 7.8.

The performance appraisal form consisted ofone page. It was filled up by the superior and signedby the subordinate in the presence of the superior.When the subordinate disagreed with the ratinggiven by the subordinate on a particular factor, itwas discussed between the superior and subordi-nate. The rating could be modified if the superiorwas convinced about the arguments of the subor-dinate. The superior gave recommendations aboutthe salary increase or promotion for the appraisee.The reviewing officer, who was a manager seniorto the supervisor conducting the appraisal, thensigned the form. Finally, the performance appraisalforms were submitted to the HR department.Appraisal was an annual exercise and the appraisalcycle was fromJanuary to December each year.

Mr Patel felt that this appraisal system had itslimitations. A major drawback according to himwas that it provided no information regarding com-pany expectations, leaving the employees in thedark as to what they needed to do to achievefavourable ratings. Moreover, due to its impact onsalary and promotions, the appraisal system gen-

erated considerable degree of emotions during anda-fter appraisals. To resolve these problems, Mr Patelconsidered introducing changes in the design andimplementation of the appraisal system atthe head-quarters. His initiative was completely backed byMr Seshadhiri and the President of the company.

Mr Patel designed and conducted training for allmanagers in the use of the new performance re-view system before it was implemented in 1997.

The new appraisal system was now called AnnualPerformance Review' and it consisted of threeparts.


Specifi c performance objectives This consistedof identifying Key Performance Areas (KPAs) foreach job. The KPAs constituted the job criteria.Specific measurable performance objectives (tar-gets) were identified for each KPA. The KPAs andthe objectives were jointly negotiated by the su-

pervisor and the subordinate, at the beginning ofthe rating period. The supervisor had to ensure thatthe objectives contributed to the achievement ofthe strategic goals of the organization. Self-appraisalwas built into the form. Employees had to ratethemselves on the degree to which they hadachieved the specified objectives within the giventime period. If they had not been able to achievethe targets, they also had to record the reason forthis. Subsequently, the supervisor rated the employ-ees on the degree of task accomplishment.

Behavioural standards This consisted of a rat-ing form listing several positive and negative jobbehaviours (for example, 'takes initiative in groupmeetings', 'gets along well with colleagues', 'isclosed to new ideas', etc.). There was no self-ap-praisal on this form. The supervisor rated the sub-ordinate and it was directly sent to the supervisor'sboss (reviewing officer). The aspects on which theemployee needed to improve were discussed dur-ing the feedback meeting.

Salary and promotion recornmendations Basedon the employee's strength, weaknesses, and ac-complishments, the supervisors recommended sal-

ary action and promotion status for each employee.The reviewing officer reviewed these recommen-dations and forwarded them to the HR departmentfor final approval.

In 1999, business environment for the phar-maceutical industry underwent a major transfor-mation. The changes in international regrrlationswith respect to pricing, patenting, etc., led phar-maceutical firms to pay greater attention to mar-gins in order to ensure their presence in the market.The pharmaceutical industry was also faced with ahighly competitive business environment with aspate of mergers and acquisitions. Amber Ltd it-self has acquired two small companies within In-dia and is poised to make a major acquisition in


Table 7.8: Rating Scale for Performance AppraisaL of Marketing Manager

Qpantity ofwork(volume ofwork achieved)

Quality ofperformance(process inhandling duties)

Clarity aboutduties andresponsibilities

Dependability(can be reliedon to meetworkrequirements)

Initiative(resourcefirlness

and willingnessto acceptresponsibility)

Adaptability(ability torespond tochangingconditions)

Communicationskills(ability to putacross ideas tosubordinates)

Europe. Such an environment has ensured that theperformance of the company and all its employ-ees is closely monitored.

The company therefore, began to place greateremphasis on performance orientation and perfor-mance target achievements. In this year, anew di-mension was added to the performance appraisalform. On the basis of ratings in Part I of the perfor-mance appraisal form, all employees were classi-fied into three categories-those who had exceededthe specified performance targets by more than aspecified percentage, those who had met the per-formance targets, and those who had not achievedthe targets. Decisions about annual bonus and ca-reer movements were based on this classification,with the employees who exceeded the targets clas-sified as 'high performers' getting the maximumrewards. Those who had not met the targets werecalled for a counselling session to help them im-prove their performance next year. The tacit un-derstanding was that those who got classified inthis category for three consecutive occasions shouldfind alternate employment. This year, a formal ap-praisal feedback system was also introduced.Though appraisal feedback gave the employee anopportunity to discuss his/her per{ormance withthe supervisor, the final decision still rested withthe latter. Part II of the form continued to be usedfor identifying areas of improvement.

On a sunny winter morning in December 2001,Patel was mentally reviewing his stint with AmberLtd. He felt he had accomplished reasonably well.He had just returned after attending a four dayconference on 'the use of technology in HR.

Questions

l. What were the main drawbacks of the traditional appraisal system of Amber Ltd that wasin place until 1997? Did the new performancereview system overcome these drawbacks?Explain citing examples from the case.

2. Evaluate the 'annual performance review' as

it was implemented in 1997. Do you think themodifications introduced in the performance


Amber still did not use technology for several prac-tices; though employee records such as leave, ab-senteeism, training, etc. were computerized. Pateldecided to make the performance review systemavailable online. Having made his decision, Patelgot up to get a cup of coffee. He was taken abackwhen Mr Das, his marketing manager, walked inlooking visibly upset. \Arhen Patel asked him whatthe matter was, Mr Das expressed his dissatisfac-tion with the performance review system. Das hadjust got to know that he had not been classified as

a 'high performer'. Das had been with Amber Ltdfor the past 15 years. He had a consistently goodperformance record, got along well with all his col-leagues, and the firm trusted his decisions. Thisyear, however, he had faced some personal prob-lems and had not been able to give undivided at-tention to official assignments. He told Patel thathe felt betrayed since he had expected the com-pany to be understanding. Das felt that the perfor-mance review system itself needed a reviewurgently. Patel listened to Das, grving an empatheticear, and assured him that he would take up thematter with the top management. Patel sought anappointment with Seshadhiri to discuss the matter.He knew that Das would have no dearth of offers,should he decide to leave. Patel wondered whetherit was time to revamp the performance review sys-tem. How could a firm be performance orientedand yet show concern for the personal problemsof employees? How can a performance system bedesigned and implemented to ensure appraisalobjectivity as well as employee satisfaction with thesystem?

review system in 1999 atAmber Ltd helped itto become more performance-oriented? Givereasons for your answer.

3. Is Amber Ltd ready for a technology supportedperformance review system? Why do youthink so? What will be the best way fordesigning an online performance appraisal atAmber?


4. Do you think Mr Das's reaction is justified?

What problems do you see in the current per-formance review system at Amber Ltd?

5. Give suggestions for making the current per-formance review system at Amber Ltd moreeffective.

6. Do you think that implementing a competencybased performance management system willhelp Amber Ltd overcome some of theproblems of the current performance reviewsystem?

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