HUMAN CAPITAL DEVELOPMENT

MR. BISWAJIT SAHOO

FACULTY COMMERCE
P.G. DEPARTMENT COMMERCE
UTKAL UNIVERSITY
 UNIT-1
 Introduction: Meaning & Definition of Human Capital

 Importance, Development of the Concept

 Functional areas of HRM

 Human Resources Policies

 Human Resource Environment

 Role of HR Practitioner.
WHAT DOES THE WORD “CAPITAL” STAND FOR ?

Capital refers to already produced durable goods which further contribute to the
production of goods and services.
In simpler words, capital refers to any produced good/service which enables an
individual/organization to deliver high quality output.
Capital acts as a catalyst to increase productivity in organizations.
CONSTITUENTS OF CAPITAL
Intellectual capital - Intellectual capital describes the knowledge assets available to the
organizations and is a large part of intangible value, which is defined as the stocks and
flows of knowledge available to an organization. (Company employees knowledge, skills,
business training)

 Social Capital- Social Capital describes as the structures, networks and procedures that
enable those people to acquire and develop intellectual capital represented by the stocks
and flows of knowledge derived from relationships within and outside the organization.

Human capital - The knowledge, skills, abilities and capacity to develop and innovate
possessed by people in an organization.

Organizational capital - Organizational capital is the institutionalized knowledge

possessed by an organization that is stored in databases, manuals, etc. It is often called
“structural capital”.
INTRDUCTION
 “Human Capital” was introduced by A. W.
Lewis in “Economic Development with
Unlimited Supplies of Labour”.
 Human capital is defined as the collective
stock of skills, creative abilities, attributes,
knowledge, and expertise of employees
which further plays an integral role in
increasing the productivity of the organization.
 HISTORY OF HUMAN CAPITAL
 The concept of human capital was coined in the 18th century book “An Inquiry into

the Nature and Causes of the Wealth of Nations”, by Adam Smith. Smith set out the
idea that boosting human capital through training and education would make any
business more profitable and this, in turn, would make society as a whole wealthier.

 The term itself was coined in the 1960s, as economists such as Gary Becker and

Theodore Schultz put forward the view that it could be used like any other form of
capital to improve the quality and quantity of production within a business.
 COMPONENTS OF HUMAN CAPITAL
*Thomas Davenport breaks the definition of human capital into various elements:
Ability-is the proficiency in a set of activities or forms of work.
Knowledge- command of a body of facts required to do job. Knowledge is broader than
skill; it represents the intellectual concept within which a person performs.
Skills- facility with the means and methods of accomplishing a particular task. Skills may
range from physical strength and dexterity to specialized learning.
Talent- inborn faculty for performing a specific task. Talent is roughly synonymous with
aptitude.
Behavior- mean observable ways of acting that contribute to the accomplishment of a task.
Effort- is the conscious application of mental and physical resources toward a particular
end. Effort goes to the heart of the work ethic.
Time- refers to the chronological element of human capital investment: hours per day,
years in a career, or any unit in between.
 Human capital in an organisation mean technical skills and soft skills of
Economic, Social, Physiological, Psychological and Spiritual beings.

Physiological, Economic person

Psychological
person

Social person
Spiritual person

Technical skill include: Job skill, Knowledge, abilities, competence, talents

Soft skill includes: Skill of perception, leadership, attitude, mindset, commitment, self
motivation
 WHAT IS HUMAN CAPITAL DEVELOPMENT?

 Human Capital is “the sum of a workforce’s skills, knowledge and experience”

 Human Capital Development: “A Strategic responsibility increasingly shared by

all an organization’s Leaders”

 “A strategic approach to marshalling, managing and maintaining the human

capital needed to maximize organizational performance”.
 HCD – FUNDAMENTAL PRINCIPLES
 People are assets whose value can be enhanced through investment. The goal is
to maximize value while managing risk.

 HR traditionally seen as a cost center but is increasingly being seen as

a strategic partner

 An organization’s Human Capital approaches should be designed, implemented

and asses.
 CASE STUDY
Mrs. Neha Kumari, VP HRM in a IBM India Pvt. Ltd Having a work experience of
almost 35 years in different HRM capacities, has diversified field experience. There is
only 7 years left for her retirement. And her entire work tenure she has worked in
Bhubaneswar. On the morning of 9th February 2022, she gets an email that she has been
transferred from Bhubaneswar to Bengaluru. This came as a pure shock for Mrs. Neha
Kumari.

Ques. How do you perceive the present situation?

Ques. Analyse the present scenario and discuss the probable solutions for both the
parties?
QUES. HOW DO YOU PERCEIVE THE
PRESENT SITUATION?
The present situation seems to be quite challenging for Neha Kumari. After spending 35
years in the same company and in the same location, being suddenly transferred to a
different location can indeed be shocking and disruptive for her. It's understandable that
she may feel unsettled, especially considering her proximity to retirement.
 QUES. ANALYSE THE PRESENT SCENARIO AND DISCUSS
THE PROBABLE SOLUTIONS FOR BOTH THE PARTIES?

For Mrs. Neha Kumari : Present Scenario

1. Emotional Impact: She might feel a sense of loss, disruption, and possibly even resentment towards the
company for such a sudden change.
2. Personal Circumstances: She may have family commitments, social ties, and lifestyle preferences built
around her current location, making it difficult for her to adapt to a new environment.
3. Career Transition: Given her extensive experience, transitioning to a new location might pose challenges in
terms of adjusting to new colleagues, organizational culture, and possibly even job responsibilities.

For Mrs. Neha Kumari : Solution

4. Open Communication: Express her concerns and preferences to the HR department or senior management. They
may consider her tenure, proximity to retirement, and personal circumstances before finalizing the transfer.
5. Negotiation: Explore alternative options such as part-time work, remote assignments, or delayed transfer until
closer to retirement.
6. Career Planning: Use this opportunity to evaluate her career goals and aspirations, and consider whether the
transfer aligns with her long-term objectives.
IBM India Pvt. Ltd: Present Scenario
1. Business Needs: The company likely has strategic reasons for the transfer, such as filling a skill gap, enhancing
diversity, or optimizing resources in different locations.
2. Employee Mobility: Transferring employees across locations can foster cross-functional collaboration, knowledge
sharing, and talent development within the organization.
3. Legal and Ethical Considerations: The company must ensure that the transfer complies with employment laws and
regulations.
IBM India Pvt. Ltd: Solution
4. Empathy and Support: Acknowledge Mrs. Neha Kumari concerns and provide support in terms of relocation
assistance, counseling, or flexible work arrangements.
5. Clear Communication: Clearly communicate the rationale behind the transfer and how it aligns with the company's
goals and objectives.
6. Flexibility: Consider alternative solutions that meet both the company's business needs and Mrs. Neha Kumari
preferences, such as temporary assignments or phased transition plans.

Overall, finding a mutually beneficial solution requires empathy, flexibility, and open
communication from both parties involved. Balancing the company's operational needs with the
well-being and career aspirations of its employees is crucial for maintaining a positive work
environment and fostering long-term employee loyalty.
HUMAN CAPITAL ARE THE FOLLOWING:
 Education
 Technical or workplace training
 Punctuality
 Problem-solving abilities
 People management
 Communication skills
 Good health
 Mental and emotional wellbeing

Investing in any or all of these qualities will have a twofold effect –

It will increase the productivity of the business and boost the earning power of the
individual.
Human: This term refers to an organization's required workforce.
The term Resource refers to an organization's workforce supply.
Management refers to the most efficient use of resources in order to achieve organisational goals.
WHAT IS HUMAN CAPITAL MANAGEMENT ?
 Human Capital management refers to managing an organization’s employees for them
to contribute significantly in the overall productivity of organization. In a layman’s
language managing workforce of an organization refers to human capital
management.
 Human Capital Management is defined as the process of acquiring, training,
managing, retaining employees for them to contribute effectively in the processes of
the organization.
 In simpler words, upgrading the existing skills of an employee and extracting the best
out of him/her refers to human capital management.
 DEFINITION
Edwin B. Flippo ―Human resource management is planning, organizing, directing and
controlling of the procurement, development, resources to the end that individual and societal
objectives are accomplished.
B. Decenzo and Robbins ―HRM is a managerial process of acquiring and engaging the
required workforce appropriate for the job and concerned with developing, maintenance and
utilization of workforce.
C. Desseler ―the policies and practices involved in carrying out the people or human resource
aspects of a management position, including recruiting, screening, training, rewarding, and
appraising comprises of HRM.
D. French Wendell ―Human resource management is the recruitment, selection, development,
utilization, compensation and motivation of human resources by the organisation.
WHO IS RESPONSIBLE FOR HUMAN CAPITAL
WITHIN A BUSINESS?

The management of human capital within a business is usually handled by the human
resources (HR) department. HR department is in charge of recruiting and managing
employees, and also takes responsibility for longer-term strategies for ongoing
training and development.

An HR department that has a full grasp of the importance and value of human capital
will also undertake reporting and analytics designed to drive a deeper understanding of
the human capital within the business.
EVOLUTION OF THE CONCEPT OF HRM
 HRM has evolved from the Personnel Management. ―Old bottle with a new label
 Going back to the roots of evolution of personnel management the contributions of
Psychologists and management experts such as Elton Mayo, F.W. Taylor and Robert Owen
play a significant role.
 .Elton Mayo was the founder of the human relations movement in the 1920s. In the
famous Howthorne study, he measured the relationship between productivity and the
work environment.
 Owen recognised the importance of improving working conditions in the workplace and its
impact on worker productivity and efficiency.
 Taylor has developed a differentiated compensation system that rewards employees with
higher performance levels , that are still used in the company
 “Pet milk principle”
HISTORICAL EVOLUTION OF HR
 FROM INDUSTRIAL REVOLUTION ERA TO THE PRESENT ERA,
VARIOUS STAGES TO DEVELOPMENT OF MANAGEMENT OF
HUMAN RESOURCE PRACTICES MAY BE CLASSIFIED AS
FOLLOWS:
1. Industrial Revolution Era:
The systematic development of HRM started with industrial revolution that started during 1850s
in Western Europe and USA. The industrial revolution consisted, essentially, the development of
machinery, the use of mechanical energy in production processes, and consequently the
emergence of the concept of factory with large number of workforce working together.
2. Trade Union Movement Era:
Shortly after the emergence of factory system, workers started to organize themselves based on
their common interests to form workers’ associations which were subsequently known as
trade unions. The basic objectives of these associations were to safeguard interest of their
members and to sort out their problems which arose primarily because of employment of child
labour, long hours of work, and poor working conditions.
3. Social Responsibility Era:
In the first decade of 20th century, some factory owners started adopting a more humanistic and
paternalistic approach towards workers. Paternalistic approach to labour management is based on the
philosophy that labour is just like a child and owner is just like a father and the owner should take care of
his labour just like a father takes care of his children.
4. Scientific Management Era:
Around the beginning of 20th century, Taylor started to find out ‘one best way of doing thing’ based on
time and motion studies. On the basis of his experiments, he was able to increase workers’ productivity
considerably and wrote many papers based on these experiments and a book on scientific management.
5. Human Relations Era:
Around 1920s, management researchers gave a close look at the human factor at work and the variables that
affected people’s behaviour. It is concluded that in order to have better productivity, management should
take care of human relations besides the physical conditions at the workplace.
6. Systems and Contingency Approach Era:
Systems and contingency approach has attracted maximum attention of thinkers in management in the
present era. It is an integrated approach which considers management of human resources in its totality
based on empirical data.
7. Human Resource Management Era:
 CONCLUSION
HRM began as a record-keeping function. Later on, the administration of labor
agreements became its primary task. After some time, the focus shifted to the
scientific aspect involving systematic techniques for employee selection,
training & Compensation. On the other hand, the emerging concept looks upon
them as a resource, an asset & an opportunity.
 HRM AND ITS EVOLUTION IN INDIA
 The history of HRM in India dates back to the early 1980s when Mr. Udai pareek and Mr. T.V. Rao
championed the cause of the HRM movement. The early adopters of the HRM movement include
public sector enterprises such as Bharat Heavy Electricals Limited (BHEL), State Bank of India, etc.
 Initially, Indian organizations used to have an industrial relations (IR) department, which was
subsequently re-christened ad the personnel & IR department, with the welfare department as one of its
sub-departments.
 The organizations have to compete for scarce resources, the most important among them being the
human resources, more so in the case of the service sector. This has called for the radical
transformation of personnel and administrative departments into human resource departments to reflect
the human facet of organizations.
 A glance at the structure of various Indian organizations indicates that the majority of the organizations
have rechristened their personnel and administrative department as human resource development
(HRD) departments
 DIFFERENCES BETWEEN PERSONNEL MANAGEMENT
(PM) AND HUMAN RESOURCE MANAGEMENT (HRM)
1. Personnel management is a traditional approach of managing people in the
organization. Human resource management is a modern approach of managing people and
their strengths in the organization.
2. Personnel management focuses on personnel administration, employee welfare and labor
relation. Human resource management focuses on acquisition, development, motivation and
maintenance of human resources in the organization.
3. Personnel management assumes people as a input for achieving desired output. Human
resource management assumes people as an important and valuable resource for achieving
desired output.
4. Under personnel management, personnel function is undertaken for employee's
satisfaction. Under human resource management, administrative function is undertaken for
goal achievement.
5. Under personnel management, job design is done on the basis of division of labor. Under
human resource management, job design function is done on the basis of group work/team
work.
6. Under personnel management, employees are provided with less training and
development opportunities. Under human resource management, employees are provided
with more training and development opportunities.
7. In personnel management, decisions are made by the top management as per the rules and
regulation of the organization. In human resource management, decisions are made
collectively after considering employee's participation, authority, decentralization, competitive
environment etc.
8. Personnel management focuses on increased production and satisfied employees. Human
resource management focuses on effectiveness, culture, productivity and employee's
participation.
[Link] management is a routine function. Human resource management is a strategic
function
THE RISING INTEREST IN HRM (WHY HRM
MATTERS)
 HR activities are not to be confined to traditional administrative HR activities. It should be
evaluated on the basis of:
 HR should not be defined by what it does but what it delivers.
 HR outcome not the HR activities alone. The outcome that enrich the organizational value to the
customers, investors and employees.
 The following major situations that have made HRM the most crucial function in the
organization are:
Increasing role of human resources in the “organization effectiveness” in the competitive, ever-
changing business environment.
Rapid technological changes requiring updated human resources.
Increase in size and complexity of modern organizations.
Ever changing external environment factors and particularly globalization.
Increasingly diversity of the workforce ( cultural diversity, ethnic diversity)
 FEATURES OF HRM
 Considers Employees as Individuals as well as Team Members : HRM is a management function that
deals with dual aspects of employees. It has to plan keeping in mind that employees work s a single
person as well as a team member.
 HRM Cover different categories of employees:

 Continuous and Never Ending process: Functions of human resource management is a continuous
process as it operates in alignment with the overall organisational strategy.
 Both a Line and staff function: it is present both in the planning as well as the executing functions. It
design policies this is a staff function, and then it makes the same policies executed by ordering the line
supervisors .
 HRM is a Complex process: HR‟s primary work is to deal with people, it has to face a lot of challenges.
The very nature of human beings is complex as there are known and unknown characteristics that affect
the organisational culture as well as the performance.
 Development Oriented : The primary responsibility of human resource is to provide uninterrupted
supply f right talents in a cost effective manner to the organisation
 HRM OBJECTIVES
Societal Objectives:
The societal objectives are socially and ethically responsible for the needs and challenges of society. While doing
so, they have to minimize the negative impact of such demands upon the organisation. The failure of
organisations to use their resources for society‘s benefit in ethical ways may lead to restrictions.
For example, the society may limit human resource decisions to laws that enforce reservation in hiring and laws
that address discrimination, safety or other such areas of societal concern.
Key functions: Legal compliance Benefits ,Union- management relations

Organisational Objectives:
The organisational objectives recognise the role of human resource management in bringing about organisational
effectiveness. Human resource management is not an end in itself; it is only a means to assist the organisation with
its primary objectives. Simply stated the human resource department exists to serve the rest of the organisation.
Key functions: Human Resource Planning ,Employee relations ,Selection ,Training and
development ,Appraisal ,Placement ,Assessment
Functional Objectives:
Functional objectives try to maintain the department‘s contribution at a level appropriate to the
organisation‘s needs. Human resources are to be adjusted to suit the organisation‘s demands. The
department‘s level of service must be tailored to fit the organisation it serves.
Key functions: Appraisal ,Placement ,Assessment

Personal Objectives:
Personal objectives assist employees in achieving their personal goals, at least insofar as these goals enhance
the individual‘s contribution to the organisation. Personal objectives of employees must be met if they are to
be maintained, retained and motivated. Otherwise, employee performance and satisfaction may decline
giving rise to employee turnover
 Key functions: Training and development ,Appraisal, Placement ,Compensation ,Assessment
PROCESS OF HRM
 Planning Human Resource - Any business functions cannot be started without understanding the
need, cost factor as well s the environmental factor. Thus in this step a detailed plan is made that
consists of identifying human resources needs in terms of number of employees and type of skills.

 This assessment is done on the basis of business plans like, expansions, closure, market
competition, turnover etc. Estimating costs of employing persons, how it will impact the finances
etc. Human resource planning is generally in the starting of the year.

 Acquisition of Human Resource - Once the plain is done, the next step of the HR process is to
identify the potential employees. It means getting the right talent in the organisation and placing
them in their jobs. The sub functions include, induction, placement, communicating job
expectations etc.
 HR development - Once the right employees are inducted in the organisation, the second
essential function is to provide them the training and development

 Employee Training: Training is usually a short term activity and aims at fulfilling the skill
gaps in an employee. An employee‟s gets knowledge and practical learning of operational and
Technical skill.
 Management Development: This helps in enhancing an employee‟s knowledge, capabilities
and competencies. It is concerned with developing the managerial skills in an employee like
team work, supervisory skills, leadership etc.

 Career Development: This is a continuous process and help employees in taking their careers
ahead. Organisation provides those help in the form of performance assessments, feedbacks,
mentoring, coaching etc. Apart from this career are managed through succession planning,
promotions, transfers etc.
 Motivation - The next important step of the HRM process is the Motivational Programs. The
various development activities that were provide to an employee‟s makes them ready to
perform their assigned roles and responsibilities.

 Administration - The final step is concerned with managing the various aspects related to
employee‟s safety, well being etc. various norms related to labour laws; compensations etc. are
reviewed from time to time to keep the organisational talent safe and secure.
In order to achieve the above objectives, human resource management undertakes the following
activities:
i) Human Resource Planning, i.e., determining the number and kinds of personnel required to fill various
positions in the organisation.
ii) Recruitment, selection and placement of personnel, i.e., employment function.
iii) Training and development of employees for their efficient performance and growth.
iv) Appraisal of performance of employees and taking corrective steps such as transfer from one job to
another.
v) Motivation of workforce by providing financial incentives and avenues of promotion.
vi) Remuneration of employees. The employees must be given sufficient wages and fringe benefits to
achieve higher standard of living and to motivate them to show higher productivity.
vii) Social security and welfare of employees.
 FUNCTIONAL AREAS OF HRM
1. Strategic HR Management:
As a part of maintaining organizational competitiveness, strategic planning for HR effectiveness can
be increased through the use of HR metrics and HR technology.
Human resource planning (HRP) function determine the number and type of employees needed to
accomplish organizational goals.
HRP includes creating venture teams with a balanced skill-mix, recruiting the right people, and
voluntary team assignment.
This function analyses and determines personnel needs in order to create effective innovation teams.
The basic HRP strategy is staffing and employee development.

HR metrics are data points that allow you to track key human resource and recruitment activities like employee
performance, retention, compensation, engagement, cost-per-hire, time-to-hire, and more.
HR technology (human resources technology) is an umbrella term for software and associated hardware for automating
the human resources function in organizations. It includes employee payroll and compensation, talent acquisition and
management, workforce analytics, performance management, and benefits administration.
2. Equal Employment Opportunity:
Compliance with equal employment opportunity (EEO) laws and regulations affects all
other HR activities.
The principle that everyone has equal way to pursue a job that is based on merit regardless
of characteristics.
The equal employment opportunity laws have been established as a protection for
employees against workplace discrimination. The objective is to allow people from
different backgrounds to work together in a harmonious atmosphere.
3. Staffing:
The aim of staffing is to provide a sufficient supply of qualified individuals to fill jobs in an organization.
Job analysis, recruitment and selection are the main functions under staffing.
Workers job design and job analysis laid the foundation for staffing by identifying what diverse people do in
their jobs and how they are affected by them.
Job analysis is the process of describing the nature of a job and specifying the human requirements such as
knowledge, skills, and experience needed to perform the job. The end result of job analysis is job
description.
Job description spells out work duties and activities of employees. Through HR planning, managers
anticipate the future supply of and demand for employees and the nature of workforce issues, including the
retention of employees. So HRP precedes the actual selection of people for organization.
These factors are used when recruiting applicants for job openings. The selection process is concerned with
choosing qualified individuals to fill those jobs. In the selection function, the most qualified applicants are
selected for hiring from among the applicants based on the extent to which their abilities and skills are
matching with the job.
A good job analysis helps in creating a Job Description and Job Specification.
Job Description
1. Title, Position,
Location
2. Duties, Reporting
3. Machines,
Workplace
Environment

Job
Analysis
Job Specification
1. Education, Work,
Experience, Skills
2. Responsibilities,
Trainings
3. Personal and
Emotional
characteristics
4. Talent Management and Development: Beginning with the orientation of new
employees, talent management and development includes different types of training.
Orientation is the first step towards helping a new employee to adjust himself to the new job and
the employer. It is a method to acquaint new employees with particular aspects of their new
job, including pay and benefit programmes, working hours and company rules and expectations.
Training and Development programs provide useful means of assuring that the employees are
capable of performing their jobs at acceptable levels and also more than that. All the organizations
provide training for new and in experienced employee.
In addition, organization often provide both on the job and off the job training programmes for
those employees whose jobs are undergoing change.
Likewise, HR development and succession planning of employees and managers is necessary to
prepare for future challenges.
On-the-job training methods are as follows:

1. Job rotation: This training method involves movement of trainee from one job to another gain knowledge and

experience from different job assignments. This method helps the trainee under­stand the problems of other employees.

2. Coaching: Under this method, the trainee is placed under a particular supervisor who functions as a coach in training

and provides feedback to the trainee. Sometimes the trainee may not get an opportunity to express his ideas.

3. Job instructions: Also known as step-by-step training in which the trainer explains the way of doing the jobs to the

trainee and in case of mistakes, corrects the trainee.

4. Committee assignments: A group of trainees are asked to solve a given organizational problem by discussing the

problem. This helps to improve team work.

5. Internship training: Under this method, instructions through theoretical and practical aspects are provided to the

trainees. Usually, students from the engineering and commerce colleges receive this type of training for a small stipend.
The following are some of the off-the-job techniques:
1. Case study method: Usually case study deals with any problem confronted by a business which can be
solved by an employee. The trainee is given an opportunity to analyse the case and come out with all possible
solutions. This method can enhance analytic and critical thinking of an employee.
2. Incident method: Incidents are prepared on the basis of actual situations which happened in different
organizations and each employee in the training group is asked to make decisions as if it is a real-life
situation. Later on, the entire group discusses the incident and takes decisions related to the incident on the
basis of individual and group decisions.
3. Role play: In this case also a problem situation is simulated asking the employee to assume the role of a
particular person in the situation. The participant interacts with other participants assuming different roles.
The whole play will be recorded and trainee gets an opportunity to examine their own performance.
4. In-basket method: The employees are given information about an imaginary company, its activi­ties and
products, HR employed and all data related to the firm. The trainee (employee under training) has to make
notes, delegate tasks and prepare schedules within a specified time. This can develop situational judgments
and quick decision making skills of employees.
5. Business games: According to this method the trainees are divided into groups and each group has to
discuss about various activities and functions of an imaginary organization. They will discuss and decide
about various subjects like production, promotion, pricing etc. This gives result in co-operative decision
making process.
6. Lectures: This will be a suitable method when the numbers of trainees are quite large. Lectures can be very much

helpful in explaining the concepts and principles very clearly, and face to face interaction is very much possible.

7. Simulation: Under this method an imaginary situation is created and trainees are asked to act on it. For e.g.,

assuming the role of a marketing manager solving the marketing problems or creating a new strategy etc.

8. Management education: At present universities and management institutes gives great emphasis on management

education. For e.g., Mumbai University has started bachelors and postgraduate degree in Management. Many

management Institutes provide not only degrees but also hands on experience having collaboration with business

concerns.

9. Conferences: A meeting of several people to discuss any subject is called conference. Each par­ticipant contributes by

analyzing and discussing various issues related to the topic. Everyone can express their own view point.
5. Total Rewards:
Compensation in the form of pay, incentives and benefits are the rewards given to the employees
for performing organizational work. Compensation management is the method for determining how
much employees should be paid for performing certain jobs.
Compensation affects staffing in that people are generally attracted to organizations offering a
higher level of pay in exchange for the work performed.
To be competitive, employers develop and refine their basic compensation systems and may use
variable pay programs such as incentive rewards, promotion from within the team, recognition
rewards, balancing team and individual rewards etc.
This function uses rewards to motivate personnel to achieve an organization’s goals of productivity,
innovation and profitability. Compensation is also related to employee development in that it
provides an important incentive in motivating employees to higher levels of job performance to
higher paying jobs in the organization.
Benefits are another form of compensation to employees other than direct pay for the work
performed. Benefits include both legally required items and those offered at employer’s discretion.
Benefits are primarily related to the area of employee maintenance as they provide for many basic
employee needs.
6. Risk Management and Worker Protection: HRM addresses various workplace risks to ensure
protection of workers by meeting legal requirements and being more responsive to concerns for workplace
health and safety along with disaster and recovery planning.

7. Employee and Labor Relations: The relationship between managers and their employees must be
handled legally and effectively. Employer and employee rights must be addressed.
It is important to develop, communicate, and update HR policies and procedures so that managers and
employees alike know what is expected. In some organizations, union/management relations must be
addressed as well.
The term labour relation refers to the interaction with employees who are represented by a trade union.
Unions are organization of employees who join together to obtain more voice in decisions affecting wages,
benefits, working conditions and other aspects of employment.
With regard to labour relations the major function of HR personnel includes negotiating with the unions
regarding wages, service conditions and resolving disputes and grievances.
 HUMAN RESOURCE
ENVIRONMENT
What is environment?
In simple words, environment comprises all those forces which have their bearing on
the functioning of various activities including human resource activities.
Environment scanning helps HR manger become proactive to the environment which
is characterised by change and intense competition. Human resource management is
performed in two types of environments- internal and external.
 INTERNAL ENVIRONMENT
These are the forces internal to an organisation. Internal forces have profound influence on HR
functions. The internal environment of HRM consists of unions, organizational culture and conflict,
professional bodies, organisational objectives, polices, etc. A brief mention of these follows.
 Unions: Trade unions are formed to safeguard the interest of its members/workers. HR activities like
recruitment, selection, training, compensation, industrial relations and separations are carried out in
consultation with trade union leaders.
 Organisational Culture and Conflict: As individuals have personality, organizations have cultures.
Each organisation has its own culture that distinguishes one organisation from another.
 Culture may be understood as sharing of some core values or beliefs by the members of the
organisation “Value for time” are the culture of Reliance Industries Limited. The culture of Tata
conglomerate is “get the best people and set them free”.
 HR practices need to be implemented that best fit the organisation’s culture. There is often conflict
between organizational culture and employee’s attitude. Conflict usually surfaces because of dualities
such as personal goal vs. organisational goal, discipline vs. autonomy, rights vs. duties, etc. Such
conflicts have their bearings on HR activities in an organisation.
Professional Bodies: Like other professional bodies, the NIPM as the HR professional body
regulates the functions of HR practitioners in India. For this the NIPM in of ethics which the HR
practitioners are expected to declare their allegiance to the code. Thus, professional bodies also
influence HR functions of an organization
Employee Relations: Human resource activities must consider several factors like training their staff
before promoting them when their recruitment policies are based on internal promotion. They should
monitor retiring employees so that replacement arrangements are made in time.
New entrants: These are businesses entering into an industry. New entrants offer competitive salaries
that attract employees. HRM should analyze their industry in order to know new entrants. This will
help them have strategies aimed at retaining in order prevent them from being poached by the new
entrant.
Organisational Structure: Organizational structure is a system used to define a hierarchy within an
organization. It identifies each job, its function and where it reports to within the organisation.
 EXTERNAL ENVIRONMENT

External environment includes forces like economic, political, technological, demographic etc. these
exert considerable influence on HRM. Each of these external forces is examined here.
 Economic: Economic forces include growth rate and strategy, industrial production, national and per
capita incomes, money and capital markets, competitions, industrial labour and globalisation. All
these forces have significant influence on wage and salary levels. Growing unemployment and
reservation in employment also affect the choice for recruitment and selection of employees in
organisations.
 Political: Political environment covers the impact of political institutions on HRM practices. For
example, democratic political system increases the expectations of workers for their well being.
 Government Regulations: Presence of Government regulations with the introduction of new
workplace compliance w.r.t work, workers and workplace, HR is constantly under pressure to stay
within the law. These types of regulations influence every process of the HR department, including
hiring, training, compensation, termination, and much more. Without adhering to such regulations a
company can be fined extensively which if it was bad enough could cause the company to shut down
 Technological: Technology is a systematic application of organised knowledge to practical tasks.
Technological advances affect the HR functions in more than one way: First; technology
makes the job more intellectual or upgraded. Second, it renders workers dislocated if they do not
equip themselves to the job. Third, job becomes challenging for the employees who cope with the
requirements of technology Fourth, technology reduces human interaction at the work place.
Finally job-holders become highly professionalized and knowledgeable in the job they perform.

 Demographic: Demographic variables include sex, age, literacy, mobility, etc. Modem work force
is characterized by literate, women and scheduled caste and scheduled tides workers. Now,
workers are called knowledge workers’ and the organisations wherein they work are called
‘knowledge organisations’. As such, the traditional line of distinction between manual and non-
manual workers is getting blurred. Employees are demanding parity in remuneration and
responsibility among various categories and levels of employees.
Legal factors like organizational health, trading, competition and regulations from legal firms directly affect a
business. The important legislations affecting HRM in India are:
i. Factories Act, 1948
ii. Trade Unions Act, 1926
iii. The Payment of Wages Act, 1936
iv. The Minimum Wages Act, 1948
v. Employees State Insurance Act, 1948
vi. Workmen‟ Compensation Act, 1923
vii. The Payment of Bonus Act, 1965
viii. The Payment of Gratuity Act, 1972
ix. The Maternity Benefit Act, 1961
x. The Apprentice Act, 1961
ROLE OF HR MANAGER IN AN
ORGANISATION
HR manager plays a pivotal role to achieve organizational objectives. It is human
resource/work people who perform task and achieve company goals. So, human resource is
a must in an organization. To get the right number and right kind of human resource at the
right time of company need and to motivate, prepare and develop the human resource to
perform task, the person in charge of such job, i.e., human resource manager is no less
important in an organization than human resource at work.
HR manager is a guide, philosopher, friend, path-finder, path identifier, problem solver,
competence maker of the human resource
ROLE OF HR MANAGER TO ACHIEVE
ORGANIZATIONAL OBJECTIVES
 1. Advisory Role: One of the major roles of HR manager is, to advise the top management in the matter
relating to management and development of human resource, in order to achieve organizational objects.
Looking to the company’s vision, mission and long range planning, HR executive advises the higher
management to formulate appropriate HR policies, procedures which may create a perceptible
change in the minds of the workers’ to help the transformational process of dynamism.

 2. Pro-Acting Role: HR manager ascertains the probable areas of conflict and differences between
workers and management, identifies the factors that may create problems in future, forecasts the extent,
quantum of loss that may occur and the department may suffer loss and takes remedial measures
beforehand by way of developing organizational culture, climate, introducing system, mechanism,
and does not leave any room to crop up problems, grievances.
 3. Welfare Role: HR executive looks to the welfare aspect of the employee’s viz., canteen, crèche, rest-room,
hospital, transportation, housing accommodation, school, etc. His one of the principal roles is to provide
welfare facilities to the employees for their betterment and well-being.

 4. Developmental Role: Development of workers for attaining company goals is made by the HR manager
through improvement of knowledge, skill, abilities, aptitude, attitude, value, beliefs etc. A dynamic
organization needs dynamic employees and transformation of employee’s mind-set to the process of
dynamism is possible only when all the potential areas for growth and development are reinforced. HR
manager takes all possible measures for growth and development of employees through formulation of HR
policies in the matter of training, career planning and development, counselling etc.
 5. Mediator’s Role: HR manager works as a link personality between trade unions and top management in
order to eliminate the differences of opinions cropped up in process of settlement of disputes. He takes
initiative to sort out problems through collective bargaining/ bipartite negotiation process.
 6 Social Upliftment Role: Organization is part and parcel of the society. As a societal member it has ethical
and moral obligation to contribute to the society for its growth and development by way of taking
necessary measures like creating and improving infrastructure, spreading learning institutions, providing
medical facilities, generating employment opportunities. HR executive plays a vital role to give a proper
shape in the formulation of suitable HR policies for the people in the society.
 7. Counsellor’s Role: Because of illiteracy and ignorance workers cannot take decision in their personal problems and
they need advice to sort out such problems, viz. education of children, medical treatment, marital matter, family
problems, etc. HR manager, as he comes close to the workers because of his nature of work, develops understanding
between them and advises, guides the workers in right direction.

 8. Spokesperson Role: HR executive works as a spokesperson of the company especially, in the matter of depicting
organization health, condition, strength etc. to the employees while negotiating for settlement of industrial disputes.
He also acts as a representative of the workers when they are nonunionized/unorganized and cannot represent their case
properly to the top management. Under such circumstances HR manager places their grievances, problems, demand to
the top management for settlement/redressal.

 9. Motivator’s Role: One of the functions of HR manager is to motivate the employees to achieve their own goals, as
well as organizational goals HR manager performs such role by way of introducing reward schemes. HR
manager’s role of establishing mutual understanding, mutual confidence and mutual trust helps to motivate the
employees to excel in the level of their performance.
Depending on the size of the organization, an HR manager has the responsibility of looking at all the functions
that deal with the needs and activities essential for people management. Some of roles and responsibilities are as
follows:
1. Recruiting and hiring: It is a process of discovering sources of manpower and employing effective measures for
attracting that manpower in adequate numbers to facilitate the selection of an efficient working force in an
organization.
2. Training and development: These processes help in enhancing and enabling the capacities of people to build their
strengths and confidence in order for them to deliver more effectively.
3. Competency development: Competency is a cluster of related knowledge, skills, and attitude that affect a major
part of one’s job. It can be improved by means of training and development.

4. Communication: It is an activity that involves conveying meaningful information. At all times, the HR must
convey all relevant information to the employees.

5. Employee relations: This is a concept that works towards bettering the relations among the employees, as well as
between the employee and the management.

6. Policy recommendation: Policy recommendations help to streamline management practices and reduce employee
grievances. For example, a manager who is more than 35 years and, who possesses a minimum experience of 7 years,
is entitled to receive the benefits stated in the company’s administrative manual.
ROLE OF HR MANAGER –AS BUSINESS PARTNER
In today’s times, HR managers in organizations function as strategic partners working closely with
others to be able to contribute to the development and the accomplishment of the organization’s
business plan and objectives.
The HR business objectives need to be aligned to the overall strategic business plan and
objectives.
The tactical HR representative needs to be deeply knowledgeable about the design and redesign of
work systems to make the organization a better and a more efficient place to work in.
This strategic partnership impacts all the HR services including hiring, rewarding, recognizing,
developing appraisal systems, and many more. T
o be an effective business manager, the HR personnel should be business-minded, knowledgeable
about finance and accounting, and accountable and responsible for cost reductions and the
measurement of all other HR programs and processes.
 ROLE OF HR MANAGER –AS EMPLOYEE ADVOCATE
As an employee advocate, the HR manager utilizes his knowledge and skills to promote
people’s interests for organizational successes.
This advocacy includes expertise in creating a work environment in which people choose to
be motivated and happy. It conforms to the maxim—live happily and work happily.
An HR professional fosters effective methods of goal setting, communication, empowerment
through responsibility, and builds employee ownership of the organization. Apart from
these functions, he also helps in establishing a suitable organizational culture and
environment in which people have the competency, concern, and commitment to serve
customers well.
 ROLE OF HR MANAGER –AS COUNSELLOR

Though every manager in an organization performs the role of a counsellor in relation to the
employees, the role is generally limited to solving minor problems.
Human resource manager and other HR personnel are uniquely placed to perform the role of
counsellors organization- wide. An HR manager can perform the role in employee counselling in
two forms — working as counsellor and providing training for counselling to line managers for
effective counselling.
As a counsellor, an HR manager, having behavioural science background, can perform all
functions of counselling. Because of his in-depth knowledge, he can identify and diagnose the
emotional problems of employees and suggest suitable solution with a provision of continuous
feedback. He can organize his department in such a way that he has required number of employee
counsellors in his department. In fact, most of the large organizations emphasize the appointment
of professional counsellors in HR department.
HR manager can also develop counsellors from among the line managers for providing
counselling. The need for training supervisors in counselling is more relevant so that they may
take care of the emotional vulnerability of workers. Training for counselling may include
sensitivity training, empathy training, and other behavioural training.
 What Are HR Policies?
Human resource policies are rules and processes that govern the employment relationship between
the employer and employee.
Human resources (HR) policies and procedures are regarded as formal commitments that are focused
upon the ways, in which employers treat the employees. Within the organization, it is apparent that
members cannot carry out tasks and activities in isolation.
. The primary objective of HR policies and procedures is to create a working environment, which
makes provision of support and assistance to the employees to build up self-esteem and self-
confidence.
HR policies and procedures are subjected to changes. They do not remain the same throughout. With
advancements taking place and with the advent of modernization and globalization, changes take
place in HR policies and procedures.
The HR policies and procedures aim at promoting an environment, in which the individuals feel
appreciated and empowered.
 WHAT HR POLICIES DO
HR policies are an important part of how your business is structured and regulated to ensure
compliance and actions consistent with culture. Some benefits of HR policies include:
• Describe the rights and responsibilities of both employers and employees.
• Guide employees and leaders clarifying expected behaviors.
• When the human resources abide by the policies and procedures, they are not only able to
implement their job duties appropriately, but also would promote discipline within the
working environment.
• Minimise favouritism and discrimination
• Compared the performance
• Create and develop employee enthusiasm and loyalty
1. Social Responsibility:
(a)Equity-treating employees fairly and justly by adopting an even-handed approach.
(b) Consideration-considering individual circumstances when decisions affect
the employee's prospects, seniority or self-respect.
(c) Quality of work life- increase the interest in the job and organisation by reducing monotony, increasing
variety of responsibilities, avoiding stress and strain.
(d) Working conditions - Provide healthy, safe and conducive working conditions.

2. Employment Policies:
Provision of equal employment opportunities - selecting the candidates based on job requirements -
encourage the employee on the job and in the organisation.

3. Promotion Policies:
Promotion policies would attempt to reconcile the demands of the employee for growth and organisation's
demands for fresh and much more potential blood. Promotion policy should be fair, and just to all.
4. Development Policies:
Policies should cover the kind of employees to be trained, time span of training programmes,
techniques, rewarding and awarding system, qualifications and experience of the trainer,
encouraging the employees for self-advancement, etc.
These policies also cover the areas like career planning and development, performance appraisal,
organisational change and organisational development.

5. Relations Policies:
Relations policies cover the areas of human relations like: policies regarding motivation, morale,
communication, leadership styles, grievance procedure, disciplinary procedure, employee
counselling, etc.
These policies also cover the areas of industrial relations like union recognition, union
representation, collective bargaining, prevention and settlement of industrial disputes, participative
management, etc. Human resource policies to be effective, should be written on the basis of authentic
information available from different sources.
 AT-WILL EMPLOYMENT
This statement reiterates that either the employer or the employee have the right to
terminate the employment relationship at any time.
Furthermore, the reasons for termination can also be numerous, but it needs to be ensured
that reasons are lawful and valid.
In other words, when the employers and employees are bringing an end to the employment
relationship, when employees are quitting their jobs or when employers are terminating the
employees, in accordance to the policy the reason should be genuine and lawful.
Therefore, it can be stated that at-will employment is an important HR policy, applicable in
various types of organizations.
 ANTI-HARASSMENT AND NON-
DISCRIMINATION
These are the policies that prohibit harassment and discrimination within the working
environmental conditions. Within the organization, there are individuals, who are different from
each other on the basis of number of factors. These include, caste, creed, race, religion, gender,
age, ethnicity, educational qualifications, competencies and socio-economic background.
It is necessary to make provision of equal rights and opportunities to all individuals and
there should not be any form of discrimination on the basis of any of these factors.
In order to lead to enrichment of the organizational structure, it is essential to abide by the
policies of anti-harassment and non-discrimination.
 EMPLOYMENT CLASSIFICATIONS
The employment classifications are defined as jobs, which are full-time and part-time. In
various types of organizations as well as educational institutions, the individuals seek
employment opportunities on full-time as well as part-time basis.
When the individuals form the viewpoint that they are engaged in other tasks for which they
need to take out time or have other responsibilities, they are engaged in their jobs on part-time
basis.
Normally, individuals are engaged in jobs on full-time basis to enhance their career prospects
and to sustain their living conditions in an appropriate manner. Employment classifications
determine the eligibility for pay and benefits.
 LEAVE AND TIME OFF BENEFITS
When employees are overwhelmed by various issues and problems and are required to take
leave, it is necessary to grant them leave in accordance to the policies and procedures.
On the other hand, when they need time off, such as, when they are required to leave the
workplace within the course of working hours, then too it has to take place in accordance to
policies.
These policies address the rules and procedures of the organization in terms of holidays,
vacations, sick leaves, bereavement leaves, leaves due to personal problems, family issues
and other time off benefits. Furthermore, it is necessary to check the state and local law to
ensure all the leave requirements are included in employee handbook.
 SAFETY AND HEALTH
Safety and health of the employees are regarded to be of utmost significance. It is indispensable
for the employees to maintain good health in order to carry out their job duties in an appropriate
manner.
Safety policies are related to the safety procedures. When employees are engaged in hazardous
jobs, it is essential for them to generate awareness in terms of safety and health procedures that
are necessary to generate the desired outcomes.
On the other hand, policies related to maintenance of good health conditions among the
employees are primarily concerned with methods that are necessary to prevent accidents, injuries
and various types of health problems. It is essential for the employees to take precautions,
especially when they are engaged in hazardous occupations and are required to work with
chemicals and machines.
EMPLOYEE CONDUCT, ATTENDANCE AND
PUNCTUALITY
Policies related to employee conduct enable them to maintain good terms and relationships with
each other, communicate effectively and inculcate the traits of morality and ethics.
Whereas, policies related to attendance and punctuality make provision of information to the
employees that they need to maintain their attendance and depict punctuality.
The employees need to be scheduled to work in their required work timings. Within the course of
performance of their job duties, they need to be aware of measures and approaches that are
necessary to achieve personal and organizational goals and incur the feeling of job satisfaction.
 CONFLICT RESOLUTION METHODS
Conflict resolution methods need to be put into operation in a peaceful manner.
In some cases, there are occurrence of conflicting situations and disagreements among the
members of the organization. In such cases, there are formulation of policies that they need
to be implemented in a peaceful manner.
Peaceful settlement of conflicting situations and disagreements enable the individuals to
form good terms and relationships with each other, carry out their job duties in an efficient
manner and incur the feeling of job satisfaction.
When there are occurrence of conflicting situations and disagreements, it is vital to
implement effective communication skills and listen to each other in a calm manner.
Therefore, it can be stated that conflict resolution methods are effective in the maintenance
of good terms and relationships with each other and work in co-ordination.
 AUTHORITY OF HR MANAGER AT REGIONAL LEVEL
National Bank of India is the biggest commercial bank in the country with its head office at Mumbai. It
has 6,000 branch offices across the country. It has been managing these branches with 20 regional offices
located in important places in the country. One of those regional offices is located in Agra.

Mr. Kamlesh Sharma is the regional manager of Agra Region and Mr. SankarDayal is the HR Manager at
the Agra Regional Office. Mr. Purohith is working as the Chief HR Manager at the Central Office,
Mumbai. Earlier the central office is used to select candidates for different jobs and allot them to different
regions. But the bank has recently decided to decentralize the hiring process and hence asked all the
regional managers to select their own candidates. Mr. Kamalesh Sharma asked various departemental
heads at regional office and branch managers to rewrite job description, job specification, estimate man
power needs and send them directly to him.
Mr. SankarDayal has received a letter to this effect in the capacity of head of personnel department in the
regional office immediately he met Mr. Kamalesh Sharma and told him that his job was to prepare job
description, job specification, estimate manpower for the entire region and as such, he would be
authorized to do all those functions instead of departmental heads at regional office and branch managers.
But the regional manager did not accept his request and told Mr. SankarDayal that things would go
according to his own instructions. Mr. SankarDayal told the regional manager not to discount his request
and restore his positional authority.

Questions:

a) What is the main problem in this case?

b) What should be done to resolve the conflict between the Regional manager and Regional HR manager?
 CASE STUDY
Mr. Bhat, Human Resource Manager of IVS Group of companies approached the CEO on 30th march,
2007 and apprised him of the absence of [Link] Vaidhya, Assistant Accountant in the Corporate Finance
Department, for the past one month and requested him to approve the show-cause notice to be saved to
[Link] as per the Labour Laws in force.
The CEO told [Link]: "When [Link] has been absent for the last one month , your duty is to go to
[Link],s house, find out the reason and solve the problem of [Link], and not just to report the absence
to me. Go immediately to [Link],s house find the reason and report it to me before [Link] P.M. today."
Mr. Bhat immediately left for [Link]'s house and learnt from [Link]'s Wife that [Link] has been in
distress as he has been trying to mobilise Rs.1,00,000 for the surgery of his sick wife in a reputed hospital
in Chennai. [Link] could meet [Link] around [Link] and both of them then met the CEO. Both of them
apprised the CEO the reason for the absence and distress of [Link].
The CEO immediately contacted the hospital and informed them that the company will pay Rs.1,00,000
tomorrow i.e., 31st March 2007 and requested the doctor to conduct the surgery for Ajay's wife tomorrow
itself.
The CEO ordered [Link] to arrange to issue a cheque for Rs.1,00,000 in favour of the hospital and also
pay Rs.10,000 in cash to [Link] to meet incidental expenses as a grant. [Link] as well as [Link] were
surprised at the decision of the CEO [Link] became emotional and touched the feet of the CEO.
The CEO told [Link]: "Problems of our employees are the company's problems. We treat the employees
as human being and members of the company's family."
This piece of news spread in the entire company within no time and the employees felt highly secured.
The productivity level increased by 100% in the next quarter itself and sustained over the years to come.

Questions:-
1. Why did Mr. Bhat prefer to follow a legal approach to the problem?
2. Why did the CEO provide Rs. 1, 10,000 as just a grant to Mr. Ajay?
3. What would be the morale of employee's family members after this incident?
4. Suggest a suitable title for the above said case and justify that title.