1283587490HRM Notes Various Topics August 2010

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HRM Issues. HRM has much to offer but there are reservations:
 Ambiguous and flawed concept: all hype and hope; full of rhetoric not
reality; promising more than it can deliver.
 Morality- workers must identify with aims and values of the bus. Their
involvement is on the company's terms. HRM may be a form of insidious
control. Executives preach that “what’s good for GM is good for America”.
“What’s good for the bus must be good for everyone in it”.
HRM and Personnel Management.

 Both concepts flow from bus strategy.
 Matching people for ever changing requirements.
 Communication and participation
 Differences may be in emphasis not substance. However Personnel
Management focuses on non- managers.
Organising the HR Function. This depends on the extent of decentralization,

size, type and nature of the enterprise, roles assigned etc. However in general
 The Head reports directly to CEO and is on the board or management
committee to facilitate strategy formulation.
 In decentralised/divisionalised organisations or subsidiaries each unit is
responsible for its own HR management affairs. But there is a group HR
head.
 Some activities are out sourced e.g. training HR, management and
specialists to provide support to ensure consistence of HR policies. Such
roles may appear to be a form of policing causing tension and ambiguity.
“HR proposes but the line disposes” They should however not issue
directives.
Job Analysis [JA]

This is the process of collecting, analysing and setting out info about the
content of jobs to provide a basis for job description and data for recruitment
training, JE and PM. It is concerned about what job holders are expected to do.
Role Analysis collects information as above on what people do and is concerned

about behaviour expected of role holders: the knowledge, skills and experience
needed to perform competently. It covers generic role carried out by a number
of people.
Competence Analysis establishes what is required to carry out a role in terms of

behavioural competence [soft skills] as well as technical/functional
competences [hard]
Job Description. Sets out job purpose, where it fits into the organisational
structure, context in which job holder functions and the principal
accountabilities of the job holder. These are derived from JA and are used for:
 Defining the place of the job in the organisation and to clarify the job's
contribution to organisational departmental objectives.
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 To produce person specification.

 Basis for contract of employment
 Framework for setting objectives for pm.
 Basis for Je and job grading.
It helps to build flexibility into a job description by focusing on results, need for
team work must be stressed. It should state job title, overall purpose/objective
of the job. Job descriptions should be as brief as possible.
Role Profile/Definition covers expectations, KRAs or accountabilities. What

role holders have to achieve.
Person Specification [job/personnel specification] spells out education,

qualifications, training, experience, personal attributes required to perform
satisfactorily. They are used in recruitment.
JA produces the following about a job:

 Overall Purpose – why the job exists, what holder is expected to
contribute
 Content Tasks. Operations and activities to e carried out converting inputs
[knowledge, skills, and abilities] into outputs [results].
 KRAs for which job holder is accountable.
 Performance criteria i.e. measures/indicators for assessing if job was done
satisfactorily.
 Responsibilities -with reference to the scope and impact of the job; the
amount of discretion allowed for decisions, difficulty, scale variety and
complexity of problems to be solved. Quantity/value of resources
controlled. The type and importance of interpersonal relations.
 Organisational factors- reporting relationships directly or functionally.
Involvement in team working.
 Motivating factors- promotion or career prospects, opportunities to
acquire new skills/expertise.
 Environmental factors. Working conditions, physical, mental, emotional
demands, health/safety considerations, unsocial hours, mobility,
ergonomic factors e.g. with reference to design, use of equipment or work
stations.
Data Collection Steps.

 Obtain documents e.g. organisation charts, manuals etc about the job.
 Ask managers.
 Ask job holders.
 Observe job holders.
Techniques used include:

 Interviews and check lists.
 Questionnaire
 observation
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 self description
 Diaries and logs.
Skills Analysis – skills needed for an acceptable standard of performance. This is

useful for designing learning and training programmes. It is mainly used for
technical, craft, manual and office jobs. It starts with a broad job analysis.
Competence Analysis. Approaches.

 Expert opinion. This tends to be bland and is a crude instrument.
 Structured Interviews use list of competences drawn up by experts.
 Workshops where people with expert knowledge gather. A facilitator is
used.
 Functional Analysis. Tasks are activities done at work while functions are
purposes for those activities.
 Critical Incidents on effective and ineffective behaviour through actual
examples.
 Repertory Grid also distinguishes good from poor standards of
performance. It is based on personal constructs – how we view the world.
This helps define essential requirements of successful performance.
Job Descriptions derived from Job Analysis are used for:
 Defining the place of the job in the organisation and clarifying it
contribution to organisational/departmental objectives.
 To produce person specification.
 Basis for contract of employment.
 Framework for setting objectives for Performance Management.
 Basis for Job Evaluation. And job grading.
It helps to build flexibility into a job description by focussing on results. Need for
teamwork must be stressed. The Job Description must state job title, overall
purpose/objective of the job.
Job Descriptions should be as brief as possible.
MOTIVATION. A motive is reason for doing something – what influences people

to behave a certain way. Motivation embodies:
 direction – what the person is trying to do
 effort – how they are trying
 Persistence- how long they keep at it.
Motivation is goal directed behaviour. Its main theories are:

 Instrumentality Theory. Rewards and punishment shape behaviour.
 Content Theory- Motivation is about acting to satisfy needs. [Maslow,
1954, Herzberg Two Factor, 1957]
 Process Theory focuses on psychological processes affecting motivation
with reference to expectations [Vroom, 1964], goals [Latham &Locke,
1979] and perceptions of equity [Adams, 1965].
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Instrumentality is belief that doing one thing leads to another e.g. that people
work for money. Rewards/penalties are attached directly to performance. It is
based on Skinner's [1974] principle of reinforcement in which behaviour is
assumed to be conditioned. It is also called the law of effects. It relies on
external controls.
Content/Needs Theory. An unsatisfied need creates tension and disequilibrium.

This unsatisfied need motivates behaviour. Needs have different potencies.
Different goals can satisfy a need and one goal can satisfy different needs e.g. a
new car satisfies transport and prestige needs. In addition to Maslow and
Herzberg, Alderfer ERG Theory [existence, relatedness and growth].
Process/Cognitive Theory. This concerns perceptions of one's environment

and the way it is interpreted and understood. The processes are:
 expectations [Expectancy Theory]
 goal Achievement [Goal Theory]
 Feeling about Equity [Equity Theory
Expectancy Theory. Was originally in Vroom's Valency-Intrumentality-

Expectancy Theory. [VIE].
Valence= value. Instrumentality=belief one thing leads to another. Expectancy
= probability that action/effort will lead to an outcome. The strength of
expectancies may be based on past experiences [reinforcement].
Goal Theory [Latham and Locke, 1979]. Where goals are specific, difficult
but accepted so participation in goal setting is important. Feedback helps in
maintaining motivation. Demanding goals if acceptable lead to better
performance than easy ones [Erz & Zidon, 1984]. This is the principle of MBO of
the 1960s. MBO however failed because need for agreement, reinforcement and
feedback was not appreciated. And it was done bureaucratically. Goal theory is
now the basis for Performance Management.
Equity Theory [Adams, 1965]. Perceptions about how one is treated compared
to others [Reference
group or relevant other persons]. Equity is always a comparative process and it
has two forms:
 Distributive Equity – fairness of rewards relative to contribution.
 Procedural Equity/justice – how company procedures are operated e.g.
appraisal, promotion and discipline. This must recognize employee's
viewpoint, absence of personal bias, applying criteria consistently;
feedback on outcomes of decisions and explanation of decisions made.
Commitment, Job Satisfaction and Job Engagement. Independently or in

association significantly affect organizational and individual performance.
Commitment is attachment and loyalty, identification and involvement in a
particular organization. It consists of:
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 strong desire to remain a member

 Strong belief in or acceptance of values/goals of the organization.
 Readiness to exert considerable effort for the organization. Actions are
undertaken voluntarily.
Commitment assumes a unitary frame of Reference consisting of shared

interests. However, Cyert and March [1963] and Mintzberg [1983] argue that an
organization consists of a coalition of interest groups where political processes
operate. So they ask: “Commitment to what? What’s in it for me?” the unitarist
notion also seems to foster a conformist approach.
Job Satisfaction refers to feelings and attitudes people have about their work.
Morale is often equivalent to satisfaction. It is affected by intrinsic or extrinsic
motivating factors, quality of supervision, social relationships. It is also
influenced by career opportunities, team work, and job challenge. It is
commonly held that job satisfaction leads to improve performance. But the
relationship may be in the opposite direction.
Job Engagement- people are interested even excited about what they do. But
people may like what they do without liking the organization especially
knowledge worker where the work is interesting in itself, has variety, give
autonomy, task identity and significance.
Psychological Contracting. Belief held by an individual and the employer

about what to expect from each other – a set of reciprocal but unarticulated
expectations. It is unwritten. Expectations are often implicit: they are not spelt
out in the employment contract. Employees expect to be treated fairly as
human beings; to be provided with work that uses their abilities, be rewarded
equitably; offered opportunities for growth. The employer expects employees to
do their best for the organization, to be committed to organizational values, to
be loyal, to enhance corporate image.
A psychological contract cannot be enforced at court, is never written down but

it is necessary for harmonious relationships. [See other Notes on this topic]
Job and Role Design. A job consists of a set of related tasks carried out by one
person. it is designed To fulfil a purpose. It remains unchanged whoever is in the
job. A role is the part people play in carrying out their work. Individual roles are
carried out by one person. Generic roles are essentially similar activities carried
out by a number of people. They may cover a whole occupation. It is described
in behavioural terms. It sets out outputs or outcomes.
Work provides an extrinsic reward [money] which satisfies basic needs but is
also instrumental in satisfying higher needs. However work also provides
intrinsic rewards under the control of the worker. A job embodies a number of
tasks, the different skills/competences used, range/scope of decisions, and
difficulty in predicting outcomes.
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The internal structure of a task consists of three elements:

 Planning [deciding on the course of actions, its timing and resources
required.
 Executing the plan and carrying it out.
 Controlling [monitoring performance and progress and taking corrective
action]
Fully integrated jobs must contain all three task elements. To be intrinsically
motivating jobs must provide:
 Feedback on performance preferably by self-evaluation. Ideally work should
be the complete product or significant part of it.
 Use of abilities.
 Self control – setting own goals and paths for achieving them.
Job Design. Specification of content, methods and relationships of jobs. It aims

to satisfy the needs of the individual. Job design starts with what work needs to
be done.
Principles of Job Design.

 Skill, variety, providing opportunities for people to do several tasks or
combine tasks.
 Task identity
 task significance
 autonomy
 feedback
Approaches to Job Design.

 Job Rotation to reduce monotony and increase variety.
 Job Enlargement -fragmented tasks are combined into one job.
 Job Enrichment -adds autonomy and responsibility. It maximizes interest
and challenge of work by providing a job which is:
◦ A complete piece of work producing a recognizable an d definable
product.
◦ Affords variety, decision making responsibility and control.
◦ Provides direct feedback through the work itself.
Self-managing Teams [autonomous work groups]. These are self-regulating;

working without supervision. This extends job enrichment.
High Performance Work Design – setting up working groups in environments

where high performance is required.
 Encourages multi-skilling by eliminating job demarcation lines and
acquisition of new skills.
 Self-managed teams or autonomous working groups are established [each
about a dozen members]
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 Managers and team leaders adopt a supportive not autocratic style.

 Management sets goals and standards for success.
 System is introduced by involvement and communication programmes.
 Thorough training is done after assessment of needs
 pay may be related to team performance [team pay] but with skill based
pay for individuals
 Peer performance review may be used so that team members assess one
another's performance as well as performance of the team as a whole.
Self Managing teams. These are allocated an overall task and given
discretion on how to do it. They enlarge individual jobs by giving a wider range
of skills [multi-skilling]. Decisions on work methods, planning, scheduling and
controlling work. Also distribution of tasks among members. It is accommodates
social/group factors. Performance – assessing one another's performance as
well as performance of the group as a whole.
Intellectual Capital [IC].

IC consists of the stocks and flows of knowledge available to an organization. It
is an intangible resource. Together with tangible resources intangible resources
comprise the market or total value of a firm. Intangible resources are the factors
other than financial or physical assets that contribute to the value generating
processes of a firm and are under its control. These comprise all relationships
inside and outside the organization e.g. with customers and suppliers.
Also included are intangibles like goodwill, image and brands.
There are three elements of IC:

 Human Capital which consists of knowledge, skills and abilities of
employees. It is the human factor in the organization; its combined
intelligence, skills and expertise that give it its distinctive character. The
human elements are those that are capable of learning, changing,
innovating and providing creative thrust. If properly used these can
ensure survival of the organization. The term HC was originated by
Schultz [1961] HC is the most important element in an organization's IC.
 Social Capital [SC] – the stocks and flows of knowledge derived from
networks of relationships within and outside and also the norms and trust
and institutions. These enable participants to act together more
effectively to pursue shared objectives. It is the glue that binds the
organization.
 Organizational Capital [OC] – the institutionalized knowledge possessed by
an organization; stored in databases, manuals. It is also called structural
capital.
Individuals generate, retain, and use knowledge [HC]; but this knowledge is
enhanced by interactions between them [SC] to generate institutionalized
knowledge possessed by the organization [OC]. Individual knowledge must be
captured through Knowledge Management processes. Both flows and stocks
matter. IC develops and changes over time usually when people act together.
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HC is the knowledge, skills and abilities of individuals that create value. It is

therefore these individuals not their employers who own this capital. They
decide when, where, how they contribute it. HC theory proposes that
sustainable competitive advantage arises when there is a HR pool that cannot
be imitated or substituted. There is both HC advantage and HC process
advantage i.e. processes within the firm like cross departmental cooperation,
executive development etc. HRM stresses that people are assets not costs and
should be treated likewise.
Knowledge Management.
Km is “any process or practice of creating, acquiring, capturing and using
knowledge wherever it reside, to enhance learning and performance in
organizations” [Scarborough Swan &Preston, 1999]. It focuses on firm-specific
knowledge and skills that are the result of OL processes. Knowledge can be
stored in databases, found in presentations, reports, libraries, manuals, policy
documents. It can be moved through IS and also through traditional methods
such as meetings, workshops, courses, video, tapes, written publications and
also intranet. There is both “knowing how” and “knowing what”. Knowledge is
multi-facetted and complex, situated and abstract, implicit/explicit,
distributed/individual, physical/mental, developing/static, verbal/encoded.
KM is about storing and sharing the wisdom, understanding and expertise

accumulated in an organization about its processes, techniques and operations.
Owners of family business over years have passed commercial wisdom to
children; master craftsmen to apprentices and workers among themselves. KM
is concerned about how people acquire exchange, disseminate knowledge also
about IT. KM is closely associated with Human Capital [HC] and the Learning
Organisation [LO].. Managers need knowledge about customers, best practices
and effective processes about the competences and capabilities of the
company. KM requires that there should be linkages of people to people,
positive linkages to documented experiences.
Knowledge is:
 Embedded in technologies, rules and organizational procedures
 Encultured as collective understandings, stories, values, beliefs.
 Embodied into practical activity based competences and skills of key
embers.
 Embraced as conceptual understanding and cognitive skills of key
members [Blackler, 1995]
Nonaka [1991] suggests that knowledge is held by individuals or collectively i.e.

embodied/embraced or embedded/encultured].
 Data – basic facts which are building blocks for information and knowledge.
 Information- data that is processed in a meaningful way. "Information is
data endowed with meaning and purpose”. [Drucker, 1988]
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 Knowledge – information that is put to productive use; personal and often

intangible. It can be elusive.
Nonaka & Takeuchi say knowledge is either:
Explicit – can be codified.
Tacit – exists in people’s minds. Acquired through personal experience,
insights about an industry, business, and judgement. The main challenge
is how to turn TK to EK.
A successful company is a knowledge creating company.
Approaches to KM: [Hansen, Nohria & Tierney, 1999]

Codification strategy. Knowledge is codified and stored where it can be
accessed and used by anyone in the organization. This strategy is
document driven. Knowledge is extracted from the one who has it, made
independent of that person and then use for various purposes. This relies
on IT.
Personification Strategy. Knowledge is closely tied to its holder. It is then
shared through person to person contacts. This involves TK. Exchange is
done through networks, face to face communication between individuals
and teams, conferences, brainstorming etc.
In general, Hansen et al established that companies pursue one strategy
predominantly and then use the second to support the first. Trying to excel on
both risks failure at both. Nonaka & Takeuchi say Knowledge Creation involves
SECI
KM involves:
1) Technical aspect which centralizes knowledge that is scattered across the
organization and codifying TK.
2) Social/Political aspect which collectivizes knowledge so that it is no longer
the exclusive property of one person or group.
3) Economic aspect – to intensify the creation and exploitation of knowledge.
KM Systems:
o Intranet
o Groupware information communication technologies
o Networks and communities of practice/interest
o w/workers sharing knowledge
KM contributes to Organisational Learning.
OL is concerned with how learning takes place in organizations. It focuses on

collective learning. However the actions of individual members in the
organization are critical. The organization on it part must facilitate learning. OL
is concerned with the development of new knowledge. Individual and team
learning must be translated into an organizational resource. OL is not just the
sum of the learning of individuals/groups. It occurs at SLL [adaptive] or DLL
[generative].
Learning is an essential ingredient if organizations are to survive. Learning at
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operational, policy and strategic levels needs to be conscious, continuous and

integrated. Senge [1990] first popularized the term LO. Many definitions of LO
[as with Senge] are aspirational in vein.
 Senge: an organization “where people continually expand….how to learn
together”
 Peddler, Burgoyne & Boydell [1991]: An organization which facilitates the
learning o all its members and continually transforms itself”.
 Wick & Leon [1995].An organization which “continually improves by rapidly
creating and refining the capabilities require for future success”
 Garvin [1993]: “skilled at creating, acquiring and transferring knowledge
and at modifying its behaviour to reflect new knowledge and insights”.
LO learn from experience, using systematic problem solving techniques. The

concept of LO is persuasive because of its rationality and attractiveness. But
literature on LO tends to be prescriptive. The notion itself is rather nebulous. It
is cast in the model of a single best practice [Easterby-Smith, 1997].
How People Learn. Kim [1993]. Learning is the process of “increasing one’s
capacity to take action”. Training on the other hand is a way to promote
learning. People learn in teams and by interacting with managers, co-workers
and even people outside the organization. People learn by doing and by
instruction.
 Reinforcement Theory – based on Skinner [1974]. Changes in behaviour
result from a response to stimuli/events and the ensuing consequences
[rewards/punishment]. Individuals can be “conditioned’ to repeat
behaviour through positive reinforcement e.g. feedback/knowledge of
results. This is a stimulus-response theory.
 Cognitive Learning Theory involves gaining knowledge and understanding
by absorbing information in the form of principles, concepts and ‘facts’.
 Experiential Learning. This is a personal “construction” of meaning through
experience.
 Social Learning- effective learning requires social interaction. We all
participate in “communities of practice” –groups of people with shared
expertise who work together.
 Kolb’s Learning Styles. This model describes how experience is translated
into concepts which then guide the choice of new experiences. Individual
must shift from being observers to participants. Trainees must also adjust
to these styles. Kolb’s model is a simple description of how experience
translates into concepts which then guide choice of new experiences.
Effective learning must involve a shift from being observer to being
participants, from direct involvement to objective analytical detachment.
Each person has his own learning style. Trainers must adjust to learning
styles of trainees and not stick to their won preferred approaches.
Kolb’s Learning Styles:

Accommodators learn by trial/error combining concrete and
experimentation stages.
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Divergers prefer concrete to abstract learning situations and reflection to

active involvement. They have imaginative ability and view a situation
from different viewpoints.
Convergers experiment with ideas considering their practical usefulness.
The main concern is whether the theory works in action [combining
abstract & experimental dimensions].
Assimilators like to create their own theoretical models. They assimilate
many disparate observations into an overall integrated explanation
[Reflexive & Abstract]
The styles are not exclusive so one person could be both reflector and
pragmatist].
Honey & Mumford [1986]: also identified four styles:

Activists involve themselves without bias in new experiences and revel in
new challenges.
Reflectors –stand back and observe new experiences from different angles.
They collect data, reflect and come to a conclusion.
Theorists adapt and apply observation. They may tend to perfectionism.
Pragmatists – keen to try out new ideas, approaches and concepts to test
them out.
The styles are not exclusive so one person may be both reflector and
pragmatist.
However, none of these four learning styles is exclusive. It is quite possible that
one
person could be both a reflector and a theorist, and someone else could be an
activist/pragmatist, a reflector/pragmatist or even a theorist/pragmatist.
Theory/Concept Content Implications

The process of Learning is complex and is Different learning needs require
Learning achieved in many different ways. different learning methods,
The context is important. often in combination. Learning
effectiveness depends on the
extent to which the
organization believes in
learning and supports it
Reinforcement Behaviours can be strengthened Reinforcement theory

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theory by reinforcing them with positive underpins training programmes

feedback (conditioning) concerned with developing
skills through instruction. The
learner is conditioned to make
a response and receive
immediate feedback and
progress is made incrementally.
Cognitive learning Learners acquire understanding Knowledge and understanding
which is internalised by exposure can be enriched and
to learning materials and solving internalized by using learning
problems. materials, case studies,
projects problem solving
activities. This includes self
directed learning and personal
development.
Experiential Learning by constructing Learners reflect on and make
Learning theory meaning and developing skills better use of their learning
through experience . through their own work as well
as other people’s experience.
They get help from mentors
facilitators and coaches.
Social learning Learning is most effective in a Learning can be encouraged in
theory social setting. Individual Individual communities of
understanding is shaped by practice and in project teams
active participation in real and networks,
situations.
Learning styles Every person has his or her own Learning programmes need to
learning style be
adjusted to cope with different
learning styles. Trainers have
also to flex their methods.
People will learn more
effectively if they are helped to
‘learn how to learn’ by making
the best use of their own style,
but also by
experimenting with other styles
The learning The time required to reach an Recognize that progress may
curve. acceptable standard of skills or vary and may not be
competence which varies continuous. . Enable learners to
between people. Learning may consolidate their learning and
proceed in steps with plateaux, introduce reinforcement
rather than being a continuous periods in training programmes
process to recognise the existence of
learning steps and plateaux.
The motivation to People need to be motivated to Learners should be helped to
learn learn effectively develop
learning goals and to
understand the
benefits to them of achieving
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them.
Performance management
processes
leading to personal
development plans can provide
a means of doing this
Learning and Motivation. People will learn if they are motivated. Motivation is
“the disposition and commitment of the learner – the motive to learn – is one of
the most critical factors affecting training effectiveness. Under the right
conditions, a strong disposition to learn, enhanced by solid experience and a
positive attitude, can lead to exceptional performance”.
Conditions for effective Learning.

 Individual motivated to learn; aware that their present level of knowledge,
skills, competence, and existing attitude/behaviour require to be
developed/improved. They need a clear picture of the behaviour they
should adopt.
 Individual must have learning goals, targets or standards of performance
which they accept and regard as achievable and against which they can
judge progress. They should be encouraged to set own goals.
 Sense of direction and feedback they can get by self-regulation. A facilitator
helps.
 Must gain satisfaction from learning
 Learning must be an active not passive process.
 Appropriate process and methods must be used.
 Methods should be varied.
 Learning requires time for assimilation, to test and for acceptance.
 There are different levels of learning; each requires different methods and
takes different time/direction e.g. at a higher level learning involves
adapting existing knowledge to a new task/environment or when a
principle manifests itself in a range of practices/action; or isolated tasks
require integration; or require interpersonal skills; or is concerned with
values/attitudes of people/groups.
The learning Curve is the time taken by an inexperienced person to reach

required level of performance in a job/task. This is also called the experienced
worker’s standard [EWS].
Learning rates differ and are influenced by effectiveness of training,
experience/aptitude of the learner, interest in learning. Learning is often
stepped, with a plateau where progress is halted allowing for consolidation
when skills acquire are practiced.
Communities of Practice [Wenger & Snyder, 2000]: “groups of people

informally bound together by shared experience and a passion for joint
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enterprise”. It is in such communities that much of the organization’s TK is

created and shared. Knowledge –sharing should be both an accountability
[KRAs] and a competency [expected mode of behaviour]. It becomes an
accepted part of the fabric and therefore culture of the organization through
interaction, communication and participation. This is a sharing culture.
Wenger and Snyder [2000] say these communities should be treated as a

“learning ecology” with a life of its own. People jointly reflect on experience so
that it is converted to learning.
Individuals have responsibility for their own learning but also need support from
managers and the organization.
Workplace Learning. [Stern & Sommerlad, 1999].

 Workplace as a learning site. Learning and working are spatially separated.
Some structured learning may occur off/near the job e.g. company
training centre or on the shop floor in the form of a “training island” where
the productive process is reproduced for trainees.
 Workplace as learning environment. The workplace itself is an environment
for learning with on the job training. Here learning is intentional and
planned as when supporting, structuring and monitoring workers’
learning. On the job training activities are structured to different degrees
 Learning and working are inextricably mixed. Here learning is informal, an
everyday part of the job; built into routine tasks. Workers develop skills,
knowledge and understanding through challenges posed by the work. It is
continuous learning. “Learning is not something that requires time out
from being engaged in productive activity, learning is the heart of
productive activity.” [Zuboff, 1998].
 Self managed/directed learning may seek to improve performance in the
present job or to satisfy career aspirations.
Reward Management [RM]. RM concerns formulation and implementation of

strategies/policies for rewarding people fairly, equitably and consistently
according to their value in the organization. It deals with the design,
implementation and maintenance of reward practices for improving
organizational, team, and individual performance. RM must:
1) Support business strategy
2) Address longer term goals, strategic issues to reward achievement.
3) Be part of the HRM strategy and be integrated with them.
4) Develop a positive employment relationship and psychological contract.
5) Adopt a ‘total reward’ approach which include financial and non-financial.
All approaches must be integrated for maximum effectiveness.
6) Based on a well articulated philosophy – a set of beliefs and guiding
principles.
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7) Reward people according to their contribution. This is part of HC

investment.
8) Focus on development of skills and competencies of employees
9) An integrate process that operates flexibly.
RM must ensure that the organization has skilled, competent well motivated
people. People should be rewarded for the value they create. It must reward the
right things to convey the right message. An effective reward strategy has three
components:
Clearly defined goals which are linked to business objectives
Tailored to satisfy needs of the organization and its people – consistent and
integrated with one another.
Effective and supportive HR and reward processes in place.
Criteria:
Link reward plans to corporate goals.
Enact organization’s values.
Clarity on goals and flexibility in achieving them
Recognize resource availability
Plan for implementation.
It may seek to develop high performance culture, attracting and retaining
good quality people; achieving equity, managing costs etc.
Example of Reward Strategy
Strategic Aim Strategic Plan

Provide rewards that attract, retain & competitive pay: monitoring market
motivate staff and develop high rates to ensure pay remains
performance culture. competitive
ensure pay levels remain competitive Job Evaluation: develop & Introduce
computer-based JE scheme covering all
staff.
reward people according to their Grade/Pay structure: explore
contribution alternative approaches to the design of
a new grade/pay structure recognizing
JE & competitive pay intelligence.
Introduce a ‘total reward’ approach by Performance Management: review PM
creating the right mix of financial/non- processes to ensure they support the
financial rewards. development of a performance culture.
Clarify performance improvement
requirements & development needs.
Help motivate staff and pass decisions
on rewards.
Develop reward processes that provide Contribution Pay: explore alternative
for equitable pay- fair, consistent and ways of rewarding contribution.
transparent. Reward managements
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initiatives must promote improved

performance and be affordable.
Total Reward: motivating staff through
n0n-financial rewards.
Reward Processes: examine all policies
& procedures for managing rewards to
achieve equity, fairness, consistency &
transparency at an affordable cost.
Total Reward [TR]: [Worldatwork, 2000]: “all the employer’s available tools
that may be used to attract, retain motivate and satisfy employees. This
encompasses every single investment that an organization makes in its people
and everything its employees value in the employment relationship”
Thus all aspects of reward form an integrated and coherent whole – including
base pay, performance pay, competence/contribution, employee benefits. All
must be mutually supportive. It is all the tools an employer uses. This is a
holistic approach. The reward elements should be interrelated, complimentary
and mutually reinforcing. TR includes:
Compensation which is “foundational”; primarily financial and to satisfy
income needs.
Benefits – satisfy protection needs; often not performance based.
The work experience – this is relational binding workers to the organization
e.g. for personal development and fulfilment.
TR offers the following benefits:

Flexibility tailored for particular challenges/circumstances
Recruitment and retention
Reduced costs
Visibility in a tight labour market to attract talent.
Enhanced profitability – linking motivation to quality.
Total Reward Model: Thompson, 2002.
Transactional [Tangible]
PAY BENEFITS
Individual
Communal
 Base Pay  Pensions

 Bonus  Health Care
 Long term incentives  Holidays
 Shares  Perks
 Profit sharing  Flexibility
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LEARNING & DEVELOPMENT WORK

 Workplace learning ENVIRONMENTIRONMENT
 Training  Organisational Core Values
 Performance Management  Leadership
 Career Development/Progress  Employee Voice
 Work-life Balance
 Job/work design.
Relational [Intangible]
The transactional quadrants are financial in nature and are essential for
recruitment and retention. But they can be copied. The relational quadrants
enhance the value of the transactional ones.
Reward policies provide guidelines for implementing reward strategies. They are
influenced by organizational philosophy:
Levels – high payer, average or even below average. It is influenced by
market competition for quality people; posture of the firm; its culture etc.
Market rates & Equity. These two are often in tension.
Differential rewards for performance, contribution; how much, under what
circumstances e.g. performance bonus may be set between 10% and
30%. Also how to relate to individual, team or organizational performance.
Flexibility in respect to fast changing conditions.
Reward Strategy: general issues-

o Grade & Pay Structure
o Base pay is the rate for the job. Pay related to service, performance,
competence may be consolidated to this. It relates to market rates
o Contingent pay relates to service, performance, competence, skill or
contribution.
o Variable pay – bonuses, cash etc contingent on individual, team,
organization etc.
o Market analysis identifies rates in the market.
o Job Evaluation – a systematic process to establish relative worth of jobs in
the organization.
o Grade structure – sequence/hierarchy of grades, bands into which
jobs/groups of jobs are placed.
o Pay structure. These are ranges of base pay attached to grades including
pay progression relating to service, performance, competence,
contribution. Base pay is influenced by equity and market rates and
equity.
o Employee benefits-pensions etc
o Non-financial rewards do not involve direct payment. They arise from the
work itself e.g. achievement, autonomy, recognition, scope to use skills,
career development opportunities.
o Performance management – which involves managers, individuals, teams
to define performance expectations and assess performance against
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expectations, provide constructive feedback. It determines contingent pay

decisions.
o Total Remuneration = Sum of Base Pay, contingent pay plus benefits.
o Total Reward =Total Remuneration + non-financial rewards.
Factors affecting Pay Levels.

o Internal job value – relative contribution of the jobs. The bigger the job, the
more it is paid.
o External job Value – influenced by market rates, policy of the organization,
impact of market forces on recruitment/retention.
o Value of the person depending on their worth in the marketplace e.g.
length of service, skills, competence.
o Affordability
o Trade unions e.g. CBA, legislation
Economic theories explaining pay levels
Other things being equal, if Emphasizes the importance

there is a surplus of labour of labour market factors in
and supply exceeds the affecting market rates.
The law of supply demand, pay levels go
down; if there is a scarcity
of labour and demand
exceeds the supply, pay
goes up.
Firms will pay more than Organizations use

the market rate because efficiency
they believe that high Theory (although they will
wages theory levels of pay not call it that when they
will contribute to increases formulate) pay policies
Efficiency wage in productivity by which place them as
motivating superior market leaders or at least
performance, attracting above the average.
better candidates, reducing
labour turnover and
persuading workers that
they are being treated
fairly. This theory is also
known as ‘the economy of
high wages.
A worker has a set of skills Employees and employers

developed by education each derive benefits from
and training which investment in creating
Human capital generates a stock of human
theory productive capital. capital. The level of pay
should
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supply both parties with a

reasonable return on that
investment.
The owners of a firm (the A system of incentives to

principals) are separate motivate and reward
from the employees (the acceptable behaviour. This
agents). This difference can process of ‘incentive
Agency theory create ‘agency costs’ alignment’ consists of
because the agents may paying for measurable
not be so productive as the results that are deemed to
principals. The latter be in the best interests of
therefore have to devise the owners.
ways of motivating and
controlling the efforts of the
former.
Workers aim to strike a Management has to assess

bargain about the what level and type of
The effort bargain relationship between what inducements it has to offer
they regard as reasonable in return for the
contribution and what their contribution it requires from
employer is prepared to its workforce.
offer to
elicit that contribution.
The basic economic determinant of pay is supply and demand. However pay
levels are also explained by efficiency wage and HC theory.
 Supply and demand. Classical economic competitive theory on pay focuses
on external pressure than internal equity. “A job is worth what the market
says it is worth.” Thus market pricing prevails against job evaluation
which measures the relative worth of jobs within the organization with no
regard to external relativities.
 Efficiency Wage Theory. Pay may exceed market rate if the firm believes
this increase productivity by motivating superior performance, attracting
better candidates, reducing turnover. Thus firms seek to be market
leaders.
 Human Capital Theory. Workers possess skills which can be “rented out” to
employers. Knowledge and skills acquired through education/training
constitute a stock of productive capacity. Employees expect returns on HC
investments through higher earnings. Employer gets improved
performance, capacity to innovate.
HC theory implies that investing in people adds value to the firm. HCT
encourages skills/competence based pay as a reward method. Individuals have
their own value in the marketplace. This value may be higher than market rate.
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Agency Theory [Principal Agent Theory]. This recognizes separation

between owners [principal] and agents [managers]. The principal may not have
complete control over his agent whose actions may be in conflict with the
principal or even not revealed to him. This difference between what the
principal would have earned/achieved for himself and what he gets from
stewardship of the agent amounts to agency cost. These can be reduced by
monitoring and controlling the actions of the agent [e.g. using standards or
objectives]. However the problem of ensuring that managers do what they are
told is not eliminated.
A system of incentive to reward acceptable behaviour is needed. This “incentive

alignment” is done by paying for measurable results which are in the interest of
the owners. Outcomes are tracked through quantifiable indices of the firm’s
performance e.g. EPS not through the behaviour that led to them. With a proper
incentive scheme for mangers, they will monitor total organization performance
through self-interest.
Job Evaluation [JE] was criticized in the 1980s and 90s but is now
acknowledged for achieving internal equity. Definition: “a systematic process for
defining the relative worth/size of jobs within the organization. Approaches to JE
may be analytical or non-analytical. JE gives a framework for grading and for
pay decisions. It achieves equality pay for work of equality value. It enhances
transparency e.g. sex, age, race or disability.
JE: Aims:
 Internal relativities
 Information for designing/maintaining equitable/defensible grade/pay
structure [transparency]
 An objective basis for grading jobs allowing consistent decisions to be
made about grading.
 Organization meets it ethical and legal obligation to grant equality pay for
work of equality value.
Types:
 Analytical JE Schemes analyze the extent to which defined factors/elements
are present in all jobs to be evaluated e.g. effort, skill, decision. There
must be a ‘factor plan’ which defines factors and their levels and attaches
score. These scores are totalled. The totals create rank order of jobs. This
is the most common analytical approach. One scheme is used throughout
the organization.
 A graduated factor comparison scheme jobs factor by factor on a
graduated scale e.g. with 3 levels [higher, equality, lower]
 Analytical JE is systematic and judgemental; it is concerned about the job
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not the person. However any assessment of one job relative to another is
always subjective. It however must focus on the content of the job, and
the demands it makes on the job holders.
Non-analytical JE Schemes. Whole jobs are described and compared so that

they are placed in grade/rank order. In job classification, grades in a grade
structure are defined and jobs are slotted into grades by comparing job
descriptions with grade definitions. In job ranking whole jobs are compared with
one another and then arranged by size/value to the organization.
Statistical ranking compares one job with others instead of multiple

comparisons.
Job matching [or internal benchmarking] is a kind of intuitive evaluation. Each

job is compared to one that is deemed properly graded and paid on a whole job
basis. Market pricing compares jobs with comparable jobs on the market –
external benchmarking with no regard for internal relativities.
Case for & against JE.

For:
 Criteria especially with analytical schemes is made explicit. The judgement
process is structured.
 Equitable and defensible pay structure.
 Decisions can be made on grade and pay
 Achieves equality pay for work of equality value.
 More acceptable than informal, ad hoc approaches especially if the process
is transparent.
Against:
 Can be bureaucratic, inflexible, time consuming
 Schemes can decay through use or misuse e.g. people learn how to
manipulate the system to achieve higher grade. This is called grade drift –
a process not justified by increase in responsibility
 Job evaluation can make a priori judgements. The validity of the JE scheme
is judged according to pre-conceptions about the relative worth in a so-
called ‘fair test”.
Criticism centre on the process JE is operated than on the design concept. As

any management technique it can be misconceived and misused.
Design Criteria:
Thorough analysis of what factors are appropriate.
Scheme should facilitate impartial judgement of relative job size.
Factors should cover the whole range of jobs at all levels; without favouring
any particular type/occupation; or discriminating by gender, race etc. it
should measure feature of male/female dominated jobs fairly.
Factors must be defined clearly and differentiated to avoid double counting.
Levels should be defined and graduated clearly.
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Avoid gender bias in the choice of factors, their wording, weighting etc
Process Criteria:
Transparency-everyone knowing how it works and basis of the evaluations
Involve women, minorities, the disabled etc
Build consistence checks
Check that the outcome of JE does not merely replicate existing hierarchy. A
JE is generally expected to challenge present relativities.
Participants should be thoroughly trained.
Resulting grade structure and grade boundaries should not be
discriminatory
Provide a review of evaluations and for appeals
Regular review to check if scheme is still fit for its purpose.
Point Factor Scheme. This should be done by a panel which includes

employee and management representatives and HR specialists chaired by HR
official or independent person or consultant. Factors should be relevant and
important differences between jobs; they should apply well to different types of
work and not be biased. They should be understandable and comprehensive yet
avoid double counting; be acceptable to those covered by the scheme.
Examples.
Knowledge and skills
Communication and contacts
Judgement and decision making
Impact
People management
Freedom to act
Working environment
Responsibility for financial resources
Differing problems, level of clarity of thought in assessing conflicting
information, balancing risks
Sample factor and Level Definitions.

Judgement & Decision making: the requirement to exercise judgement in
making decisions and solving problems, including the degree to which the work
involves choice of action or creativity.
1 The work is well defined and relatively few situations are encountered. The causes
of problems are readily identifiable and can be dealt with easily.
2 Evaluation of information is required to deal with occasional new problems and
situations and to decide on a course of action from known alternatives.
Occasionally required to participate in the modification of existing procedures and
practices.
3 Exercise discriminating judgement in dealing with relatively new/unusual problems
where a wide range of information has to be considered and the courses of action
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are not obvious. May fairly often be involved in devising new solutions.
4 Frequently exercises independent judgement when faced with unusual problems
and situations where no policy guidelines/precedents are available. May also
frequently be responsible for devising new strategies and approaches which require
the use of imagination/ingenuity.
5 Deals with widely differing problems calling for extreme clarity of thought in
assessing conflicting information and balancing the risks associated with possible
solutions. Additionally, one of the main requirements of the role may be to develop
fundamentally new strategies and approaches.
After a point factor then jobs must be analysed e.g. using a questionnaire to
establish purpose of the job, activities carried out; demands of the job. Factors
can be tested on a sample of jobs to check on level of definition, clarity of
wording etc. factor weighting must also be done
Care is needed in managing JE to avoid decay and discredit. Good

communication is vital for successful introduction and management of a JE
scheme. JE determines internal relativities; it cannot price jobs. Pay levels must
be competitive especially where there are market pressures due to scarcity. This
is called benchmarking. Pay surveys give only a broad indication of market
rates.
Grade and Pay Structures.

Grade structure is a sequence /hierarchy of grades/bands into which groups of
jobs of comparable size are placed. There may be a single structure with a
sequence of narrow grade often 8-12] or a few broad bands [4/5]. Or a number
of career/job families each one divided typically into 6 – 8 levels,
Grades/bands/levels can be defined by one/a combination of:

 JE points
 Description setting out key activities/competences, knowledge and skills
 Reference to benchmark jobs
Pay structures. This is a grade structure to which pay ranges/brackets are

defined. There may be one structure covering the whole organization; or one for
staff and another for manual workers with Executive Directors treated
separately. There is also provision for progression. Spot rates may be used for
some jobs. These are attached to a person not a job.
A grade and pay structure communicates career and pay opportunities available
to employees. Grade and pay structures should:
 Be appropriate to the culture, needs and characteristics of the organization
and its employees.
 Facilitate management of relativities and achieve equity, fairness,
consistency and transparency
 Adapt to pressures from market rate changes, skills shortages.
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 Allow for rewarding performance, contribution, skill and competence.

 Clarify reward, lateral development and career opportunities
 Allow control of pay policies and budgets.
 Must be constructed logically so that their basis can be communicated
easily to employees
Types of Grade and Pay structures.

Narrow single grade structures are common but are being replaced by broad
career/job family structure. Moreover single grade/pay structures tend to have
too many grades with resulting pressure for upgrading [grade drift]
With broad banding, the number of grades is compressed to allow for flexibility.
However they are harder to manage. They build employee expectations. They
are difficult to explain and decisions are harder to justify due to lack of structure
and precision. There are also equal pay problems. Reliance on external market
relativities reproduces inequalities in the labour market.
Career families consist of jobs in a function/occupation e.g. marketing. This

facilitates career planning. But they may be regarded as divisive. Progression
also takes place in occupational silos. Implementing a new grade/pay structure
requires thought on assimilation which should be agreed upon in advance.
Contingent Pay [CP] – pay related to individual performance, contribution,

competence/skill or to team/organizational performance. For shop floor workers
payment by results has a long history. Performance is what a person achieves,
while contribution is the impact an individual makes on the performance of the
team or organization. Level of contribution depends on competence, skill and
motivation; as well as opportunities to demonstrate competence and the nature
of guidance/leadership received. Contribution related pay sets payments
according to both competence and results.
CP may be in the form of a consolidated increase to basic pay or as a cash lump

sum [called variable pay]. Consolidation assumes that past performance will
endure at that level in future so it should be permanent. Variable pay requires
that the amount be re-earned. This has been the case with executive pay, sales
representative and payment by results for manual workers. In general though
competence and skill based payments are usually consolidated recognizing that
competence/skill acquired enhance the value of the worker in the longer term.
Incentives are forward looking while rewards are retrospective-

 Financial incentives seek to motivate people to achieve objectives, improve
performance or enhance skills/competence by focusing on specific
targets/priorities.
 Financial rewards recognize past achievement e.g. meeting/exceeding
performance targets
Financial incentives provide direct motivation –“do this and you will get that”
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e.g. shop floor payment by results scheme or commission for sales

representatives. An achievement bonus is a financial reward [a tangible form of
recognition]. These are indirect motivators as workers may expect similar
recognition in future.
Rationale for Contingent Pay [CP].

 Motivation for increasing performance, competence/skills etc
 Message- CP delivers a general message that competence. Performance,
skills and contribution are important. It may also stress value – e.g.
quality, customer service, leadership, team working etc.
CP can help achieve highly desirable result but it is hard to get it right and it
often fails because it is misconceived, badly introduced and managed. It should
be crafted in the context of business strategy. Individuals and teams should
have a clear “line of sight” between what they do and what they get for doing it
[expectancy theory]. The golden rule:
 Clarity about standards and targets [individual/team]
 Ability to influence performance by changing behaviour/decisions.
 Rewards should be meaningful
 Incentive/bonus formula should be easy to understand
 Reward should come close to accomplishment
Performance Related Pay [PRP] relates progression [increase to base rate]

or bonuses to assessed performance of individuals. PRP systems operate in
different ways:
 Pay structure must allow for progression
 Progression is determined by performance ratings
 Decelerated progression in line with learning curve theory so that pay
increase is higher in the early stages when learning is highest
 PRP may be consolidated within defined ranges.
 Pay matrix sets increases based on ratings e.g. exceptional, average,
developing etc.
 Holistic approach – taking an overall view of performance, competence etc
and setting the increase/bonus. Thus pay reviews are decoupled from
performance review.
Advantages of PRP
 Motivation
 Delivering message
 Fair to reward performance
 Tangible means to reward/recognize achievement
Disadvantages of PRP
 Motivation nit guaranteed
 Performance assessment is difficult and measure of performance may not
be realistic. So ratings may be unfair/subjective. Emphasis on individual
performance destroys team working.
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 Pay may rise faster than performance [pay drift] and hence is not cost
effective in the long run. PRP schemes are difficult to manage well. They
rely on effective PM processes.
 People focus on meeting quantitative targets. So PRP may produce poor
quality performance.
 Short- termism – pursuit of quick results not longer term strategic goals.
Sometimes PRP is seen as a way to reward managers’ favourite. There is also

strong trade union hostility. Thus far from motivating PRP may demotivate.
However in some situations PRP works. But money alone cannot sustain
motivation. Goal setting in PRP is itself a powerful motivator [goal theory]
Competence Based Pay [CBP]. Pay progression is related to levels of

competence people have achieved. People are rewarded for their ability to
perform not just for their performance. Expected competence [capability] in a
role is defined and actual levels achieved are compared to this expected level.
However measuring competence is not easy.
Competences may be generic [covering many roles] or specific for
particular roles.
CBP is not based on achievement of specific results. It is also forward
looking whereas PRP is backward looking.
Some organizations have hybrid schemes where base rate depends on

competence but out-of –the-ordinary achievements attract bonuses. A
competence framework should be in place and fair/reliable methods to assess
competence should be in place. Managers, team leaders and employees in
general should be trained on how the scheme operates. CBP may be more
appropriate for knowledge workers where flexibility, adaptability, continuous
development matter.
Competence can also be assessed through pay thresholds which define criteria
needed to progress to a higher zone in a grade e.g. developing practitioner,
fully qualified or advanced/expert practitioner. [What individual has to know or
be able to do].
Skill Based Pay. SBP is linked to the number, kind and depth of skills
individuals develop and use. It pays for horizontal acquisition of skills on a wide
range of tasks and for vertical development of skill to operate at a higher level;
or development of depth in existing skill. SBP is people not job oriented. They
are paid for necessary skills. It does not dwell on how well the skill is used [This
would then be PRP].
Skill blocks or modules/clusters must be defined
Success in a block/module leads to increase in base pay
Training module/programmes are defined.
SBP is often part of multi-skilling. It avoids problem of PRP but can be expensive
to introduce or operate.
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Contribution Related Pay [CRP]. Contribution is what people do to bring about a

result – the part people play in generating results because of the attributes they
bring to their role [skills & competences] and how they use these attributes. It is
thus measured in terms of inputs and outputs [competences and results]. CRP
recognizes that performance embraces both these factors [inputs and outputs].
CRP raises the following issues:
Impact the person in the role made to team departmental or organizational
performance
Levels of competence applied
Has contribution been affected by competence displayed.
+ Pay for future Success
Pay for past performance
Paying for Contribution
=
+
Results Competence
Paying for Contribution Model
Service Related Increments –based on service. An increment is granted for

each year of service. Merit can be captured e.g. increments withheld for poor
performance or accelerate increments or additional increment on top of the
scale. Or merit bars which are passed only by high performers. However these
refinements are rarely used. [See threshold]
Team Based Pay for team/groups carrying out similar/related work.

Performance is measured by outputs or service delivery standards. Quality of
output and opinion of customers can be considered. It is usually paid as a bonus
to be shared among team members usually in proportion to bas e rate.
Individuals may be eligible additionally to competence related or skill based pay
but not to PRP.
Advantages:
Encourages effective team working and cooperative behaviour.
Flexible working within teams.
Encourages multi-skilling.
Incentive for the team collectively to improve performance.
Encourages less effective members to improve and meet team standards.
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Disadvantages:
Require cohesive mature teams
Resentment as individual efforts are not specifically rewarded.
Peer pressure compels conformity to group norms
Teams must be:

Readily identified, well established
Team work must be interrelated, depending on collective effort of team
members.
Targets and standards can be determined and readily agreed upon.
Acceptable measurement of team performance.
Shop Floor Incentive Schemes. Pay is related to the number of items

produced; time taken to complete a task/amount of work or other aspect of
performance. Pay fluctuates with performance in the short term. These are
payment by results schemes. They may be counterproductive in terms of
quality and team working.
Individual Piecework. A uniform price per unit of production. Pay is directly
proportional to results. Often there is a fall-back or minimum wage set at
70/80% of average earnings. There are also guaranteed payments for
downtime caused by machine failure, maintenance or waiting for
materials. The system is easy to operate or understand; it can run itself
with minimum supervision to ensure quality. However employers lose
control over level of production, negotiating piece rates can be time
consuming. New technology has made piece work inappropriate.
Work Measured Schemes. Job is timed and payment made for performance
above standard time using work study. Standard performance is set.
Measured Day Work. There is an incentive level of performance and
incentive payment is guaranteed in advance
Group or Team Incentive Schemes. Bonus is paid related to performance.
Company’s prosperity is shared and so commitment increases. Reward is
not directly related to individual effort so such schemes are not direct
motivators. Types of bonus schemes.
Gain sharing is based on a formula applied company/factory wide to share
in the increase in added value or productivity. Workers can be further
motivated when they are involved in analyzing results and identifying
areas for improvement.
Profit sharing. In cash/shares related to the firm’s profit. The amount
shared may be set by formula or management discretion. Profit sharing
goes beyond improved productivity and is concerned about other factors
not controllable by employees. It is therefore not a direct incentive. The
link between effort and reward is remote.
Employee share Schemes. Shares may be for free or purchased. There may
also be share options where employee can acquire the shares in future.
Employee Benefits. These do not provide a direct/immediate impact on

performance but can improve commitment and organizational performance in
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the long term.

Pension usually contributory
Personal security – illness, health, accident.
Financial assistance – loans, house purchase, relocation expenses.
Discounts on company goods.
Personal needs create an interface between work and domestic needs e.g.
child care, recreational facilities, counselling services
Company car and fuel
Other e.g. subsidized meals, clothing allowance.
Intangible benefits contribute to quality of working life.
HR Policies. These are continuing guidelines the organization uses in

managing its people. They include philosophy, value on how people should be
treated. They act as points of reference when HRM practices and decisions are
made. a policy provides generalized guidance whereas procedures set out
precise actions to be taken in line with policy. Policies convert espoused values
into values in use. They promote equity in the treatment of people. All
organizations have policies though not always in explicit form. However written
policies can be inflexible.
HR Policy Areas.
Overall:- values and beliefs on treatment of people
Equity – fair, even handed and just treatment. Protection from unfair
decisions made by managers. Equal employment opportunity and
promotion, pay.
Consideration for individual circumstances.
OL- promoting learning and development
Performance through people – culture of continuous improvement with
provision for feedback.
Quality of Work Life – working to improve QWL: increasing sense of
satisfaction with work, reducing monotony, increasing variety, autonomy
and responsibility, avoiding stress. Acceptable balance between work and
life outside work.
Working Conditions –healthy and safe and pleasant
Equal Opportunity irrespective of sex, creed, disability, age, marital status
etc. where warranted affirmative action to redress past imbalances.
Discrimination may be direct/indirect [a condition is applied which
adversely affects one group]. [nationality, sexual orientation]
Managing diversity i.e. individual differences including eliminating cultural
bias.
Age & Employment. Age is a poor predictor of performance. It is not to be
equated with physical and mental ability. Criteria for selection/promotion
should emphasise ability to do the job.
Promotion – balance between internal/external recruitment.
Work Life Balance –with interests and responsibilities outside work through
flexible practices e.g. child care, special leave for parents/carers.
Reward – equitable pay system; equal pay for work of equal value, paying
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for performance, skills etc, sharing success of the organization; employee

benefits. Non-financial rewards –recognition, autonomy, opportunity to
develop.
Involvement and participation [employee voice] in matters that affect them
e.g. joint consultation, suggestion scheme.
Employee relations rights of employees, role of trade unions.
New technology – consultation about its introduction to minimize
redundancy or impacting working conditions or arrangements
Health & Safety.
Discipline e.g. principle of natural justice.
Grievance procedures e.g. assistance from union representative, appeals
procedures
Sexual harassment –issues handled sensitively but firmly respecting the
rights of complainant and accused
Aids – no forced disclosure. Protection from infection e.g. medical workers,
confidentiality. Non-discrimination
E-mails e.g. ban on sending and downloading offensive e-mails. No secret
monitoring.
The Traditional Activities of Personnel Management
manpower Analysis of manpower needs according to current manpower
planning & resources & nature of labour market. Laying foundation for
Control policies on recruitment, selection, training, pay etc.
recruitment Starting with detailed job analysis, then selection of the most
appropriate method of recruitment eg use of job centres,
consultants, adverts in the media. The aim is attract suitable
candidates
selection Using a variety of techniques eg application forms, interviews,
tests. Decision is made based on general/specific criteria.
Training & Type of training; people to be trained; appropriate training
Development. methods eg on the job instruction, specific courses
appraisal A contentious issue generally. Sometimes resisted by trade
unions. Formal systems are needed to assess contribution of
individuals. System is often designed by personnel specialists
but administered by all managers.
pay a complex area involving rate of pay [negotiated with unions]
administration eg flat rate, payment by results etc. number/range of fringe
benefits eg pensions, company cars, mortgages etc.
job & how jobs are to be carried out or the organisation structured;
Organisational design & administration of programmes such as job
Design enrichment or quality of working life etc.
Collective Preparing employer’s case & negotiating with employee
Bargaining representatives; then applying such agreements and dealing
with outcomes.
grievance & Personnel Manager is at the fore front dealing with
dispute individual/collective grievances. Usually specific procedures
handling are laid down.
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legal advice Personnel Managers are the resident experts on legal matters
pertaining to employment & must guide others.
employee Personnel specialists communicate general information to the
communication workforce & administer programmes on employee
s & counselling participation e.g. suggestion schemes. Also sometimes include
employee advice & counselling
personnel Especially as firms get larger. Records are useful for making
Information & personnel decisions.
Records
Competency Framework for HR specialists

business & understands:
cultural  Business environment &its competitive pressures
awareness including critical success factors
 Key activities & processes in the business & their effect on
business strategy
 Culture- core values & norms.
 How HR policies/practices impact on business
performance.
1) Seeks involvement in business strategy formulation &

strategic contributes to its development
capability 2) Has a clear strategic vision of how HR supports
achievement of business strategy
3) Develops & implements coherent HR strategies
integrated with business strategy & with one another
organisational  Contributes to planning/implementation of cultural change
effectiveness  Contributes to development of resource capability &
ensuring business has needed human capital eg high
quality, skilled, committed, well motivated & flexible.
Engages in talent management
 Enhancement of Intellectual Capital through development
of knowledge management processes.
internal  Analysis/diagnosis of people issues and proposing
Consultancy practical solutions.
 Intervenes to meet client needs acting as catalyst,
facilitator and experts as required.
 Coaches clients to deal with problems and transfers skills.
service  Providing effective/efficient services in each HR area
delivery
responds to  promoting empowerment of line managers to make HR
requests for HR decisions but still providing guidance where needed
services, help
& advice
continuous  developing professional knowledge/skills
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professional  benchmarks good HR practices

development  Keeping in touch with HR concepts, practices and
techniques.
 Demonstrating understanding of relevant HR policies.
Competence Based HRM is recruitment, selection, job design, PM, employee

development and reward. Competency is about performance. It is an underlying
characteristic in a person that results in effective or superior performance.
Competence and competency are often used interchangeably. Behavioural
competencies are soft skills which define how people are expected to behave in
order to perform well. Technical/functional competencies [hard skills] –what a
person ought to know and be able to do to perform well.
HR Planning [HRP]. “The process of ensuring that the HR requirements of an

organization are identified and plans are made for satisfying those
requirements”. People are an organisation’s most important strategic resource.
HR are viewed in both quantitative and qualitative terms –how many? What
sort?
HRP has ‘hard’ dimension – quantitative analysis to ensure the right number of
the right sort of people. Soft –availability of people with the right attitudes and
motivation. Manpower planning tends to be quantitative and therefore hard.
HRP;
forecasts future people need [demand forecast]
forecasts future availability of people [supply forecasts]
Drawing up plans to match demand and supply.
However prediction of demand and supply is difficult due to influence of

external events. Hence today there is more emphasis on what skills will be
required with only broad indication of numbers needed in the future.
Reasons for undertaking HRP:

Planning for substantive reasons. Acquiring and nurturing skills takes time.
It is important to identify potential problems and minimize chances for
bad decisions.
Process benefits in understanding the present to confront the future.
Organizational reasons – linking HR plans to business plans,
HRP considers internal labour markets – people who can be promote, trained
and be re-deployed and then external labour markets at local, regional,
national, international levels. A make/buy approach can be adopted.
Make –recruit at junior levels as trainees and the rely on promotion
Buy – bring in fresh blood.
Often there is a mix between the two depending on the circumstances of each
firm.
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Aims of HRP.
Attract and retain appropriate skills, competences and expertise.
Anticipate potential surpluses/deficits
Develop well trained flexible workforce
Reduce external dependence when skills are in short supply through
retention and employee development strategies.
Improve utilization of people through flexible systems of work.
HRP Process. The process may be circular not merely linear. A well articulated
business plan forms the basis for HR plans. Business plans may be evolutionary
rather than deliberate- fragmented, intuitive and incremental. Where future is
not predictable, HRP may involve broad scenarios rather that precise forecasts.
It may be summarized as:
Business strategic plans setting out future activity levels and skills
required.
Resourcing strategy –by developing intellectual capital.
Scenario planning – broad assessment of where the organization is going in
its environment and implications for HR requirements
Demand/Supply forecasting – numbers and skills available/required from
within or outside the organization.
Labour turnover analysis –actual turnover used as input to supply forecasts
Work environment analysis scope to develop skills and achieve job
satisfaction.
Operational effectiveness analysis e.g. productivity and scope for flexibility
to cope with new/changing demands.
Components of Resourcing strategy:

Resourcing plans – internal development new skill. External –attracting
High Quality candidate as an employer of choice.
Flexibility plans using HR and to adapt swiftly to changing circumstances.
Retention plans
Scenario Planning is often an informal approach to think about the future in

broad terms based on likely changes in the internal/external environment. Thus
a scenario is an imagined sequence of future events; a view of changes that can
be foreseen. It opens minds to the range of possibilities that an organization
may confront. It creates pictured of alternative futures; it identifies issues and
examines possible consequences of events. It is necessary to make broad
assessments of likely internal developments.
Demand Forecasting. Future numbers and likely skills/competences

depending on future plans on growth/expansion or downsizing. Such forecasts
may be done through managerial or expert judgement. Or ratio trend analysis.
Forecasting skills is based on product market developments, new technologies.
Demand/Supply forecasts will indicate surplus/deficits.
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Labour Turnover is part of supply forecasting. It also helps establish if retention

strategy is needed. Labour turnover will raise costs of recruitment, induction
and training. It also demotivates remaining staff. However turnover is part of
normal functioning of an organization; a certain level can be beneficial.
Measurement of Labour Turnover:

Labour Turnover Index = No. of leavers]/No of employees. In a given period
usually a year. This is however a crude index e.g. at organizational level
leavers may be from one department/group.
Survival Rate – those who remain after so many years of service e.g. from a
cohort of trainees.
Half life index – the time it takes a cohort of starters to reduce to half
original size.
Length of service analysis – average length of service of those who leave.
Reasons for Turnover. Exit interviews will assist in drawing up retention plans.
Interviewer should probe skilfully and sensitively for reasons for dissatisfaction
or unhappiness. Attitude surveys of existing employees should also be done.
Costs of LTO.
Leaving costs – payroll costs and personal administration of leaver.
Recruitment and replacement [advert, interview etc]
Opportunity cost –recruitment, induction.
Direct costs of introducing replacement [induction]
Cost while vacancy lasts
Reduced input of starters.
Talent Management is not just about high flyers. Everyone in the organization
has talent. So TM is not for a favoured few though there is a bias for people with
scarce skills and high potential. [See Other Notes on this topic]
TM Process.
Develop organization as employer of choice –a great place to work.
Recruitment and selection that picks good quality people and are retained.
People have opportunity to grow their skills and have autonomy interest
and challenge.
Career development and growth.
Rewarding jobs.
Positive psychological contract.
Leadership qualities of line management to be developed.
Rewarding excellence, enterprise and achievement
Succession planning
Recruitment and Selection [obtaining the number and type of people the
organization needs]. The aim is to obtain employees at minimum cost. Stages:
Defining requirements –prepare job description and specification, decide
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terms and condition.

Attracting candidates – review and evaluate sources of applicants; inside
and outside company, using agencies/consultants, adverts etc.
Selecting candidates- sifting through applications, interviewing, testing,
obtaining references, assessment centres, and preparing contracts of
employment.
Requirements:
1) JD sets out details of the job, reporting relationships, activities/tasks
carried out; terms and conditions pay, benefit.
2) Person/Job specification. Competences are what person must know and be
able to do; any special aptitudes or skills required. Qualification and
training, experience. Any specific demands e.g. to introduce new systems,
develop new markets. Organisational fit –corporate culture. Special
requirements – travelling, unsocial hours, mobility. Meeting candidate’s
expectations in terms of career opportunities, training, security etc.
It is important to distinguish between essential and desirable requirements.

Adverts should attract attention of potential candidates, create and maintain
interest [about the job, company] and stimulate action.
Selection Methods.
Interviews – usually individual, face to face discussion. One interviewer
may be used [decision may be biased or superficial] or a second
interviewer or panel [e.g. personnel manager and line manager at the
same time]. Selection boards are large and more formal.
Assessment Centres use a range of techniques. Features include:
o Focus on behaviour.
o Exercises to simulate key dimension of the job e.g. role playing,
group exercises etc.
o Interviews and tests.
o Candidates are assessed together to allow interaction
o Several assessors/observers are used.
Graphology draws conclusions about personality from handwriting which is
used as a basis for predicting future performance
Application forms use a standardized format and include bio data.
Research shows that interviews are an inefficient method of predicting success

in a job. Assessment centre, psychometric tests, bio data are better. However
interviews are widely used.
After a provisional offer decision has been made, references may be obtained
on the candidate’s character and suitability. This covers factual information.
Opinions on are less reliable. They avoid adverse/detrimental remarks.
Selection Interviews. An interview is a two-way conversation with a purpose. It

offers an exchange of information on whether to offer; to accept/reject offer. To
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obtain information on candidates to allow valid predictions of future

performance. It may also supplement bio data on application from. Interviewer
is able to assess fit. These judgements are subjective. Is candidate
capable/competent? Are they motivated? Interviews are part of the classic trio –
with application form and refs.
Advantages:
Probing questions asked on experience/competence.
Interviewer can describe the job and organization
Candidate can ask about the job, career prospects, organization,
terms/conditions.
Disadvantages
Lacks validity in making sound predictions of performance and reliability
between candidates.
Relies on the skill of the interviewer. Many are poor interviewers though
they think they are good.
Does not assess competence for the particular job.
Bias and subjective judgements.
Interviews can be improved by training interviewers and through a structured

approach.
Selection Tests.
Psychological tests [psychometric-mental measurement]. They measure
individual abilities/characteristics to predict success in a job. A good test
should be:
o A sensitive measuring instrument that discriminates well.
o Standardized on a representative sample.
o Reliable – measures the same thing.
o Valid- measures what it is intended to measure. Thus an intelligence
test should measure intelligence not for example verbal facility.
Validity has these forms:
 Predictive – the test correctly predicts future behaviour.
 Concurrent - the test score differentiates individuals e.g.
high/low performers.
 Content-test relates to the characteristics of the job
 Face – test looks right and measures what it is supposed to
measure.
 Construct – measures a particular construct or characteristic.
Construct validity looks at the test itself.
Types of tests.
Intelligence tests depend on a theory of what constitutes intelligence.
Intelligence itself is however complex.
Personality is assessed in order to predict behaviour in a role. Personality is
itself also an all-embracing imprecise term and there are many
personality theories and hence tests.
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Ability – measure job-related characteristics e.g. numerical, verbal,

perceptual or mechanical.
Aptitude tests are job specific, designed to predict potential an individual
has to perform tasks within a job e.g. clerical, numerical, mechanical
aptitude and dexterity.
Attainment test measure ability/skills already acquired through
training/experience e.g. typing test.
Tests are useful where many recruits are required or exam results are
unreliable. Aptitude and attainment tests are useful where specific skills
are required e.g. typing comp progression??. Personality tests are useful
for marketing skills. Often a battery of tests is used.
Introduction to the organization. Induction is the act of receiving and welcoming

new employees and providing basic information to allow candidates to settle
down and start working. Aims:
Smooth preliminary stage to a strange/unfamiliar environment.
Establish a favourable attitude to the company to encourage the candidate
to stay.
Get effective output as quickly as possible.
Many employees leave within the first few months after joining. This entails a
cost:
Recruiting replacement
Induction
Supervision and error correction.
Induction serves to clarify the psychological contract [norms, beliefs,
expectations]. Impact on learning curve its length and the rate of learning.
Socialization is provided. Documentation is provided at induction e.g. employee
handbook. General company induction is followed by departmental induction
under the immediate supervisor for detailed induction. Formal induction can be
arranged in groups to give consistent comprehensive information. These may
mix people from different departments but usually at the same level.
Content:
The organization its products/services, structures, mission, values.
Learning arrangement/opportunities –formal training, self-managed
learning, personal development plans.
Health and safety
Conditions of service.
Pay and benefits – performance, skills/competence based schemes, profit
sharing, gain sharing, medical schemes etc.
Policies and procedures –sexual harassment, disciplinary/grievance
procedures.
Trade unions and employee involvement.
On the job induction. Such learning can be haphazard, inefficient and

wasteful. A planned systematic approach is desirable.
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Performance Management [PM]. This is based on the principle of

management by agreement not command. It stresses development and
initiation of self managed learning plans. Performance is a multi-dimensional
construct which covers:
Record of outcomes achieved; accomplishments
Also about doing work.
It covers both behaviour and outcomes/results. Behaviour transforms
abstraction to action; they are instruments for results. But behaviour is also an
outcome in its own right- the product of mental and physical effort applied to
tasks. Behaviour can be judged apart from results. When managing
performance of teams/individuals both inputs [behaviour] and outputs [results]
need to be considered.
PM is a strategic and integrated approach for delivering sustained success to

organizations by improving the performance of the people who work in them
and developing the capabilities of teams and individuals. PM allows the
organization to function effectively in its environment and to achieve longer
term goals. PM achieves integration by:
Vertical integration linking business, team and individual objectives
Functional integration linking functional strategies in different parts of the
organization.
HR integration linking different aspects of HRM – organizational
development, rewards to achieve coherent approach to management and
development of people.
Integration of individual needs with those of the organization.
PM is a way of getting better results from the organization, teams and

individuals in the framework of planned goals, standards and competence
requirements.
Principles of PM:
Translating corporate goals into individual, team, departmental goals etc
Clarifying corporate goals
A continuous and evolutionary process in which performance improves over
time.
Relying on consensus and cooperation not control/coercion
Encourages self-management of individual performance.
Require management style that is open, honest; with two way
communication between supervisors and subordinates
Require continuous feedback allowing experience and knowledge gained on
the job to modify corporate objectives.
Measures all performance against agreed goals
Applies to all staff.
Is not primarily about linking performance to rewards.
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PM should focus on performance improvement to achieve organizational, team

and individual effectiveness. It is about employee development. There must be
processes for such continuous development. It is truly performance and
development management. It must satisfy needs of all stakeholders –owners,
management, employees, customers, suppliers and the general public. PM
demonstrates that employees are important partners; their interests are
respected, their voice matters, their opinions are sought and listened to.
PM is concerned with communication and involvement in an atmosphere of

continuing dialogue between managers and members to define expectations,
share information on mission, values and objectives.
Ethical considerations:-
Respect for the individual
Mutual respect for each others’ needs and pre-occupation
Procedural fairness- limiting adverse effects
Transparency – people affected should be able to examine the basis of
decisions made.
PM is not an isolated process run by the personnel department functioning once

a year. Goals should be in alignment from corporate level to functional/business
units to teams and individuals. Objectives should be agreed not imposed;
through open dialogue. PM has grown from merit rating schemes and MBO. It
includes performance appraisal which often tends to be top-down. It focuses on
future performance planning and improvement than retrospective performance
appraisal. It sets a climate for dialogue. Individual ratings are only one outcome
of PM. While it deals with targets, standards and performance
measures/indicators, it is also concerned with inputs [knowledge, skills,
competences required to produce result. It is not top-down, or backward
looking: it is forward looking and developmental. Managers should seek ways to
support team members rather than dictate. It is a transformational process not
an appraisal process.
Key Activities: PM is a continuous self-renewing cycle.

Role profile –KRAs and competence requirements are agreed.
Performance agreement/contract –defines what the individual will achieve,
how performance will be measured. This is a performance planning stage
Performance development plan for extending knowledge, skills,
competence levels [performance development stage]
Managing performance throughout the year – action is taken to implement
agreement and personal development plan. Continuous feedback is given
on performance, informal progress review is done; objectives are updated.
Problems are dealt with and counselling is given where needed.
Performance review involves formal evaluation in the final stage of the
review period. It covers achievements and problems. It forms a basis for
revised PM agreement and personal development plan. It also includes
performance ratings.
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Role profile/definition is the framework for PM.

Purpose of role – what the role holder is expected to do.
KRAs/principal accountabilities are the main output areas. Objectives and
standards are agreed on these.
Key competences indicate what the role holder must be able to do and the
behaviour necessary for effective performance. This sets a basis for
drawing up personal development plans and assessing the input aspect of
performance. These competences may refer to the organization or may be
generic for similar role or they may be specific to the role.
Performance Agreements/Contracts define expectations/results to be achieved

and the competences required to attain these results.
Objectives, standards, target of performance
Performance measures and indicators
Competence assessment – how this will be assessed
Core values/operational requirements e.g. for quality, customer service,
team working, employee development etc which must be upheld. Other
areas include health and safety, budget control, cost reduction, security.
Objectives – something to be accomplished over a period of times. They are

expressed as:
 Targets [quantifiable results e.g. ROCE, output, sales, levels of service
delivery, reduction of rejects etc
 Tasks/projects to be completed by a specific date
 They can be work related or personal e.g. learning objectives for enhancing
knowledge, skills.
Individuals must participate in setting objectives/goals for themselves and for
teams, functions or even the organization.
Objectives are designed to bring about change; they should cover all important
aspects of the job [KRAs] and not focus on one dimension. They should be
SMART:
 Specific/stretching, clear, unambiguous, challenging.
 Measurable e.g. quantity/quality, time, money.
 Achievable –challenging but within reach of a competent committed
person.
 Result oriented and Relevant to the objectives of the organization hence
achieving alignment.
 Time framed –achievable within an agreed time scale.
Performance standards are useful when time –based target cannot be set. They
may endure from one period to another. They should be quantifiable as far as
possible e.g. speed of response, level of service. Performance measures are
necessary to establish that the intended result has been achieved to the level to
which the job holder is responsible for the result. Such measures should:
 Relate to result not effort
 Results must be within the job holder’s control
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 Be observable and objective e.g. financial [economic value added, costs,

rate of return, or as output e.g. units produced, new accounts created. Or
impacts e.g. attainment of standards, changes in behaviour, completion of
work/project. They may be based on the judgements of others
[internal/external] they may relate to time e.g. speed of response,
comparison with time table, and time to market, delivery times or amount
of backlog.
Balanced Scorecard [originally developed by Kaplan & Norton, 1992]. They

declare: “what you measure is what you get”. And “no single measure can
provide a clear performance target or focus attention on the critical areas of the
business”. There must be a balance between financial and operational
measures. A BSC should be a set of measures that gives fast and
comprehensive view of business. It assumes four questions-
 How do customers see us [customer perspective]
 What we excel at [internal perspective]
 Whether we can continue to improve and create value [innovation &
learning perspective]
 How we look at shareholders [financial perspective].
It can also be viewed as:

 Financial results
 Customer service
 Internal processes [how well things are done]
 People management.
Managing performance throughout the Year. PM is a continuous process. This is

a key idea. It is not something special that managers should do. It is a natural
process that all good managers must follow. Conventional performance
appraisal systems are built around an annual event – the formal review which
dwells on past performance. This was done at the request of the personnel
department; ten it was forgotten. Under PM, the annual review is no longer the
most important part. Greater prominence is given to performance agreement
and the continuous process of PM. This continuous process emphasizes
achievement of sustained improvement in performance, continuous
development of skills and competence, importance of OL [organizational
learning]. Managers must address development and improvement need as they
arise. Learning and work should be integrated. People should learn from
successes, challenges and problems inherent in their everyday work. Continuing
assessment should refer to agreed performance standards and objectives.
Progress review can be informal or through formal systems of team meetings.
Interim reviews at pre-determined points in the year e.g. twice yearly or as
‘milestones in a project. At such meetings the manager and employee update
objectives and work plans, focus on continuous learning and deal with
performance problems.
Performance agreements and plans are working documents subject to new
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demands in new situations, addressing shortfalls in light of what has been done,
examining changes in the circumstances in which the job is done, and noting
new pressure/demands, changes in duties or responsibilities. PM should
enhance “deliberate learning from experience” [Mumford. 1994]. Every task
represents a learning opportunity and we should reflect on the experience: how
it was done and draw conclusions on future behaviour.
Dealing with Performance problems.

 Identify and agree the problem by analysing feedback which may be from
managers, customers, their own evaluations or from automatic control
information. The employee is then able to assess his own performance
and take action. This is self-regulating mechanism.
 Reasons for shortfall. Managers should not seek to attach blame. The
individual and manager must work together to identify what has
contributed to the problem. Some causes may be external and so not
controllable by the individual or manager. The individual may have lacked
necessary support and guidance or did not fully understand expectations
or lacked ability to do the task or did not know how to do it [skill] or
lacked the right attitude.
 Decide on action [by individual, manager or both] covering behaviour,
attitudes, expectations.
 Resource the action e.g. coaching, guidance, experience, facilities to
enable agreed actions to happen.
 Monitor and provide feedback.
Performance Review. Such discussions assist in building a perspective on

past performance as a basis for future planning. An overall view of progress
made is necessary indicating what has happened and why. These are occasions
for dialogue not top-down appraisal; they should be free flowing open meetings
where views are exchanged. They involve:
1) Measurement – assessing result against agreed target/standards
2) Feedback
3) Possible reinforcement – what has been done well and some constructive
criticism
4) Exchange of views – full, free, frank on achievements, what need to be
done.
5) Agreement on action plans.
Individual and manager prepare for the review [reviewer and reviewee].
Individual should engage in self-assessment/appraisal. This helps build positive
discussion and less inhibition/defensive behaviour. It is more constructive and
builds open dialogue. It is less unilateral. Individual works on the basis of
standards/targets agreed upon. There must be mutual trust between the two.
Reviewers must not capitalize on honest self-assessment. The risk is that
reviewees will over-estimate their achievements especially if money is at stake.
Neither party should dominate; it is a joint affair. However it helps if reviewee
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does most of the talking while reviewer listens attentively. Analyse performance
not personality, what was done not the sort of person; the whole period not
isolated or recent events only. Adopting a no surprises approach e.g. if
performance problems were identified and dealt with at the time of their
occurrence. Recognizing achievements/strengths, ending the meeting positively.
Performance Rating. Early PM systems incorporate rating especially

associated with PRP. This is no longer so. The first task is to choose between an
odd/even number of levels. An odd number represents normal distribution of
ability. An even number however make it difficult to centralize ratings. The most
typical is 4/5 levels. Some organizations favour three arguing that beyond that it
is difficult to discriminate.
Rating scales can be behavioural [good, average, inadequate] or graphic [along

a continuum] e.g. a, b, c [alphabetical] or numerical [1, 2, 3] or by initials e.g.
exe for excellent. Some attempt to disguise the hierarchical nature of the scale.
It may also be adjectival e.g. A-excellent; B- highly acceptable; C- acceptable-
not entirely acceptable and E –unacceptable. Sometimes verbal descriptions are
used to avoid “putting people into boxes”. It is advisable to avoid above
average, average, below average because what is average? And why label
someone “below average” for 12 months.
The tendency is also to avoid negative descriptions in the levels and to leave
out “unsatisfactory” and “unacceptable”. Thus a popular method provides
positive reinforcement at each level. This aligns with continuous improvement –
all performance is improvable.
Example:
1) Highly Effective –frequently exceeds agreed targets/standards and
performs consistently in a thoroughly proficient manner beyond
expectations
2) Effective-achieves agreed targets/standards and meets normal
expectations.
3) Developing- contribution stronger in some aspects, most
objectives/standards met but some areas need further development.
4) Improvable-contribution generally meets/almost meets standards and
there is clear room for improvement in a number of definable areas
Such a rating compares performance to performance and not comparing

employees as in average/below average.
Arguments for ratings:

 PRP require an overall rating
 Sums up judgements
 Basis for predicting potential assuming that people who perform well in the
present job will perform well in future in different jobs
 Letting people know where they stand; in the mind of the manager
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[assuming he is honest and fair]
Against.
 A single rating summing up total performance is an over-simplification of
complex factors influencing performance some beyond the individual’s
control.
 Consistency between raters is difficult/impossible to achieve.
 Largely subjective – thus may be unfair/discriminatory
 Ratings encourage manager to be dishonest especially if related to pay
 Turns an open, positive, constructive discussion into a top-down
judgemental exercise.
 Positive developmental aspects of review may be overshadowed when a
rating leads to a pay decision. Pay implications then dominate the whole
process.
 Labelling people with a letter/number is demotivating/demeaning
 Rating conveys opinion about past performance not the future.
Achieving consistency, equity and fairness in ratings poses huge problems.

Some raters are more generous than others who are harder. It is possible for
ratings to be questioned and monitored and in some case computer based
systems have been introduced. Many managers want to do their best for their
staff; or simply to curry favour. Some consistency can be achieved by:
 Forced distribution – ratings must conform to a pattern usually
corresponding to normal distribution curve in each department. However
both employees and manager resent this. It produces win/lose situations.
It is arbitrary.
 Ranking. Performance ratings are distributed according to this ranking. This
is similar to forced distribution. It still depends on objectivity and fairness
of ranking.
 Training Consistency workshops are held. This can build common
understanding about rating levels
 Peer reviews/moderating discussions. Managers meet and discuss patterns
of each others’ ratings and challenge unusual decisions and distributions.
It raises consistency but is time consuming
 Monitoring by a central department usually HR who may challenge unusual
pattern and identify unwarranted differences between departments.
 Behaviourally Anchored Rating Scales [BARS] are designed to reduce rating
errors found in typical conventional scales. managers rate each dimension
on a scale e.g.:
A Continually contributes new ideas/suggestions. Taking a leading role in

group meetings but is tolerant/supportive of colleagues & respects other
people’s points of views. Keeps everyone informed of own activities. Is also
aware of what team members are doing to support team objectives.
B Takes a full part in group meetings and contributes useful ideas frequently.
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Listens to colleagues and keeps them reasonably well informed of own

activities while keeping abreast of what they are doing.
C Delivers opinions/suggestions at group meetings from time to time but is
not a major contributor to new thinking/planning activities. Generally
receptive to other people’s ideas and willing to change own plans to fit in.
Does not always keep others properly informed or take sufficient pains to
know what they are doing.
D Tendency to comply passively with other people’s suggestions. May
withdraw at group meetings but sometimes shows personal antagonism to
others. Not very interested in what others are doing or in keeping them
informed.
E Tendency to go own way without taking much account of the need to make
a contribution to team activities. Sometimes uncooperative & unwilling to
share information.
F Generally uncooperative. Goes on way, completely ignoring the wishes of
other team members and taking no interest in the achievement of team
objectives.
Documentation
PM is about managing and improving performance not completing forms.
However some format always assists orderly presentation of plans and
comments. The forms constitute working documents to be completed jointly by
managers and individuals. They record agreement about performance actions
and achievements. Some protection against unfair assessment is provided
where the manager’s manager views and comments on the completed form. [So
called “grandfather”]
Introducing PM
Care is needed to minimize risk of failure considering:
 Where and how PM is to be introduced
 Who is covered
 When reviews? What sort?
 Pilot testing
 Briefing arrangements.
PM is usually organization-wide starting at the top. It takes into account the

structure and relationships in the organization e.g. divisions and branches; level
of decentralization. A project team/working group is often helpful to serve for
consultation and communication and to achieve understanding and acceptance
of the process. It is constituted of management and staff representatives.
Today PM covers all professional, administrative, technical and support staff.

Shop floor works may also be included. Annual formal reviews with interim
reviews are common. Some organizations do development reviews on the
anniversary of the date of engagement. This spreads the load on managers. If
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there is performance pay this review is on a fixed date in the year.
Written and oral briefings help. Introduction of PM should be monitored. A

survey of reactions can be done. The organizational performance should be
analysed to assess the impact of PM.
360 Degree Feedback. Interest in this technique of PM is increasing. It is defined

as the “systematic collection and feedback of performance data on an
individual/group derived from a number of stakeholders on their performance”
[Ward, 1995]. The data is in the form of ratings on the various performance
dimensions. It is also called multi-score assessment or multi-rater feedback.
Performance data may be from supervisor, peers e.g. team members,
colleagues, from parts of the organization]; internal/external customers. Other
stakeholders include customers, clients/suppliers. [Sometimes called 540degree
feedback]. Self-assessment is also sometimes included. Feedback may be sent
direct to individual or to their manager or both. Counselling/coaching is then
given by the HR Dept or consultant.
360 degree is used:

 To support learning and development
 Appraisal, resourcing and succession planning
 Pay decisions
Rationale: assumptions:
 Enhanced Awareness of self vs.
 how others see us
 Enhanced Awareness is key to maximum performance as leader.
Management is complex and it benefits from various sources. Managers should

not assess behavior they cannot observe. 360 degree captures performance
dimensions previously neglected by organizations.
. Manager
Internal Customers
Peers Individual
Direct Reports
360 Degree Feedback Model

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Methodology. Use questionnaires on a list of competences developed within

the organization or from a supplier. Dimensions refer to leadership,
management, approaches to work.
Example
Leadership, Team Player/manage people,

Self Management, Communication
Vision, Organizational skills,
Decision Making, Expertise,
Drive, Adaptability,
Ratings may refer to both importance and performance e.g.

1: Not important 6: Essential
Or on performance:
1: Weak 6: Outstanding.
Questions are prepared by computer. Feedback is often anonymous and

commonly presented to individual, less commonly to the manager. If purpose is
developmental, action is generally left to individual, planning may be shared
between individual and organization.
Steps for developing and implementing 360 degree.

 Objectives to be achieved by 360 e.g. development, appraisal, pay
 Decide on recipients
 Decide on who gives feedback – including whether it is anonymous
 Areas of work and behaviour – list of headings of competence. Model must
fit organizational culture, it values and type of work.
 Methods of collecting data
 Data analysis /presentation –software should be simple.
 Initial implementation- piloting preferably with top management.
Launch must communicate benefits and allay fears. Reactions should be

analysed and necessary changes made,
 Plan and implement full programme – including briefing, communicating
training and support from HR or external consultants.
 Monitor and evaluate. Such a programme can cause stress and anxiety or
produce little practical gain for the effort invested.
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Advantages:
 Broad perspective on how one is perceived by others.
 Increased awareness of and relevance of competence
 More reliable feedback to senior management about their performance
 Encourage more open feedback
 Clearer picture of individual’s real worth
 More rounded view of performance
 Identifying key development areas for individual, department, organization
 Identify strengths in the organization
 Awareness of personal impact of managers
 Supporting continuous development
 Feedback perceived as more valid/objective leading to acceptance of
results
Problems.
 Feedback not frank/honest
 Feedback giving stress
 Lack of follow-up action
 Over-reliance on IT
 Too much bureaucracy.
Most likely to succeed if:

 Active support of top management who give/receive feedback
 Commitment everywhere based on briefing, training etc
 Questionnaire reflects typical aspects of behaviour.
 Process is non-threatening e.g. with anonymous feedback or using 3rd party
facilitator
 Questionnaires are easy to complete
 Bureaucracy is minimized.
International HRM: Four organizational Models [Bartlett & Ghoshal, 1993].

1) Decentralized Federation. Each unit is managed as a separate entity
which optimizes its performance in its local environment. This is the
traditional MNC.
2) Coordinated Federation. Centre has sophisticated management
systems for maintaining overall control while giving some scope for
local management to recognize local market conditions
3) Centralised Hub. Focus is on the global market, not local markets.
Such an organization is truly global not merely multinational. This is
typical of Japanese firms. There is centralized decision making.
4) Transnational Model adopts multi-dimensional strategic capabilities
for competing globally. There is also local responsiveness to market
requirements.
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However business and HR issues influence each other. HRM strategic Models:
1) High Performance Management- developing processes that make an
impact on the firm’s performance through its people e.g. in productivity,
quality, levels of customer service, growth, profit etc leading to increased
shareholder value. It starts with leadership, vision and benchmarking
which create momentum, and direction. Its main driver are:
a. Decentralized, devolved decision making by those closest to the
customer.
b. Development of people capabilities through learning at all levels
with emphasis on self-management and team capabilities.
c. Building trust, enthusiasm and commitment for direction of the
organization.
d. Fair treatment for those who leave, engaging needs of the
community outside the organization.
e. Necessary practices are rigorous recruitment and selection, training,
incentive pay and PM processes.
2) High Commitment Management. Aims to elicit a commitment so that
behaviour is self regulated not controlled through sanctions/pressures.
High levels of trust features:
a. Career ladders and emphasis on trainability
b. High levels of functional flexibility and abandoning rigid job
descriptions.
c. Reducing hierarchies and status differentials.
d. Reliance on team structures for disseminating information, team
building and working, structuring work and problem solving [quality
circles]
e. Job design that incorporate intrinsic satisfaction
f. No compulsory lay-offs or redundancies, permanent employment
guarantee
g. Assessment/payment systems such as merit pay, profit sharing
3) High Involvement Management. Employees are treated as partners. They
are respected and they have a voice. There is continuing dialogue
between managers and team members.
a. “On-line” work teams
b. “Off-line” employee involvement activities and problem solving
groups
c. Job rotation.
d. Suggestion programmes
e. Decentralization
f. Concerned with communication and involvement
g. Climate of continuing dialogue between managers and members to
define expectations and share information on values, mission,
vision, objectives etc
The nature of Work. Work is the exertion of effort and application of

knowledge and skills to achieve a purpose. Most people work to earn a living –
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earn money. But work also creates satisfaction by doing something worthwhile,
creating a sense of achievement, prestige, recognition, opportunity to use and
develop skills, scope to exercise power and for companionship.
Theories about work

 Labour Process Theory: - Originally formulated by Karl Marx. He states that
labour adds value but is paid less than that value. This surplus is
appropriated by owners. Capitalists extract that surplus value. A modern
view about labour process theory is that management techniques,
mechanization and automation secures subordination of labour and de-
skilling of work in the office and shop floor. The worker is deprived of
control. This is the application of Taylorism i.e. scientific management
with its systems of observation and measurement, task specialization
[Braverman, 1974]. Management has a range of controls e.g. job
performance assessment –to be used to secure compliance.
 Agency Theory. Principals must develop ways of monitoring and controlling
the activities of their agents [staff]. Principals have problems in ensuring
that agents do what they are told. This theory tends to view the
employment relationship purely from management’s point of view. It
suggests that workers cannot be trusted.
 Exchange Theory. Organizational behaviour is explained in terms of
rewards and costs incurred in the interaction between employer and
employee. Main concepts:
o Rewards
o Costs – fatigue, stress, anxiety, punishment or value lost because of
lack of opportunity.
o Outcomes:-rewards less costs. If this positive the interaction has
yielded profit which is satisfactory; if it exceeds minimum
expectations.
o Level of comparisons- outcome of an interaction is evaluated
against profit foregone elsewhere.
Unitarist and Pluralist Frames of Reference. One aim of HRM is to increase

commitment to the organization; to share its views and values and integrate
their objectives with those of the organization. This is a unitary frame of
reference. Organizations are assumed to be harmonious’ working as one team.
Cyert & March [1963] view organizations as coalitions of interest groups. There
must be respect for interests of different groups.
Factors affecting Work. Organizations are forced to respond to new demands

and environmental pressures. BPE, downsizing and delayering have all affected
work, feelings of security and career opportunities. The following are significant:
1) Lean organizations. Womack & Jones [1970] popularized the term lean
production in The Machine that changed the World. Initially confined to
the car industry especially Toyota. All forms of waste had to be eliminated
–over-production, waiting, transporting, over-processing, inventories,
moving, defective parts/products. Lean Production [LP] minimizes costs,
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adds value by minimizing waste on materials, time, space and people.

Hence production systems like JIT, Supply Chain Management, zero
defects, right first time, MRP. Business Process Engineering [BPE] also
assisted leaner production and TQM.
The concept of “leanness” has been extended beyond manufacturing

organizations through reduction of headcounts [downsizing] reducing
management/supervisory levels [delayering]. But there is no model of a lean
organization. More positive approaches include:
 Team based work organizations
 Shop floor empowerment and problem solving practices
 Quality built in, not inspected in
 Horizontal business processes vs. vertical structures
 Partner relationships with suppliers
 Cross functional management and development teams
 Responsiveness to customer demands
“Are lean organizations usually mean?” The impact of leaner methods has
implications for employees e.g. longer hours, stress, morale/motivation,
reduction in career opportunities.
Changing Role of Process Worker. Increasing automation and new technologies

have eroded the number of low-skilled jobs and process workers are less
involved in manual tasks. They are given more responsibility for the processes
they work on. In addition they must be more customer and business oriented
and carry out simple engineering and maintenance tasks.
The Flexible firm. The concept was originated by Atkinson [1984]. Increasingly
the trend is for firms to seek various forms of structural and operational
flexibility. This takes three main forms:
 Functional flexibility enables workers to be redeployed quickly and

smoothly between activities/tasks. This may require multi-skilling as craft
workers who possess a number of skills e.g. mechanical/electrical,
manufacturing/maintenance
 Numerical flexibility. Number of employees can be quickly/easily
increased/decreased to cope with short-term changes in demand levels of
labour.
 Financial Flexibility. Pay should reflect supply/demand in the external
labour market. Also use of flexible systems that facilitate
functional/numerical flexibility.
The labour force is broken into peripheral [numerical flexibility] groups around a
numerically stable core group which handles the organisation’s key, firm
specific activities. At the core the focus is on functional flexibility. At the
periphery, numerical flexibility is more important. As market grows, periphery
expands to take up slack; it contracts when growth slows. At the core only
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tasks/responsibilities change. Here they are insulated from medium term market
fluctuations and so enjoy job security. Periphery is not so lucky.
Changing Patterns of Work. There is greater use of part-time workers,

propensity to subcontract and outsource; greater requirements for specialists
[knowledge workers] and professional; more teleworking; expansion of call-
centre work. There are more short term contracts. Organizations do not seek to
offer careers: they want specific contribution to achieve organizational goals
now.
Unemployment. There is less security in employment today. Life long careers

are less common. On both sides there is less commitment. Employees seek to
advance careers by changing jobs. They seek employability.
Role. How a person behaves is often prescribed by socially acquired rules. The
person adopts a suitable role in order to perform effectively within the situation.
Role is the part played by individuals at work in fulfilling their job requirements.
Roles give the specific forms of behaviour required for a particular task. It sets
the way tasks are carried out not the tasks themselves i.e. broad aspects of
behaviour. Thus a job description lists tasks to be carried out. People at work are
always acting a part; not reciting lines but interpreting them in terms of their
own perception especially in interactions with other people. Thus roles exist in
relation to other people i.e. a role set.
Contribution – what people do to bring about a result? It can be measured in

terms of both inputs and outputs – competence and results.
Comparison: Performance and Contribution Pay
Feature Pay for Performance Pay for Contribution

Philosophy Formulae, systems Processes
Measurement Pay for results-the what Pay for both results and
how they are achieved
Design Uniform across the Diverse approaches to fit
organization different needs
Time scales Immediate past Mix of past review and
performance future development
Pay linkage Fixed formula, matrix More flexible linkage
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Performance is what a person achieves. Contribution is the impact by that

person on the performance of the team/organization.
Competence [Boyatzis, 1982 –US] “a capacity that exists in a person that leads
to behaviour that meets the job demands within the parameters of the
organizational environment and that, in turn, brings about desired results”.
Page 53 of 53

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HRM and Personnel Management.

Organising the HR Function. This depends on the extent of decentralization,

Job Analysis [JA]

Role Analysis collects information as above on what people do and is concerned

Competence Analysis establishes what is required to carry out a role in terms of

 To produce person specification.

Role Profile/Definition covers expectations, KRAs or accountabilities. What

Person Specification [job/personnel specification] spells out education,

JA produces the following about a job:

Data Collection Steps.

Techniques used include:

Skills Analysis – skills needed for an acceptable standard of performance. This is

Competence Analysis. Approaches.

Job Descriptions should be as brief as possible.

MOTIVATION. A motive is reason for doing something – what influences people

Motivation is goal directed behaviour. Its main theories are:

Content/Needs Theory. An unsatisfied need creates tension and disequilibrium.

Process/Cognitive Theory. This concerns perceptions of one's environment

Expectancy Theory. Was originally in Vroom's Valency-Intrumentality-

Commitment, Job Satisfaction and Job Engagement. Independently or in

 strong desire to remain a member

Commitment assumes a unitary frame of Reference consisting of shared

Psychological Contracting. Belief held by an individual and the employer

A psychological contract cannot be enforced at court, is never written down but

The internal structure of a task consists of three elements:

Job Design. Specification of content, methods and relationships of jobs. It aims

Principles of Job Design.

Approaches to Job Design.

Self-managing Teams [autonomous work groups]. These are self-regulating;

High Performance Work Design – setting up working groups in environments

 Managers and team leaders adopt a supportive not autocratic style.

Intellectual Capital [IC].

There are three elements of IC:

HC is the knowledge, skills and abilities of individuals that create value. It is

KM is about storing and sharing the wisdom, understanding and expertise

Nonaka [1991] suggests that knowledge is held by individuals or collectively i.e.

 Knowledge – information that is put to productive use; personal and often

Approaches to KM: [Hansen, Nohria & Tierney, 1999]

KM contributes to Organisational Learning.

OL is concerned with how learning takes place in organizations. It focuses on

operational, policy and strategic levels needs to be conscious, continuous and

LO learn from experience, using systematic problem solving techniques. The

Kolb’s Learning Styles:

Divergers prefer concrete to abstract learning situations and reflection to

Honey & Mumford [1986]: also identified four styles:

Theory/Concept Content Implications

Reinforcement Behaviours can be strengthened Reinforcement theory

theory by reinforcing them with positive underpins training programmes

Conditions for effective Learning.

The learning Curve is the time taken by an inexperienced person to reach

Communities of Practice [Wenger & Snyder, 2000]: “groups of people

enterprise”. It is in such communities that much of the organization’s TK is

Wenger and Snyder [2000] say these communities should be treated as a

Workplace Learning. [Stern & Sommerlad, 1999].

Reward Management [RM]. RM concerns formulation and implementation of

7) Reward people according to their contribution. This is part of HC

Example of Reward Strategy

Strategic Aim Strategic Plan

initiatives must promote improved

TR offers the following benefits:

Total Reward Model: Thompson, 2002.

 Base Pay  Pensions