Thursday, August 17, 2017

Human Resource Management Notes: Training and Management Development

Unit – IV: Training and Management Development
Meaning and definition of Training
Training refers to the imparting of specific skill, abilities and knowledge to  employee. System and practices get outdated due to new discoveries in technology, including technical, managerial and behavioral aspects. In this context training enhances the knowledge, skills and attitudes of employees to increase efficiency and effectiveness on the prsent job as well as expected future job.
Training is defined by Wayne Cascio as “training consists of planed programs undertaken to improve employee knowledge, skills, attitude, and social behavior so that the performance of the organization improves considerably.”
Training is normally viewed as a short process. It is applied to technical staff, lower, middle, senior level management. When applied to lower and middle management staff it is called as training and for senior level it is called managerial development program/executive development program/development program.
Objectives/purpose/goals of training and development
Defining training objectives in both qualitative and quantitative terms helps in evaluating and monitoring the effectiveness of training. Involvement of top management is necessary in order to integrate training objective with organizational objectives. Employees will definitely learn best when objectives of the training program were clearly stated to them, objective means the purpose and expected outcome of training activities.
1.       To impart basic knowledge and skill to new entrants required for intelligent performance of definite task in order to induct them without much loss of time.
2.       To assist employees to function more effectively by exposure of latest concepts information and techniques and development of skills required in specific fields including production, purchase, marketing, logistics, information technology etc.
3.       To broaden minds of supervisors. Sometimes, narrowness of outlook may arise in supervisors because of specialization. In order to correct this narrowness they are provided with opportunities and interchange of experience.
4.       To build second line of competent employees and enable them to occupy more responsible positions as situation emerge.
5.       To prepare employees to undertake different jobs in order to enable redeployment and maintain flexibility in workforce so that ever changing environment of market can be met and downturns can be managed without loosing experienced employees.
6.       To provide employees job satisfaction, training enables an employee to use their skill, knowledge and ability to fullest extent and thus experience job satisfaction and gain monetary benefits from enhanced productivity.
7.       To improve knowledge, skills, efficiency of employees to obtain maximum individual development.
8.       To fulfill goals of organization by securing optimum co-operation and contribution from the employees.
Steps in Training process
The steps of Training Process are as under:
1. Organizational Objectives and Strategies: The first step in the training process is an organization in the assessment of its objectives and strategies. What business are we in? At what level of quality do we wish to provide this product or service? Where do we what to be in the future? Its only after answering these and other related questions that the organization must assess the strength and weakness of its human resources.
2. Needs Assessment: Needs assessment diagnoses present problems and future challenge to be met through training and development. Needs assessment occurs at two levels i.e. group level and individual level, an individual obviously needs training when his or her performance falls short or standards that is when there is performance deficiency. Inadequate in performance may be due to lack of skills or knowledge or any other problem
3. Training and Development Objectives: Once training needs are assessed, training and development goals must be established. Without clearly-set goals, it is not possible to design a training and development programme and after it has been implemented, there will be no way of measuring its effectiveness. Goals must be tangible, verifying and measurable. This is easy where skilled training is involved.
4. Conducting Training Activities: Where is the training going to be conducted and how?
Ø  At the job itself.
Ø  On site but not the job for example in a training room in the company.
Ø  Off site such as a university, college classroom hotel, etc.
1.       Designing training and development program: Who are the trainees? Who are the trainers? What methods and techniques? What is the level of training? What are the principles of learning?  Where to conduct the program?
2.       Implementation of the training programme: Program implementation involves actions on the following lines :
Ø  Deciding the location and organizing training and other facilities.
Ø  Scheduling the training programme.
Ø  Conducting the programme.
Ø  Monitoring the progress of the trainees.
3.       Evaluation of the Results: The last stage in the training and development process is the evaluation of the results. Since huge sums of money are spent on training and development, how far the programme has been useful must be judge/determined. Evaluation helps determine the results of the training and development programme. In the practice, however organizations either overlook or lack facilities for evaluation.
Methods of determining training needs / Areas of Training
1. Management audit method:
a) Environmental assessment- environmental (political-legal, economic, socio-cultural, technological) changes are identified to determine training needs.
b) Objectives, strategies and structure change- training needs are identified to manage such changes.
2. Task analysis method: Collection and analysis of task related information- performance standards for each task are set- details are found about how tasks are done- training needs are identified for effective task performance. Job description, job specification, job performance standard
3. Performance analysis method
a) Organizational performance method- specifies desired performance standard. Overall performance such as- goal achievement, production performance, quality control, sales performance,cost, absenteeism, labour turnover,accident rates etc. It determines the overall training needs.
b) Employee performance analysis- identifies actual performance on the current job. Performance deficiencies and problem faced by the employees are identified to determine training needs through- employees performance appraisal reviews, career planning discussion, exit interview, performance test etc.
4. Supervisory recommendation method: In this method supervisor identify gap in knowledge and skills and recommend needed training for the employees.
5. Training need survey method: In this method direct questioning is used to gather opinion about training needs through individual survey (each employee), group survey (group of present employees, former employees and supervisors). The result of survey becomes training needs. Competency survey- experts are asked to give opinion on desired competencies to perform the job effectively. This desired competencies determines training needs.
Various Methods for Training of operating personnel/factory workers
Training is defined by Wayne Cascio as “training consists of planed programs undertaken to improve employee knowledge, skills, attitude, and social behavior so that the performance of the organization improves considerably.” There are different methods of training for operating personnel (factory workers). Training these workers becomes important because they handle equipment worth crores of rupees.
1. On the job training method: In this method workers who have to be trained are taken to the factory, divided into groups and one superior is allotted to every group. This superior or supervisor first demonstrates how the equipment must be handled, and then the worker is asked to repeat whatever he has observed in the presence of the supervisor. This method makes it easy for the employee to learn the details about specific equipment. Once the worker studies the first equipment thoroughly the supervisor moves on to the next equipment and so on.
2. Apprenticeship training: In this method both theory and practical session are conducted. The employee is paid a stipend until he completes training. The theory sessions give theoretical information about the plant layout, the different machines, their parts and safety measures etc. The practical sessions give practical training in handling the equipment. The apprentice may or may not be continued on the job after training.
3. Vestibule training: In this method of training an atmosphere which is very similar to the real job atmosphere is created. The surroundings, equipment, noise level will be similar to the real situation. When an employee is trained under such conditions he gets an idea about what the real job situation will be like. Similarly when he actually starts doing the job he will not feel out of place. This method is used to train pilots and astronauts. In some places graphics are also used to create the artificial surroundings. This method involves heavy investment.
4. Job rotation: In this method the person is transferred from one equipment to the other for a fixed amount of time until he is comfortable with all the equipments. At the end of the training the employee becomes comfortable with all the equipment. He is then assigned a specific task.
5. Classroom method: In this method the training is given in the classroom. Video, clippings, slides, charts, diagrams and artificial modules etc are used to give training.
Methods of training for managers/methods of managerial development/executive development:
A) On the job method: On the job method refers to training given to personnel inside the company. There are different methods of on the job training.
1. Job rotation: This method enables the company to train managerial personnel in departmental work. They are taught everything about the department. Starting from the lowest level job in the department to the highest level job. This helps when the person takes over as a manager and is required to check whether his juniors are doing the job properly or not. Every minute detail is studied.
2. Planned progression: In this method juniors are assigned a certain job of their senior in addition to their own job. The method allows the employee to slowly learn the job of his senior so that when he is promoted to his senior job it becomes very easy for him to adjust to the new situation. It also provides a chance to learn higher level jobs.
3. Coaching and counseling: Coaching refers to actually teaching a job to a junior. The senior person who is the coach actually teaches his junior regarding how the work must be handled and how decisions must be taken, the different techniques that can be used on the job, how to handle pressure. There is active participation from the senior.
Counseling refers to advising the junior employee as and when he faces problems. The counselor superior plays an advisory role and does not actively teach employees.
4. Under study: In this method of training a junior is deputed to work under a senior. He takes orders from the senior, observes the senior, attends meetings with him, learns about decision making and handling of day to day problems. The method is used when the senior is on the verge of retirement and the job will be taken over by the junior.
5. Junior board: In this method a group of junior level managers are identified and they work together in a group called junior board. They function just like the board of directors. They identify certain problem, they have to study the problem and provide suggestions. This method improves team work and decision making ability. It gives an idea about the intensity of problem faced by the company. Only promising and capable junior level managers are selected for this method.
B) Off the job training method: Off the job training refers to method of training given outside the company. The different methods adopted here are:
1. Classroom method: The classroom method is used when a group of managers have to be trained in theoretical aspects. The training involves using lectures, audio visuals, case study, role play method, group discussions etc. The method is interactive and provides very good results.
2. Simulation: Simulation involves creating atmosphere which is very similar to the original work environment. The method helps to train manager handling stress, taking immediate decisions, handling pressure on the jobs etc. An actual feel of the real job environment is given here.
3. Business games: This method involves providing a market situation to the trainee manager and asking him to provide solutions. If there are many people to be trained they can be divided into groups and each group becomes a separate team and play against each other.
4. Committee: A committee refers to a group of people who are officially appointed to look into a problem and provide solution. Trainee managers are put in the committee to identify how they study a problem and what they learn from it.
5. Conference: Conferences are conducted by various companies to have elaborate discussions on specific topics. The company which organizes the conference invites trainee manager and calls for experts in different fields to give presentation or lecture. The trainee manager can ask their doubts to these experts and understand how problems can be solved on the job.
6. Readings: This method involves encouraging the trainee manager to increase his reading related to his subject and then ask him to make a presentation on what he has learned. Information can be collected by trainee manager from books, magazines and internet etc.
7. In basket training: In this method the training is given to the manager to handle files coming in and to finish his work and take decisions within a specified time limit. The trainee manager is taught how to prioritize his work, the activities which are important for his job and how to take decisions within limited time limit.
Significance/Importance or Advantages of training programs/training to the company and employees:
The following are the advantages of training program to the company:
1. Increase in efficiency of worker: Training programs can help workers to increase their efficiency levels, improve quality and thereby increase sales for the company.
2. Reduced supervision: When workers have been formally trained they need not be supervised constantly. This reduces the work load on the supervisor and allows him to concentrate on other activities in the factory.
3. Reduction in wastage: The amount of material wasted by a trained worker is negligible as compared to the amount of material wasted by an untrained worker. Due to this the company is able to reduce its cost its cost of production.
4. Less turnover of labour: One of the advantages of the training program is that it increases the confidence of employees and provides them with better career opportunities. Due to this employee generally do not leave the company. There by reducing labour turnover.
5. Training helps new employees: A person, who is totally new to the company, has no idea about its working. Training helps him to understand what is required from him and helps him to adjust to the new environment.
6. Union management relations: When employees are trained and get better career opportunities. The union starts having a possible attitude about the management. They feel that the management is genuinely interested in workers development. This improves union management relations.
The following are the advantages of training program to the employee
1. Better career opportunities: Training programs provide the latest information, develops talent and due to this the employee is in a position to get better jobs in the same company or other companies.
2. High rewards: Effective training programs result in improved performance. When performance appraisal is done excellent performance from the employee is rewarded by giving him incentives and bonus.
3. Increased motivation: Employees who have been trained are generally more confident as compared to others. Since their efforts will be rewarded in future they are very much interested in improving their performance. Therefore we can say that their motivation levels are very high.
4. Group efforts: Training programs are not only technical programs but are also conducted in areas like conflict management, group dynamics (formal and informal groups), behavioral skills, stress management etc. this enables employees to put in group effort without facing problems that groups normally face. In other words training teaches people to work in a group.
5. Promotion: People who attend training programs learn from them and improve themselves are generally considered for promotion. Thus training increases chances of promotion.
Management or Executive development
All those persons who have authority over others and are responsible for their activities & for the operations of an enterprise are managers. Any activity designed to improve the performance of existing managers to provide for a planned growth of managers to meet future requirements is management development.
According to Flippo “executive development includes the process by which managers and executives acquire not only skills and competency in their present job but also capabilities for future managerial tasks of increasing difficulty and scope.” 
In simple words, Executive development or management development is a systematic process of learning and growth by which managerial personnel gain and apply knowledge, skills, attitudes and insights to manage the work in their organization effectively and efficiently.
The characteristics of executive development are as follows:
a)      Executive development is a planned and organized process of learning.
b)      It is an ongoing and never ending exercise.
c)       Executive development is a long term process as managerial skills can not be developed overnight.
d)      It aims at preparing managers for managers.
The programme of executive development aims at achieving following purposes:
a)      To sustain good performance of managers throughout their careers by exploiting their full potential.
b)      To understand economic, technical, and institutional forces in order to solve business problems.
c)       To acquire knowledge about problems of human resources.
d)      To think through problems which may confront the organization now or in the future.
e)      To develop responsible leaders.
f)       To inculcate knowledge of human motivation and human relationships.
g)      To increase proficiency in management techniques such as work study, inventory control, operations research and quality control.
Process of executive development:
1.       Analysis of development needs: First of all the present and future development needs of the organization are ascertained. It is necessary to determine how many and what type of executives are required to meet the present and future needs of the enterprise.
2.       Appraisal of the present managerial talent: A qualitative assessment of the existing executives is made to determine the type of executive talent available within the organization.
3.       Planning individual development programmes: Each one of us has a unique set of physical, intellectual and emotional characteristics. Therefore, development plan should be tailor-made for each individual.
4.       Establishing training and development programme: The HR department prepares comprehensive and well conceived programmes.
5.       Evaluating developing programs: Considerable money, time and efforts are spent on executive development programmes. It is therefore natural to find out to what extent the programme’s objective has been achieved.
Importance of Executive Development
Executive development is more future oriented. It is more concerned with education than is employee training. In today’s competitive environment, an organization has to be concerned about the development of supervisors, middle level managers and top-level executive. Executive development is important for the following reasons:
a)      Technological changes: Now a days the technology is getting change very rapidly. Many advanced and automatic machines have been bringing in present organization. So the managers should have high-quality working knowledge of the use of modern technological machines and equipment. It can be possible by developing the managers for the use of new opened machines. It enables managers to face problems related to technology and institution.
b)      Increase in size of organizations: The size of the organizations is increasing day by day. With the increase in size the complexity is also increasing. So the executives or managers need to be developed to deal with the troubles of the bulky and complex organizations.
c)       Lack of trained managers: There is scarcity of the trained managers and it is quite difficult to recruit the experienced and qualified managers. As a result it is very important to develop the brilliant employees by a disciplined development process.
d)      Social and cultural changes: The social and cultural environment is getting changed rapidly. The managers must have brought up to date the knowledge of the sociology-cultural background to understand the people intentions and actions towards us. Executives need training and education to understand and adjust to changes in socio-economic changes.
e)      Better relation with labours: Given the knowledge era, labour management relations are becoming increasingly complex. In such situation, managers not only need job skills but also behavioural skills in union negotiations, collective bargaining, grievance redressal, etc. These skills are learned through training and development programmes.
f)       Training and development of professional managers: With the recognition that managers are made not born, there has been noticeable shift from owner managed to professionally managed enterprises, even in family business houses like Tata. That is also indicated by the lavish expenditure incurred on executive training by most of the enterprises these days.
g)      As regards the importance of management development, the renowned behavioural scientist Peter Drucker opines that, “an institution that cannot produce its own managers will die. From an overall point of view, the ability of an institution to produce managers is more important than its ability to produce goods efficiently and cheaply”. In short, the importance of executive/ management development in an organisation can best be put as: anything minus management development in an organisation mounts to nothing. 
Meaning and Definition of Compensation
In layman’s language the word ‘compensation’ means something, such as money, given or received as payment for service. The word compensation may be defined as money received in the performance of work, plus the many kinds of benefits and services that organization provides their employee. It refers to wide range of financial and non-financial rewards to employee for their service rendered to the organization. It is paid in the form of wages, salaries , special allowance and employee benefits such as paid vacation, insurance, maternity leaves, free travel facility , retirement benefits etc.
According to Wendell French,” Compensation is a comprehensive term which includes wages, salaries and all other allowance and benefits.”
Wages are the remuneration paid for skilled, semi-skilled and unskilled operative workforce. Salary is the remuneration of those employees who provides mental labour to the employer such as supervisor, office staff, executive etc wages are paid on daily or hourly basis where as salary is paid on monthly basis.
Objectives of Compensation Management
The compensation paid to employees is agency consideration. Each party to agency tries to fix this consideration in its own favor. The employers want to pay as little as possible to keep their costs low. Employees want to get as high as possible. The compensation management tries to strike a balance between these two with following specific objectives:
1. Attracting and Retaining Personnel: From organisation’s point of view, the compensation management aims at attracting and retaining right personnel in the organisation. In the Indian corporate scene, there is no dearth of personnel at operative levels but the problems come at the managerial and technical levels particularly for growing companies. Not only they require persons who are well qualified but they are also retained in the organisation. In the present day context, managerial turnover is a big problem particularly in high knowledge-based organisations.
2. Motivating Personnel: Compensation management aims at motivating personnel for higher productivity. Monetary compensation has its own limitations in motivating people for superior performance. Alfie Kohn (an American author and lecturer who has explored a number of topics in education, parenting, and human behavior.) has gone to the extent of arguing that corporate incentive plans not only fail to work as intended but also undermine the objectives they intend to achieve. He argues that this is due to inadequate psychological assumptions on which reward systems are based. His conclusions are as follows:
a)      Rewards punish people-their use confirms that someone else is in control of the employee.
b)      Rewards rupture relationships-they create competition where teamwork and collaboration are desired.
c)       Rewards ignore reasons-they relieve managers from the urgent need to explore why an employee is effective or ineffective.
d)      Rewards discourage risk taking-employees tend to do exactly what is required to earn the reward, and not any more.
e)      Rewards undermine interest-they distract both manager and the employee from consideration of intrinsic motivation.
f)       Notwithstanding these arguments, compensation management can be designed to motivate people through monetary compensation to some extent.
3. Optimizing Cost of Compensation: Compensation management aims at optimizing cost of compensation by establishing some kind of linkage with performance and compensation. It is not necessary that higher level of wages and salaries will bring higher performance automatically but depends on the kind of linkage that is established between performance and wages and salaries. Compensation management tries to attempt at this.
4. Consistency in Compensation: Compensation management tries to achieve consistency-both internal and external-in compensating employees. Internal consistency involves payment on the basis of criticality of jobs and employees’ performance on jobs. Thus, higher compensation is attached to higher-level jobs. Similarly, higher compensation is attached to higher performers in the same job. Level of jobs within an organisation is determined by job evaluation. External consistency involves similar compensation for a job in all organisations. Though there are many factors involved in the determination of wage and salary structure for a job in an organisation which may result into some kind of disparity in the compensation of a particular job as compared to other organisations, compensation management tries to reduce this disparity.
Factors Affecting Compensation Planning
A combination of external and internal factors can influence, directly or indi­rectly, the rates at which employees are paid. Through their interaction these factors constitute the wage mix, as shown below:
A. External Factors: The major external factors that influence wage rates include labor market condi­tions, area wage rates, cost of living, legal requirements, and collective bargain­ing if the employer is unionized.
a)      Labor Market Conditions: The labor market reflects the forces of supply and demand for qualified labor within an area. These forces help to influence the wage rates required to recruit or retain competent employees. It must be recognized, however, that counter-forces can reduce the full impact of supply and demand on the labor market. The economic power of unions, for example, may prevent employers from lowering wage rates even when unemployment is high among union members. Govern­ment regulations also may prevent an employer from paying at a market rate less than an established minimum.
b)      Area Wage Rates: Data from area wage surveys can be used to prevent the rates for certain jobs from drifting too far above or below those of other employers in the region. When rates rise above existing area levels, an employer’s labor costs may become excessive. Conversely, if they drop too far below area levels, it may be difficult to recruit and retain competent personnel. Wage-survey data must also take into account indirect wages paid in the form of benefits.
c)       Cost of Living: Because of inflation, compensation rates have had to be adjusted upward periodically to help employees maintain their purchasing power. This can be achieved through escalator clauses found in various labor agreements. These clauses provide for quarterly cost-of-living adjustments (COLA) in wages based on changes in the consumer price index (CPI). The CPI is a measure of the average change in prices over time in a fixed “market basket” of goods and services.
d)      Collective Bargaining: One of the primary functions of a labor union is to bargain collectively over conditions of employment, the most important of which is compensation. The union’s goal in each new agreement is to achieve increases in real wages--wage increases larger than the increase in the CPI--thereby improving the purchasing power and standard of living of its members. This goal includes gaining wage settlements that equal if not exceed the pattern established by other unions within the area.
B. Internal Factors: The internal factors that influence wage rates are the employer's compensation policy, the worth of a job, an employee's relative worth in meeting job require­ments, and an employer's ability to pay.
a)      Employer’s Compensation Policy: The compensation objectives of two organiza­tions can be quite different. One might strive to be an industry pay leader, while another seeks to be wage-competitive by paying employees at the seventy-fifth percentile of their competitors’ wages. Both employers strive to promote a compensation policy that is fair and competitive. All employers will establish nu­merous compensation objectives that affect the pay employees receive.
b)      Worth of a Job: Organizations without a formal compensation program generally base the worth of jobs on the subjective opinions of people familiar with the jobs. In such in­stances, pay rates may be influenced heavily by the labor market or, in the case of unionized employers, by collective bargaining.
c)       Employee’s Relative Worth: In industrial and office jobs, differences in employee performance can be recognized and rewarded through promotion and with various incentive systems. Superior performance can be rewarded by granting merit raises on the basis of steps within a rate range established for a job class.
d)      Employer’s Ability to Pay: In the public sector, the amount of pay and benefits employees can receive is lim­ited by the funds budgeted for this purpose and by the willingness of taxpayers to provide them. In the private sector, pay levels are limited by profits and other fi­nancial resources available to employers. Thus an organization's ability to pay is determined in part by the productivity of its employees.
Essentials of an ideal Compensation Management System
Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men. Every factor contributes to the process of production/business. It expects return from the business process such as rent is the return expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur expects profits. Similarly the labour expects wages from the process.
Labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process. Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following:
a)      An ideal compensation system will have positive impact on the efficiency and results produced by employees. It will encourage the employees to perform better and achieve the standards fixed.
b)      It will enhance the process of job evaluation. It will also help in setting up an ideal job evaluation and the set standards would be more realistic and achievable.
c)       Such a system should be well defined and uniform. It will be apply to all the levels of the organization as a general system.
d)      The system should be simple and flexible so that every employee would be able to compute his own compensation receivable.
e)      It should be easy to implement, should not result in exploitation of workers.
f)       It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers.
g)      Such system would help management in complying with the various labor acts.
h)      Such system should also solve disputes between the employee union and management.
i)        The system should follow the management principle of equal pay.
j)        It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel.
k)      Sound Compensation/Reward System brings peace in the relationship of employer and employees.
l)        It aims at creating a healthy competition among them and encourages employees to work hard and efficiently.
m)    The system provides growth and advancement opportunities to the deserving employees.
n)      The perfect compensation system provides platform for happy and satisfied workforce. This minimizes the labour turnover. The organization enjoys the stability.
o)      The organization is able to retain the best talent by providing them adequate compensation thereby stopping them from switching over to another job.
p)      The business organization can think of expansion and growth if it has the support of skillful, talented and happy workforce.
q)      The sound compensation system is hallmark of organization’s success and prosperity. The success and stability of organization is measured with pay-package it provides to its employees.
Meaning of Incentives and Employees Benefit
Incentives are monetary benefits paid to workmen in lieu of their outstanding performance. Incentives vary from individual to individual and from period to period for the same individual. They are universal and are paid in every sector. It works as motivational force to work for their performance as incentive forms the part total remuneration. Incentives when added to salary increase the earning thus increase the standard of living. The advantage of incentive payment are reduced supervision, better utilisation of equipment, reduced scrap, reduced lost time, reduced absenteeism and turnover & increased output.
According to Burack & Smith, “An incentive scheme is a plan or programme to motivate individual or group on performance. An incentive programme is most frequently built on monitory rewards ( incentive pay or monetary bonus ), but may also include a variety of non monetary rewards or prizes.”
Kinds of Incentives
Incentives can be classified under the following categories:
1. Individual and Organizational Incentives
2. Financial and Non-Financial Incentives
3. Positive and Negative Incentives
1) Individual and Organizational Incentives: According to L.G. Magginson, “Individual incentives are the extra compensation paid to an individual for all production over a specified magnitude which stems from his exercise of more than normal skill, effort or concentration when accomplished in a predetermined way involving standard tools, facilities and materials.” Individual performance is measured to calculate incentive where as organizational or group incentive involve cooperation among employees, management and union and purport to accomplish broader objectives such as an organization-wide reduction in labour, material and supply costs, strengthening of employee loyalty to company, harmonious management and decreased turnover and absenteeism
2) Financial and Non-financial Incentives: Individual or group performance can be measured in financial terms. It means that their performance is rewarded in money or cash as it has a great impact on motivation as a symbol of accomplishment. These incentives form visible and tangible rewards provided in recognition of accomplishment. Financial incentives include salary, premium, reward, dividend, income on investment etc. On the other hand, non-financial incentives are that social and psychological attraction which encourages people to do the work efficiently and effectively. Non-financial incentive can be delegation of responsibility, lack of fear, worker’s participation, title or promotion, constructive attitude, security of service, good leadership etc.
The incentives that have a monetary and financial benefit are called financial incentives. Types of financial incentives are given below:
a)      Profit sharing: It has been accepted that the profit earned by the firm is also due to the effort put by the workers. So they have a full right to receive a share in it. It is an effective incentive which satisfies the workers.
b)      Co-partnership: Under this system, employees share the capital as well as the profits. It motivates them as they share the profits too.
c)       Suggestion system: Valuable suggestions are accepted and the most valuable ones are also rewarded with cash money.
d)      Retirement benefits: Every employee wants his future to be secured. The firm provides retirement benefits, pension, provident fund, gratuity etc.
e)      Perks: various perks such as housing, car allowance foreign trips etc can be given to the managers to boost up his morale.
Various types of financial incentives are given below:
1.       Job Enrichment: It is a method of motivating employee by making the task to be performed by him more interesting and challenging. The job in itself serves as a source of motivation to the employee and brings out the best in him.
2.       Suggestion System: It is a system where suggestions regarding the work procedure, environments are solicited from employees. This increase their participation & importance in the working of the enterprise and hence motivates them.
3.       Job security: Job Security refers to making the employee feel safe in his job positions. He is not threatened by transfers or removal from service and hence performs to the best of his abilities.
4.       Career advancement: Managers must provide promotional opportunities to employees. Whenever there are promotional opportunities employees improve their skill and efficiency with the hope that they will be promoted to higher level.
5.       Status: By offering higher status or rank in the organisation managers can motivate employees having self-actualization need in them.
3) Positive and Negative Incentives- Positive incentives are those agreeable factors related to work situation which prompt an individual to attain or excel the standards or objectives set for him, where as negative incentives are those disagreeable factors in a work situation which an individual wants to avoid and strives to accomplish the standards required on his or her part. Positive incentive may include expected promotion, worker’s preference, competition with fellow workers and own ‘s record etc. Negative incentives include fear of lay off, discharge, reduction of salary, disapproval by employer etc.

Prerequisites of a Good Recruitment Policy: The recruitment policy of an organisation must satisfy the following conditions:
1.       It should be in conformity with its general personnel policies;
2.       It should be flexible enough to meet the changing needs of an organisation;
3.       It should be so designed as to ensure employment opportunities for its employees on a long-term basis so that the goals of the organisation should be achievable; and it should develop the potentialities of employees;
4.       It should match the qualities of employees with the requirements of the work for which they are employed; and
5.       It should highlight the necessity of establishing job analysis.

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