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 System and practices get outdated due to new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.