CHAPTER II
REVIEW OF LITERATURE
Research Evidence Relating Good HR Practice to Business
Environment
Recent researches worldwide have shown that good HR practices
and
policies can go along way in influencing business growth and
development. The researches indicate the following practices that
effective firms adopt (Pfeffer 1994) Financial incentives for excellent
performance, work organization practice and motive employee effort and
capture the benefits know how and skill.
Rigorous selection and selectivity in recruiting
Higher than the average wages
Employee share ownership plans
Extensive information sharing
Decentralization of decision-making and empowerment
Work organization based on self managing teams High investment
in
training and skill development having people do multiple jobs and job
rotation elimination of status symbols.
A more compressed distribution of salaries across and within levels
Promotion from within
A long- term perspective
Measurement of the practices and policy implementation
A coherent view of employment relation
28
Young and Berman (1997) point out that HR practice can pay three
major roles these are:
1. Building critical organizational capabilities
2. Enhancing employee satisfaction
3. Improving customer and shareholder satisfaction
Macduffie and Krafcik (1992) studied to automotive assembly
plants representing 24 companies and 17 countries worldwide. This study
indicated that manufacturing facilities with lean production systems are
much higher in terms of both quality and productivity than those with
mass production system. For example those with lean systems took 22
hours to produce a car and with quality benchmark of 0.5 defects, While
those with mass systems took 30 hours and 0.8 defects for 100 vehicles.
The HR strategy of a mass production system was create a highly
specialized and de skilled work force to support a large-scale production
process. While that of the lean system was to create a skilled motivated
and flexible work force that could. Continuously solve problems. The
study concluded that the success of the lean production system
depended on high commitment of employee, decentralization of
production responsibilities, board job classification multi-skill practices,
profit/gain sharing a reciprocal psychological commitment between firm
and employee, employment security and reduction of status barriers.
29
Ostroff (1995) developed an overall HR quality Index firms were
grouped in to four categories. The firms that scored higher on the HR
quality Index, consistently out-performed than those with a lower index on
four financial measures market /book value ratio productivity ratio (i.e
sale/ employees) market value and sales.
Pfeffer (1998) has more recently reviewed considerable evidence
on the effectiveness of good HR practices on business performance.
Some of it is summarized below.
Macduffie (1995 cited by Pfeffer 1998;32 ) observed from his
studies that innovative HR practices are likely to contribute to improved
economic, performance only when.
1. Employees possess knowledge and skills managers lack.
2. Employees are motivated to apply this skill and knowledge through
discretionary effect
Huselid (1995) found that in a sample of 3,452 firms representing
all kinds of industries one standard deviation increase I management
practices was associated with increases in sales, market value and
profits. A subsequent study by Huselid and Bedclh (1997) found that a
one standard deviation improvement in HR system index was associated
with an increase in shareholder wealth of $ 41,000 per employee.
Similar results were found in Germany by Bilmesetal.(1997). This
study found a strong link between investing in employee and companies
that laced workers at the core of their strategies produced higher longterm returns than those who did not.
30
Welbourne and Andrews (1996) standard the survival rate of 136 nonfinancial companies that initiated public offerings in the US stock market in
1998. The firms studied were drawn from various industries ranging from
food service retailing to biotechnology and varied in size from less than 110
people. (above 50 per cent of them) to 700 of more (about 20 per cent of
them). They developed and used a scale to measure the value of the firm
placed on human resource.
This scale used five items
1. Whether the company’s strategy and mission statement cited
employees and constituting a competitive advantage.
2. Whether the company’s initial publicity material mentioned
employee training programme.
3. Whether a company’s official was charged with the responsibility
for human resource management.
4. The degree to which the company used full time employees rather
than temporary or contract workers.
5. The company’s self rating on office employee relations.
A second scale measured how the organization rewarded its
people i.e whether through stock options gain sharing profit sharing etc.
The study indicated that with the other factors. Such as the size, nature
of industry and profits controlled the human resource scale and the
reward scales were significantly related to the fitness of survival.
31
In 1989 study by Macclulfie (1995) of 70 automobile plants
representing 24 companies from 17 different countries the traditional
mass production system with a control-oriented approach to managing
people was can started with a flexible production system that placed
emphasis on people and their participation. In the traditional system of
management practice the emphasis was on the control - oriented
approach to mange people, building inventories to maintain production
volumes against uncertainties and inspection and control to ensure
quality. In contrast with flexible systems, the emphasis was employee
involvement and reduction of inventories to high light production volumes
against uncertainties and inspection and control to ensure quality. In
contrast in the flexible system the emphasis was on teams, employee,
involvement and reduction of inventories to high production problems that
could be remitted.
The results revealed that quality and productivity were much higher
in the flexible rather than in the mass production system and the two
systems different substantially on how they managed their people in
terms of emphasis on training use of teams, reduction of status
differences
and
the
use
contingent
performance
related
with
compensation.
Arthur (1994) studied the impact of two different management
approaches on the productivity of steel mills. His study of the 30 of the 44
existing steel mills in the US at the time differentiated the control approach
32
to human resource management (HRM) from that for the commitment
approach. In the control approach the goal of HRM is to reduce labour costs
or improve efficiency by enforcing employee compliance with specified rules
and procedure and basing employee rewards on some measurable output
oriented. In the commitment approach the HR systems are intended to shape
desired employee behaviours by forging psychological links between
organizational goals and employee goals. The focus is on developing
committed employees. After statistical controlling for age size union status
and business strategy of the mills the results showed that using a
commitment strategy was significantly related to improved performance in
terms of labour hours and scrap rate mini mills using the commitment
approach required 34 per cent fewer labour hours to produce action of steel
and showed a 63 per cent better scrap.
A number of studies spanning different organizations operating in
various service industries provides evidence for a positive relationship
between employee attitude, customer service and satisfaction and profits
(Pfeffer 1998) Schneide and Bowen (1995 reported in a study of bank
branches that when the branches had sufficient number and quality of people
to perform its tasks (called the service imperative) customers reported
receiving higher levels of service. In another study Schoeider (1991) found
that customer perceptions and attitude were affected by what employees
experienced organizational practices that on both service related and human
resources related seem to provide cues to customers to evolve banks service.
33
A study by Johnson Ryan and Schmit (1994) at the Ford motor
credit revealed that attitudes concerning workload, teamwork, training and
development, satisfaction with the job and satisfaction with company were
all related to customers’ satisfaction. Schmit and Allscherd (1995) found
that customer satisfaction and perceptions of service quality were
significant by related to measures of employees attitudes about the
fairness of pay, whether the management was concerned about the
employee welfare and treated people fairly and whether supervisors
encouraged an open and participative work environment employee
attitude are in turn related to profit for example in a study of and eye care
company a significant relationship was found between employee attitudes
and profit (Meeller and Schneider 1986).
Pfeffer after examining evidence from a large number of studies
linking strategy with HR strategy, concludes I have come to believe that
the strategic fit argument is sometime mustered by managers and
organizations that distant to acknowledge that the way they manage their
people is less than optional and that they should change. They find it
easier to see even though we are not doing what some firms have found
to be effective that all right because we are pursuing a different strategy.
This rationalization should be challenged by asking a simple question.
Wouldn’t our existing strategy whatever it is be better implemented it our
people were more involved committed and better skilled? (pfeffer 1998;
59)
34
Delay and doty (1996) in the study of nearly 200 banks found that
differences in the practice accounted for large differences in financial
performance Huselid conducted that prior empirical work has consistently
found that use of effective human resource management practices
enhances firm performance (Huselid 1995 640)
Pfeffer (1998) presents the following rationale to explain their
relationship.
Performance increases because people work harder
People put in effort and show greater commitment if they have
greater control over that environmental see their effort as related to
Compensation on presence activated from self managed teams.
Training job rotation and such other practices help people to work
Smarter also. Higher commitment work also saves direct and
indirect costs of labour.
Trained multi-skilled self managed and motivation of employees
save on a variety of administrator costs including the cost of
management there reflecting in profits.
In spite of all this research evidence as Pfeffer (1998) observes even in
countries like the US and the UK the speed of the practices is not as rapid as
one might expect Research by Ichnowski (1992) has indicated that only 16
per cent of the US business have at least one innovative practice in each of
the four major HRM policy areas flexible Job design, Worker training pay for
performance compensational and employment security.
35
Pfeffer (1998) has identified the following seen practices of successful
Organizations on the basis of his review of various research studies related
practice and his own personal observations and experiences. These several
dimensions seem to characterize most it not all of the system producing profits
through people.
These dimensions are
Employment security
Selective hiring of new personnel
Self managed teams and decentralization of decision making as the
basic principle of organizational design,
Comparatively high compensation contingent on organizational
performance,
Extensive training,
Reduced status distinctions and; barriers including dress language,
office arrangement and wage differences across levels,
Extensive sharing of financial and performance information through
out the organization.
As HR moves from the backroom to boardroom
N.R. Narayana Murthy, chief mentor, Infosys on 28.05.2007
Human Resource departments of companies old and new are
clearly going from the backroom to the boardroom. Functions like
recruitment, payroll and benefits that previously comprised a large part of
HR’s work are today a distraction from its core work of recruiting and
retaining the best people for the organization. Its key task is to ensure that
36
the firm has a smart work fovea of focused people who can deliver. At a
time when a company’s intrinsic value is judged by its intellectual capital,
companies are willing to spend any amount to get and retain the right kind
of people.
Citi Group for example, reportedly paid about $600 million to
acquire a hedge fund run by a non-resident Indian, Vikram Pandit, a
former Morgan Stanley executive.
One of the important roles of HR today is to build an employment
brand for the company. This involves creating a perception that stresses
on nurturing the company’s in-house talent and making employees its
brand ambassadors. No doubt, IT and BPO companies are leading the
way but traditional sectors and PSUs’ too, are not lagging.
Employees are being pampered like never before. New objectives
are being put in place, like aligning HR policies with the company’s
business plans, employee life cycle management, organization structure,
out sourced and contingency work force, training and retention and
identification of and differentiated management for high performers.
The practices for achieving these objectives are many. Generous
compensation, bonuses, pay hikes and freebies remain the most important.
But off-work attractions are becoming equally necessary. Gyms, food courts,
libraries, holidays abroad, gaming-rooms, flexi-working hours, paternity and
maternity leave and even enabling employment opportunities for the spouse
are all now becoming standard practices.
37
Added to this are the innovative practices that some companies
have come up with. Gillette India, for instance, has recently introduce a
new programme called 3R, to rigatonis, reward and rejoice. Bangalore
based IT company Though workers allows long-serving employees to
take a month off, in addition to their regular vacation, as a break to
rejuvenate. Medical transcription firm Health scribe, now known as
spheres had appointed a chief fund officer whose primary objective was
to organize fun activities in the company.
All these aim to address different needs of employee, with the fun
quotient being high. Most of them are relatively recent, so their efficacy in
lowering employee attrition would probably take some time to assess.
Some will fizzle out after the initial hoo-hah and novelty value. But a few
might just spark off an industry trend.
New HR practices keep employee motivated
By P. Dwarknath , Group Human capital of Max India and president
of National Human Resource Development Network.
Picture this an organization in which grows multifold but retains its
‘small company’ personal touch. An organization where each individual is
empowered, informed and independent and each system and process
runs itself. An organization where all its employees are in sync, aware of
all that is going on even in the remotest corner of the organizations.
An organization where employees recognize their peers and role
models and drive their culture, all by themselves. Organization wheel
38
employees decide and drive their own job path, even across functions! An
organization where help for any problem is available, be it work-related,
technical, logistical or personal.
In short, a value-based, culturally strong, empowered organization,
where distances are notional. This is the story of future HR practices in
India. All-encompassing strategic deployment of empowerment, enabling,
engaging and energizing the work force.
Constantly, HR needs to develop innovative people practices to
keep the employees motivated and connected to work and their
organizations. Gone are the days when HR’s role was merely payroll
management, recruitment or training. Alignment of HR practices with the
organization’s strategy and goals and creation of an environment that
produces a positive work experience and employee engagement are the
success factor of any HR initiative.
HR initiatives have also gone beyond just the work environment.
Companies are now liking at initiatives and support for the families of the
employees. Elder care and schooling assistance are some initiatives.
Some companies have fun programmes such as competitions, special
dress days and treasure hunts. There is a steady increase in participation
for programmers like children’s camp on paining, pottery and clay
modeling, apart from counseling and workshops on maintaining a worklike balance for spouses.
39
Some MNCs provide fun and team work by allowing their
employees to have team get-togethers. Similarly, ‘Clean the desk’ is
observed once in three months wherein one afternoon employees clear
all papers and documents which do not add values.
But we always wonder does this initiative actually pay off? It has
been observed in various surveys and data that such HR activities help
employees to be connoted to work make them feel comfortable as a
valued employee. It has also been observed that if their personal issues,
the employees tend to work more smoothly, even in extreme pressure
situations and have been able to deliver their best. It is more like a
change in perception, where the employee feels valued and that the
company also values an employee’s wok-life balance.
Challenges for HR champions
HRD competencies and their requirements need to be analyzed in
the context of the business challenge and the role of HRD professionals
in meeting them. In this context the following competitive business
challenges ahead identified by Dave Ulrich (1997) are worth noting.
Challenge 1: Globalization
Globalization entails new markets, new products, new mindsets,
new competencies, and new ways of thinking about business. In the
future, HR will need to create models and processes for attaining global
agility effectiveness and competitiveness
40
Challenge 2: Value chain for global competitiveness and HR services:
This is what Ulrich has to say on building customer-responsive
organization: ‘Responsiveness includes innovation, faster decision
making, leading an industry in price or value and effectively linking with
suppliers and vendors to build a value chain for customer. To support the
value chain argument, research indicates that employee attitude
correlates highly with customers’ attitude.
Challenge 3. Profitability through cost and growth:
Leveraging growth through customers involves efforts by the firm to
induce customers to buy more of its products and services. Leveraging
growth through core competencies involves the creation of new products
and turning research knowledge into customer products, Merger,
acquisitions and joint ventures is the third growth path
The issues for HR managers arising out of these are:
How can executive create a commitment to rapid growth and the
culture that supports it while simultaneously controlling its costs?
How can executives be sure that they hire people who can grow the
business while reducing overall labour costs?
How can executives create an organizational structure that
provides both the autonomy needed for growth and the discipline needed
to control costs?
How can executive create an organizational structure that provides both
the autonomy needed for growth and the discipline needed to control costs?
41
What are the HR implications of entering new business of
leveraging core technologies that lead into unfamiliar business and of
building the intimate customer relationships that bring an ever increasing
percentage of customer’s purchases into the same provider?
Challenge 4. Capability focus:
Organization
capabilities
are
the
DNA
of
competitiveness.
Capabilities may be hard such as technological or soft such as quality or
organizational speed of response etc. The HR professionals needs to
address these in terms
What capabilities currently exist within the form?
What capabilities will be required for the future success of the firm?
How can we align the capabilities with business strategies?
How can we design HR practices to design the needed capabilities?
Challenge 5: Change, change and change some more:
Manager, employees and organizations must learn to change
faster and more comfortably. HR professional need to help their
organizations to change. They need to define an organizational model for
change to disseminate that model throughout the organization and
sponsor its ongoing application. As cycle time gets shorter and the pace
of change increases, HR professionals will have to deal with many related
questions, including the following:
42
How do we unlearn what we have learned?
How do we honor the past and adapt to the future?
How do we encourage the risk taking necessary for charge without
putting the firm in jeopardy?
How do we determine which HR practices to change for
transformation and which to leave the same for continuity?
How do we change the hearts and minds of every one to change?
How do we change and learn more rapidly?
Challenge 6: Technology:
Managers and HR professionals responsible for redefining work at
their firms need to figure out how to make technology a viable and
productive part of the work setting.
Challenge 7: Attracting, retaining and measuring competence and
intellectual capital:
In this fast – changing world attracting and retaining talent becomes
the battleground of competitiveness. Securing intellectual capital and
developing it becomes a critical task. The most sought after mangers will
possess intellectual capital to do global business. A firm’s success
depends upon not only the economic criteria but also on the capability to
attract and retain intellectual capital. This
changes the measurement
criteria of a firm’s success and seeking, finding and using such measures
becomes another challenge for HR professionals.
43
Challenge 8: Turn-around is not transformation:
Many organizations in the past have undertaken turnaround
exercises
using
downsizing,
business
process
reengineering,
consolidation, restructuring etc. They have become more profitable. Such
turnaround
is
not
transformation.
Transformation
involves
some
fundamental changes, it may involve identity changes. Creating
fundamental and enduring changes may become another challenge for
HR professionals.
HUMAN RESOURCE PLANNING
Definition
Human resource planning is the predetermination of the future
course of action chosen from a number of alternative courses of action for
procuring, developing, managing, motivating, compensating, career
planning, succession planning and separating the human element of
enterprise. It determines a conscious choice of patterns of the
humanization of work environment in an organization.
Need for HR planning:
1. The rationale of human resource planning stems from the challenges
posed by an overflowing realization that managerial success depends on the
success of human resources management. If the desired people were not in
position, then the implementation of the plans would suffer.
2. Capabilities, skills, performance abilities and potentialities of each
individual are evaluated in the human resources audit. On many occasions,
44
replacement charts or succession plan are kept so that potential executives are
located for every position in the organization during the given future period.
3. Forecasting and auditing provide background information about
internal factors like current and expected skills and vacancies.
Accordingly manpower planning can be done. The normal wastage of HR
due to turnover, death, superannuation, needs to be planned. Thus,
manpower planning must be supported by human resource forecasting
human resource auditing and human resources analyzing.
4. There is an increasing awareness among the manager that no
business can survive and grow without adequate and appropriate human
resources and their proper management. Taking cognizance of the
emerging trends, the human resources planning must respond to the
need for structural changes on the one hand and to the emerging set of
human expectations on the other.
5. Adequate investment in human capital is indispensable in a
business environment. A substantial improvement in quality of life and
quality of work like backed by total quality management, require
systematic human resource planning.
6. Planning will help in positioning needed employees at the
desired tie taking into account the lead time for the process of identifying
the shortage, getting the vacancy account the lead time for the process of
identifying the shortages,
getting the vacancy cleared and going through
the selection process. It identifies and develops the personnel to move up
and assure greater responsibility.
45
7. Human resources planning must always be backed by proper
evaluation and appraisal systems. Periodical appraisal of performance,
both in qualitative and quantitative terms, throws light on actual
performance as a result of planning. Scientific performance appraisals
facilitate in identifying the gaps existing so that corrective measures can
be undertaken.
8. Changes in the environment are continuously taking place.
Human
resource
planning
suggests
training
and
development
programmes so that personnel can adapt to these changes.
9. Human resource planning helps in reducing the cost of
production and keeps the wheels moving, by providing adequate
personnel, utilizing the human resources present in the organization itself
and effectively controlling and utilizing them.
Human Resource Forecast:
The human resource forecast is a determination of the demand
for different categories of employees with appropriate skills for specified
time periods in the future. Generally, human resource planners must
make use of a variety of techniques to project future personnel needs.
There are four major forecasting techniques, they are:
1. Judgements and experience
2. Budgetary planning
3. Work standards data and
4. Key predictive factors.
46
1. Judgement and Experience:
It includes estimates made by people who are very familiar with the
products, processes and jobs in the business. Supervisors and managers
of the various units of the business make estimates of future manpower
needs by judgmentally covering information on short-term future business
activity into numbers and types of people needed.
2. Budgetary planning:
Budget is a plan expressed in financial and numerical terms. It is
both an instrument for planning and for managerial control. For many
organizations, the annual process of budget preparation and review
constitutes the main mechanism for planning of manpower needs.
3. Work standards Data:
Many organizations have established comprehensive sets of data
for man-hours or unit times to perform a great many production tasks. For
each department the project units of output are converted into man-hours,
man-days and number of employees by applying the established time
standards.
4. Key Predictive Factors:
The essence of ‘key predictive factors’ technique is to locate key
indicators with which total manpower correlates highly. To identify such a
factor, the human resource-planning department must examine several
business factors such as sales volume, units produced, clients serve and
so on. This has to be done to find out which factor or factors yields a good
47
historical correlation between number of employees and changes in the
business factor. A considerable amount of quantitative analysis may be
necessary to determine relationships between fluctuations in the various
business indicators and changes in manpower needs.
Training and Development
Bird in Hand:
The importance of training employees in how to take care of
existing customer “It costs five times more to get a new customer than to
keep the one you already have”. Anyone connected with sales and
marketing knows that fairly well. Yet most sales employees cannot hide
their excitement when they come across new sales opportunity. It is only
reflective of their organization’s tendency to invest more efforts, money
and time in pursuing new customers.
Undoubtedly, the lure of a new possibility and prospect is
irresistible. But definitely not at the cost of sidelining existing customers.
While most organizations continue to “pay the price to capture, but not to
keep” influencing customers can be equally challenging and financially
more beneficial.
The need to train:
Chasing new customers is the only thing most sales employees are
proficient at. An organization might find it difficult to accommodate its
sales workforce focus from customer acquisition to customer retention.
Training can accomplish this. Some organizations through comprehensive
48
training programmes teach their employees current customer growth
strategies. Organizations interested in training their employees should
incorporate following tried and tested strategies into their training
programmes.
Strategy 1: To train employees to know the customer:
Training must begin with educating employees about the
importance of customers. Such awareness must begin with orientation.
Typically, orientation training focuses on educating employees
about policies, regulation, organization history, job roles and duties.
Rarely does it involve educating employees about current best customer,
their importance to the organization and best customer profile
characteristics. Lack of such knowledge only means that employees,
once inducted, can do little to grow existing customers. Experts
recommend including the organizations ‘Best customer profile’ as part of
new employee orientation.
Best customer profile:
Some organizations rank or rate their customers by focusing on
those who generate major sales. However a more accurate approach to
profiling best customers is as follows:
Study year’s sales data
Based on the data rank customer from highest to lowest by
profitability, cost to service and gross sales.
49
From these rankings divide customers into three groups with group
one constituting high or the most valuable customers.
Next study what is common among the customers in group one.
This will help identify best customer characteristics and develop a
‘Best customer profile’.
An employee trained to use a customer profile will focus his efforts
on the top order.
Strategy 2: train employees to use customer preference profiles:
Organizations who reap profits from their current customers
recommend training on usage of customer preference profiles. Apart from
contact details, their demographic information, it provides data on gift
preference, social network and family size.
For corporate customers, a profile includes information on key
competitors, upcoming projects, corporate objectives and budget plans.
Use of such information that helps an employee sells more to best
customers. Some organizations encourage their employees to participate
in the process of building preference profiles for each of their employees.
This exercise increases and employee’s awareness on what information
is important to boost best sales.
Strategy 3: Training employees to develop ESP:
The main objective of training to “grow” current customers is to
teach to be highly sensitive to best current customer needs. While
preference profiling helps an employee with questions such as “why
50
should we sell more to current customers?”
And “what customer
information should we gather?” that is not sufficient. Sales professionals
believe that a part of training must include teaching employees to be like
detectives! Only then can they accurately decode customer requirements
current or prospective.
Strategy 4 : Train employees to use customer activity reports:
A customer activity report details customer relationship history,
number of transactions with the customer, transaction value, last
purchase date, the candidate’s purchase date, the candidate’s purchasing
status (active or passive) and the age of the customer. These specifics
are highly useful when organizations match a customer’s buying patterns
with marketing communication timings. It can also help recapture
‘defector’ customers. Training employees in using these reports helps
them uncover potential sales opportunities.
Strategy 5 : Train employees to use the “Share of customer” tool:
Sales experts believe, this tool is as valuable as the customer
preference profile. To calculate the ”Share of customer” make a grid on
the right side, list the entire range of products/service if a customer
purchase the entire range of products and service the last column will
have the value of the “total spend”.
The left side of the grid lists the organization’s top customers and
indicates the products and services that each customer buys with their
“annual spend”. If an existing customer spends Rs.5000 on a few
51
products and services and the annual customer spend (for all products
and services) is Rs.15,000, the organization has a golden sales
opportunity the existing customer instead of pursuing new ones. Making
arrest employees adept in such sales opportunities would arrest customer
acquisition costs.
More to strategies:
In addition to training, it is equally important to ensure that the sales
force understand that not all customers are equal. Rating customers and
focusing on the best is a more sensible approach to improving sales, this
approach prevents wastage of employee time and energy on customers
with little “spend value”.
Training employees in caring existing customers can help
organization maintain and improve customer retention rates, reduce sales
expenditure and increase sales revenues.
Job Satisfaction and Morale
The term ”job satisfaction” refers to a employee’s general attitude
towards his job. Locke defines job satisfaction as a “pleasurable or positive
emotions state resulting from the appraisal of one’s jog or job experiences” To
the extent that a person’s jog fulfils his dominant need and is consistent with
his expectation and values, the job will be satisfying.
Determinants of job satisfaction:
According to Abraham A. Korman, there are two types of variable
which determine the job satisfaction of an individual.
52
Organizational Variables:
Occupational level
Job content
Considerate leadership
Pay and promotional opportunities
Interaction in the work group
Personal variables:
Age
Educational level
Role perception
Sex
Relationship between job satisfaction and productivity:
Job satisfaction is closely affected byte amount of rewards that an
individual derives for his job, while his level of performance is closely
affected by the basis for attainment of rewards.
53
Determinants of job satisfaction listed by some other authors
Author
Name or the study
1.Stagner
Flebbe and
Wood (1952)
Working on the rail –road; a
study of job satisfaction
personnel Psychology, 1952,
5, 293-306). This is a study of
715 male unionized rail-road
workers
Productivity and satisfaction
of full and part-time female
employees (personnel
Psychology, 1953,6,327342). This is study of 301
women doing typing and
routine clerical work. Sixty
per cent of this number were
at least 40 years old and
more were married
2. Gadel
(1953)
3.Ross and
Zander
(1957)
4 Durganand
Sinha
(1958)
Need
satisfaction
and
employee
turnover
(personnel
psychology,
1957,10,327-338). This is a
study of skilled women in a
large company
Job satisfaction in office and
manual worker(Indian Journal
of social Work, 1958, 19, 3946).
Determinants of job
satisfaction
General working conditions
Union–management
relations
General quality supervision
Grievance
handling
procedures
For younger group
Type of work
Working conditions
Pay
Co-workers
Ease of commuting to work
Advancement opportunities
For older group:
Security
Supervision
Company prestige
Working hours
Recognition
Autonomy
Doing important work
Fair evaluation work done
Job status
Type of work
Supervisory behaviour
Work group
Morale
Viteles defines morale a “willingness to strive for the goals of a
particular group’. According to Blum industrial morale is “the possessing
feeling of being accepted by and belonging to a group of employees
through adherence to common goals and confidence in the desirability of
these goals”.
54
There are number records already available in an organization which
provide clue about the level of morale prevailing in the organization at any
time. These include;
1. Labour turnover
2. Productivity
3. Waste and scrap
4. Quality record
5. Absenteeism and tardiness
6. Reports of counseling, insurance and similar services
7. Grievances
8. Exit interviews
9. accident reports
10. Medical records
11. Training records
Determinants of Morale:
Group cohesiveness
Common goal
Progress toward goal
Meaningful task.
According to Roach who did a study of 2,072 clerical and
management employees determinants of morale are as follows:
Pride in and general attitude toward company
General attitude towards supervision
55
Satisfaction with job standards
Style of supervision
Work load and work pressure
Attitude towards co-workers
Satisfaction with salary
Attitude towards formal communication system I company
Intrinsic job satisfaction
Satisfaction with progress and changes for progress.
Relationship between Morale and Productivity:
A scientist who feels resentment toward his organization or
manager will rapidly become unproductive. But where the work does not
involve the total man a longer period of time will be required before the
adverse effect of low morale will rifest itself in the form of norms to restrict
production, increased grievances and similar developments and finally in
lower performance.
Organizational culture:
Consists of the core values, beliefs and assumptions that are
widely shared by members of an organization. It serves a variety of
purpose.
Communicating what the organization “believes in” and “stands for” Providing
employees with a sense for direction and expected behaviour (norm)
Creating a sense of identity, orderliness and consistency
Fostering employee loyalty and commitment.
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Culture is often conveyed through an organization’s mission
statement, as well as through stories myths, symbols and ceremonies.
New employees at Hewlett-Packard (HP) are told the story of how
Dae Packard and Bill Hewlett started the global giant more than 60 years
ago in a small backyard garage, which is now a state historical landmark
in the heart of Silicon valley and was a focal point of a major corporate
brand campaign. The rules of the Garage depicted are one-line principles
that explain how the sprit of invention. Contribution and collaboration
embodied in the founders can be demonstrated by employees and the
firm in order to stay dynamic in the
high-tech world.
Organizational climate:
This refers to the prevailing atmosphere that exists in an
organization and its impact on employees.
Unlike may firms that chose to cut staff to stay afloat during the
1990-s. Teknion Furniture Systems, a Canadian designer/Producer of
high-end office furniture successfully competing with the U.S. giants like
Steelcase has not had a layoff in its 17 year history. Alternatives to layoffs
are always examined because mangers at the firm realize that layoffs
result in a lack of trust between employees and management-trust that
takes years to develop. The firm’s no-layoff policy has had a positive
impact on product quality, employee satisfaction and commitment and
customer service. With a growth rate of 46 percent during 1999 the
results speak for themselves.
57
The bureaucratic climate at IBM, characterized by centralized
decision making, hierarchy of command, job security and a strict promote
from within policy, has been identified as a key factor in the firm’s
difficulties in maintaining a competitive position on both domestic and
foreign fronts in the early 1990-s. Under the leadership of Chief Executive
Officer (CEO) Louis Gerstner, the climate was totally revamped.
Unnecessary bureaucracy was eliminated and the firm was infused with
entrepreneurs.
Human Resource Development:
T.V.Rao (1990)1– The book elaborates on the various dimensions
of HRD. The qualities of the HRD managers are discussed in detail. The
essential qualities required for a successful HRD manager are that he
should be a person positive thinking, having an urge to learn, with
perseverance, initiative, discipline and communication sills. In short he
should
possess
both
Functional
Competencies
and
managerial
competencies.
Lawrence Loh. Chetan S.Sankar and Wee Yong Yeong (1995)2 - This
empirical study was conducted among 140 IT professionals in Singapore,
to develop a conceptual model for job satisfaction vis-à-vis technical or
managerial orientation of IT professional’s job. The findings proved that
1
T.V.Rao, Qualities and competency requirements of HRD Managers, The HRD Missionary, A
work for National HRD Network, New Delhi, Oxford & IBH publishing co, Pvt. Ltd., 1990,
pp.28-33
2
Lawrence Loh, Chetan S. Sankar and Wee Yong Yeong, Job orientation, perceptions and
satisfaction a study of information technology professionals in Singapore, Information &
Management, volume 29, Iss.5, Nov.1995,pp.239-250.
58
high degree of technical orientation results in perception that moving into
management would bring better pay and advancement prospects leading
to job dissatisfaction. It was identified that a technical orientation brings a
perception that the organization is a less progressive place emphasizing
procedures rather than accomplishments.
Mohammad saeed, Dr. Kamal Kishore Jain (2000)3 -The article
attempts to find out some HR practices of few top companies of Malaysia
in the face of the country experiencing labour shortage. A company’s
output quality depends on the input, namely, recruiting right people. The
company should know the critical skills needed by its employees to
perform the job. The attributes of the recruits that can be changed through
training and those that cannot be modified should be identified.
Subir Chowdhury (2000)4 - The twenty first century leaders2 most
valuable asset is the ability to dream. They nurture to make it real. This is
not a one time event but a continuous process. The adequate and faster
communication increases the flow of information breaking down
hierarchies. Any relevant change properly accepted adds benefits to the
organization. Recently leaders have started adopting multi-skilled
techniques. The organization encourages quicker adoption of changes
and is expanding internationally taking advantage of globalisation. Crisis
management is to be practiced to avoid emergency situations. Talent
3
Mohammad Saeed, Dr. Kamal Kishore Jain, Emerging corporate HR practices in a fast
developing economy,business perspectives, Vol no.1 Jan-June 200 PP.61-67
4
Subir chkowdhury, Towards the future of management, Management 21C, Publisher: Financial
Times/Prentice Hall: 1St Education, Mar 7, 2000 PP.1-14
59
management and effective leadership are the need of the twenty first
century organizations.
Pat Finnegan, John Murray (2002)5– This paper attempts to
examine the human resource management practices in the Software
Industry in Ireland, an economy heavily dependent on the Software
sector. Two organizations were selected, one with preferred practices and
the other with poor practices. A comparative analysis shows that the first
company managed software engineers as individuals within groups and
the second focused on the management of teams. The study used
pluralistic research methods to investigate human resource practices. It
has been concluded that the study proposes team based approach to
human resource management.
Sasmita Palo (2002)6– The present study seeks to examine the
various aspects of hiring, training, motivating, managing and retaining the
highly skilled workforce in the IT companies, to identify the role of HR
professionals and to find out the nature of HR function (Conventional/
Business related activity) performed.
The study covered five leading IT companies operating in India.
The HR professional plays the role of a mentor, motivator and facilitator.
The study results revealed that all the companies comprise create their
own opportunities for life-long learning contributing to expected to exhibit
5
Pat Finnegan, John Murray, Between Individuals and Teams: Human Resource Management in
the Software Sector, Human factors in Information Systems, Hershey, IRM press, 2002, PP.117134
6
Sasmita Palo, Managing Human Resources in IT companies, JIMS, The Journal of Indian
Management and Strategy, Vol.7, No.1. Jan-Mar 2002, PP.57-62.
60
multi specialty functions to facilitate change processes and to sustain
competitive edge.
P. Subba Rao (2000)7– The paper aims at exploring the shifts in
industrial relations pattern consequent upon globalisation in two
developing countries India and Papua New Guinea. The data collected
from different types of organizations were used to identify the pattern of
industrial relations before and after globalisation. The objectives were to
study the impact of globalisation on human resource management
structure in public and private sector organizations both in India and
Papua New Guinea. The findings showed that there was a paradigm shift
in human resource management structure and pattern in both the
countries.
Vijayabasker
M.Padmini
Swaminathan,
Anandhi
S,
Gayatri
Balagopal (2004)8– In India, Tamil Nadu has achieved superior levels in
Human Development among most of the states. High growth rates and
increased percaptia income add to faster growth of the state. The
significant demographic changes and high literacy rate accompanied by
lower population growth rate accelerate the state’s growth. A key
component namely sustainability in financial and environmental factors is
taken care of leading to promotion of Human Development in the state.
7
P.Subba Rao Impact of Globalisation on Human Resource Management, GITAM Journal of
Management, Vol. 3 No.1 Jan-Jun 2002 pp .71-89
8
Vijayabaskar M, Padmini Swaminathan, Ananthi S, Gyatri Balagobal, Human Development in
Tamil Nadu, Economic and policitcal weekly Feb21, 2004, pp797-820.
61
Anil Kumar Singh (2005)9 - The paper is an attempt to identify the
relationship between Human Resource Practices and the Philosophy of
management of the Indian business organizations. The objectives of the
study were to examine the assumption of top management about the
people working in the organization, understanding the philosophy of
management, examine the nature of differences in the public and private
sector and the nature of relationship between HRD practices.
Findings showed that contrary to the hypothesis, there was no
significant relationship between the variables of HR practices, particularly
training and development and rewards; they were highly but negatively
related to the philosophy of human resource.
G. Sreenivas Reddy (2005)10– The article narrates the growth of
Indian economy which was mainly because of the emerging mantra
information Technology. The credit goes to hundreds and thousands of
software engineers who have marked their presence in the global market.
The IT professionals were also called “Knowledge workers”, Gold collared
workers” and “new generation workers”. The economy hinges on these
professionals as they perform highly skilled and complex jobs. The new
millennium is facing major challenge in terms of attracting, developing,
retaining and managing these professionals with strategic HR policies.
9
Anil Kumar singh, HRD practices and Philosophy of Management in Indian Organizations,
Vikalpa The journal for decision makers, Vol.30, No.2 Apr-June 2005, pp.71-78
10
G. Sreenivas Reddy, Managing Knowledge Workers-HR Challenges and Industry Responses,
HRD Newsletter, Vol.21 Iss. 3 June 2005. pp.14-17.
62
Software companies lock in their most valuable employees with
“golden handcuffs” – hefty pay packages and perks. The companies have
started
with
innovative
path
breaking
practices
to
ignite
the
entrepreneurial passion of their employees.
B.S.S.Srinivas (2005)11– The study was undertaken with the
objective of identifying HRD practices, HRD philosophy and analyzing
various systems implemented in Software Industry and suggesting
measures for improvements in HRD practices. The findings of the study
included recommendations for enhancing the quality of HRD practices
with employee retention as the major challenge.
N.Panchanathan, S. Pragadeeswaran (2006)12–This study was carried out
to explore the relationship between yoga practices and quality of life.
In the current era of knowledge and technology explosion, the executives
face the problems of high stress, high growth, speed, accuracy and remaining
number one rather than becoming number one. They do not find time to
spend with their family and friends that it significantly affects their
personal, family and social lives, challenging the quality of life. It was
identified that the practice of yoga promotes quality of life. It was
observed that the employees of large scale organizations practicing yoga
had a better quality of life. It was also noticed that quality of life decreased
when the age increased for those who do not practice yoga.
11
B.S.S. Srinivas, HRD practice in the Software Industry: A study with special reference to
Software companies in Hyderabad, GITAM Journal of Management Vol.3,No.1, Jan-Jun 2005,
pp.247-250
12
N.Panchanathan and S.Pragadeeswaran, Executives Quality of Life and Yoga,ICFAI Journal
of organizational behaviour, Jan, 2006.
63
Sanghamitra Buddhapriya (2006)13–This paper tries to highlight the
value added by employees to the organization and the relevance of Human
capital management. The human capital management policies and practices
formulated by HR department should aim at accomplishing organizational
goals. It was found that employees with critical skills were attracted to meet
the unprecedented social, economic and technical change.
Organizations were to adopt superior HR practices to attract, retain
and ensure better business outcomes. It was concluded that even today
with challenging business climate, many organizations were not paying
enough attention leading to an under utilization of the talent in the
workforce. Being a dynamic function, HRM has a direct correlation with
organizational efficiency and output.
Sonal Sexena (2000)14– The study sought to elaborate on major
challenge faced by the IT industry in the area of Human resource
development.
HRD activities must be consistent with the development efforts of
the organization to mobilize the employees’ potential. In order to reach
new level of maturity and strength, the IT companies were expected to
think in new dimensions. The major findings of this descriptive research
conducted among five IT organizations through a questionnaire survey
confirmed the existence of effective HRD climate.
13
Sanghamitra Buddapriya, Adding value through Human capital Management Greater
responsibility for HR Abhigyan.Vol.XXIII no.4 Jan-Mar 200, pp.12-21.
14
onal Sexena, Human Resources Development Climate in Indian IT companies, ICFAI Journal
of Management Research, Feb 2006.
64
Mr. Vivek. N, professor, Department of Management of Science,
PSG College of Technology, Coimbatore, 2003 has published a research
paper titled "A Study on volatility and entry point options for BSE listed
Stocks", in the business Research conference (2003) held at PSG college
of Technology. His main research objectives are 1, to measure the
volatility of fixed Stocks in BSE for six years 2, to study the general
market volatility year by year. He has used judgment sampling and
selects 28 stocks from the BSE listed stocks.
Ms. Preethi Singh, Department of Commerce, Jesus and Marry
College, University of Delhi, Delhi, 2003 have published a paper titled "A
study on stock volatility and Financial Performance of L& T Limited, Her
main objectives are, the technical analysis do believe that the Prices of
stock fluctuate around the true intrinsic value of stock.
Fundamental Analysis
The objective of fundamental analysis is to appraise the 'intrinsic
value' of a security. The intrinsic value is the true economic worth of
a financial asset. The fundamentalists maintain that at any point of time
every share has an intrinsic value which should in principle be equal to
the present value of the future stream of income from that share
discounted at an appropriated risk related rate of interest. The actual price
of the security, therefore, is considered to be a function of a set of
anticipated capitalization rate. Price changes as anticipation changes
which in turn changes as a results of new information. The
65
fundamentalists then argue that in case this is something less than
complete information, the actual price of the stock is generally away from
its intrinsic value. Thus they believe that market can often be wrong in
appraising the value of a share of a company. Hence, the job of the
fundamental security analyst is to sort out the temporary disequilibrium
from the true shifts in the national economy and the accounting gimmick
from true changes in the firm's income in order to arrive at unbiased
estimates of the intrinsic value.
Relying upon this reasoning, the fundamentalists attempt to
estimate the real worth of a security by considering the earning potential
of a firm which in turn will depend on investment environment factors such
as state and growth of national economy, monetary policies of the
Reserve Bank Of India, Corporate Law, Social and political environment
and the factor relating to the specific industry such as state of political
environment and the growth potential of the industry. It will depend to a
large extent, on the firm's competitiveness, its quality of the management,
operational efficiency, and profitability.
Capital structure and dividend policy. However, the firm or the
Stock market cannot be analyzed in vacuum. All firms' work within the
economic environment, their survival will depend on how the economy as
a whole is faring. During periods of economic prosperity the demand for
goods and services of the firm is likely to result in increased sales and
higher profits. The expectation of the growth of economy is favorable for
66
the stock market.
In order to obtain investment perspective, we must determine the
state of the economic environment in which we invest. Essentially, we
must determine the current condition of the economy, where it is headed,
and the implications for investment decisions. Such an analysis allows us
to select the sectors of the economy that appear to offer profitable
opportunities. This analysis will also help establish what type of
investment should be undertaken among real assets, risk less
investments, intermediate or long term bonds or common stocks.
Analysis of the Industry
The industries that contributed to the output of the major segments
of the economy vary in their growth rate and in their overall contribution to
economic activity. Some have grown more rapidly than the GNP and offer
the expectation of continued growth. Others have maintained a growth
comparable to that of the GNP. A few have been unable to expand and
have decline in economic significance. If we have been unable to expand
and have decline in economic significance. If we are to succeed as
investor, we must analyze the economic significance of industries and
invest in those that offer continued success, measures by the industry's
ability to compete for its appropriate share of the GNP.
Seeking industries that are expected to grow at faster than the
"real" rate of GNP for the future seems to be a logical starting position.
We can find successful companies in industries that are not growing. On
67
the other hand, investment success is more likely to be found in growing
and strongly competitive industries. The danger in this thesis is that
investors tend to bid up the price of these assets in the market place. An
over - enthusiastic investor might pay too much for a share of stock in
such industries.
Technical Analysis
Technical analysis is probably the most controversial aspect of
Investment management. That technical analysis is a delusion, that it can
never be any more useful in predicting stock performance than examining
the insides of a deep sheep, in the ancient Greek tradition.
The term Technical analysis is used to mean fairly wide range of
techniques; all based on the concept that past information on prices and
trading volume of stocks gives the enlightened investors a picture of what
lies ahead. It attempts to explain and forecast changes in security prices
by studying only the market data rather than fundamental analyst does
information about a company or its prospects as.
This technical analyst believes that the price of a stock depends on
supply and demand in the market place and has little relationship to
value, if any such concept even exists.
Price is governed by basic
economic and psychological inputs so numerous and complex that no
individual can hopes to understand and measure them correctly. The
technician thins that the only important information to work form is the
picture given by price and volume statistics.
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The technician sees the market, disregarding minor changes,
moving in discernible trends, which continue for significant periods. A
trend is believed to continue until there is defined information of a change.
The past performance of a stock can the be harnesses to predict the
future. The direction of price change is as important as the relative size of
the change. With his various tools, the technician attempts to correctly
catch changes in trend and take advantage of them.
Dow's Theory
The Dows Theory (not to be confused with Dows Jones Averages),
Proposed by Charles Dow shortly after the turn of the century and
extended in a book by Samuel Nelson after Dow's untimely death, is one
of the oldest technical methods still widely followed. There are many
versions of this theory, but essentially it consists of three types of market
movements; the major market trend, which can often last a year or more;
a secondary intermediate trend, which can move against the primary tens
of one to several months; and minor movements lasting only for hours to
a few days . The determination of the major market trend is the most
important decision to Dow believer.
Although Charles Dow believed in fundamental analysis, the Dow
Theory has evolved into a primarily technical approach to the stock
market. It assets that stock prices demonstrate patterns over four to five
years and these patterns are mirrored by indices of stock prices. The Dow
Theory employees two of the Dow Jones average, the industrial average
69
and the transportation average. The utility average is generally ignored.
The Dow Theory is built upon the assertion that measures of stock
Prices tend to move together. If the Dow Jones industrial average is
rising, then, the transportation average should also be rising. Such
simulations price movements suggest a strong bull market. Conversely, a
decline in both the industrial and transportation average are moving in
opposite directions, the market is uncertain as to direction of future stock
prices.
If one of the averages starts to decline after a period of rising stock
Prices, then the two are at odd. For example, the industrial average may
be rising while the transportation average is falling. This suggests that the
individuals may not continue to rise but may soon start to fall. Hence, the
market investor will use this signal to sell securities and converts to cash.
The converse occurs when after a period of falling security prices
one of the averages starts to rise while the other continues to fall.
According to the Dow Theory, this divergence suggests that this phase is
over and that security prices in general will soon start to rise. The astute
investors will then purchase securities in anticipation of the price increase.
70