Department of Mechanical & Aerospace Engineering

Pulchowk Campus, Institute of Engineering

Tribhuvan University

ORGANIZATION AND MANAGEMENT

Personnel Management

Dr. Shree Raj Shakya

2022

1
https://hrmpractice.com/differences-between-human-resource-management-and-
personnel-management/
 2. Personnel Management
Employees are one of the important factor of production who
make an organization a success. Therefore, managing personals are
one of the major function of any organization.

• Personal Management: Personal management is managing the

workforce required for the organization by means of recruiting,
selecting, training and developing new employees, retaining
and promoting them, assigning the job, responsibility and
power in order to achieve organizational goals.

• Flippo defines, “Personnel management is the planning,

organizing, compensation, integration and maintenance of
people for the purpose of contributing to organizational,
individual and societal goals.”
Dr. S. R. Shakya 2
 Scope of Personnel Management
• Personnel management is related to hiring, training, developing
and compensating the workforce.
• It is concerned with promoting and stimulating competent
work force to make their fullest contribution to the concern.
• Personnel management provides advice and assist the line
managers in personnel matters. Therefore, personnel
department is a staff department of an organization.
• Handles the problems and grievances of people at work.
• It also motivates the employees through it’s effective incentive
plans so that the employees provide fullest co-operation.

Dr. S. R. Shakya 3
2.2 Functions of Personnel Management

• Manpower Planning
• Recruitment & Selection
• Training &
Development
• Industrial Relation
• Compensation
• Job Analysis and Design

Dr. S. R. Shakya 4
 2.3 Development of Personnel Policy

https://www.vskills.in/certification/tutorial/formulation-of-personnel-policy/

Dr. S. R. Shakya 5
 2.3 Development of Personnel Policy
• Identifying the need: Initially, important areas of personnel
management in HR (recruitment, selection, training, compensating,
bargaining) must have a policy formulation that is clearly spelt
out. Additional policy guidelines can come at any stage depending
on the recurrence of the ticklish issues at various levels.

• Collecting data: Once priority areas are listed, steps should be

taken to collect facts before formulating a policy. Various sources
could be tapped for these purposes such as (1) company’s records
(2) past practices (3) survey of industry practices (4) experience
of personnel handling various issues (5) top management
philosophy (6) organizational culture (7) employee aspirations
and (8) changing economic, social an legislative environment,
etc.

https://www.vskills.in/certification/tutorial/formulation-of-personnel-policy/

Dr. S. R. Shakya 6
 2.3 Development of Personnel Policy
• Specifying alternatives: Policy alternatives should
emerge clearly after collecting relevant data from various
sources. These have to be evaluated carefully in terms of
their contribution to organizational objectives. It is always
better to involve people at various levels, especially those
who are going to use and live with such policies. Top
management should put the stamp of approval only
when everything is above board and the stated policy
clearly reflects organizational priorities.

• Communicating the policy: In order to gain approval at

various levels, the formulated policy should be
communicated throughout the organization. Policy
manuals, in-house journals, and discussions with people at
various levels may be used to reach out to employees
quickly.
https://www.vskills.in/certification/tutorial/formulation-of-personnel-policy/

Dr. S. R. Shakya 7
 2.3 Development of Personnel Policy
• Evaluating the policy: Personnel policies, to be effective must
be reviewed evaluated and controlled regularly against
certain established standards. Evaluation helps determine
changes in existing policies. All these policies should be
reviewed annually and some policies should be reviewed at
specific times for example when there is collective bargaining or
after strike / lock out etc. Departmental policies may be reviewed
through the participation of all employees. Outside consultants or
experts from other organizations may be engaged to review
crucial policies.
– Adequate care should be taken to review the policies in the following
situations when
1) employees offer suggestions;
2) employees express grievances
3) unsatisfactory reports about employees performance and behavior
4) company plans for change like expansion, diversification, contraction,
adoption of new technology and introduction of new methods.
Personnel policies, to be effective should have a favorable impact on the
objectives and functions of P/HRM and help the parties concerned.

https://www.vskills.in/certification/tutorial/formulation-
Dr. S. R. Shakya 8
of-personnel-policy/
 2.4 Manpower Planning (MPP)
• Manpower planning is the estimation of
– how many qualified people are necessary to carry
out the assigned activities,
– how many will be available internally and
– how many to hire from outside.
• Manpower planning is the process of forecasting the
an organization’s future demand for and supply of ,
the right type of people in the right number.
• It is also known as personnel planning or employment
planning.

Dr. S. R. Shakya 9
 2.4 Manpower Planning
Importance of MPP
• Future Personnel Needs: It helps to determine the future
personnel needs thereby avoiding surplus or deficiency in staff
strength in an organization.
– All public sector organizations are overstaffed as they never do their
manpower planning.
• Coping with Change: MPP enables an organization to cope with
the changes in today’s dynamic business environment by
providing a qualified and skilled manpower in right number at
right time.
• Foundation for Personnel Functions: Manpower planning is the
basis of recruitment, selection, transfers, promotions, layoff ,
training & development.

Dr. S. R. Shakya 10
 2.4 Manpower Planning
Factors affecting MPP
• Strategy of Organization: The strategic plan of an organization
defines the MPP needs.
– For example, a strategy of growth means than additional employees must
be hired while acquisition and merger strategy requires to plan for layoff.
• Organizational Growth Cycles: The stage of an organization’s
growth can have influence on MPP. Small firms in embryonic
stage may not need MPP but need for manpower planning when
the firm enters the growth stage. A mature firms less number of
few employees. A declining firm may need to layoff or volunteer
retirement of employees.
• Nature of Job Being Filled: It is easy to hire shop-floor
employees but a lot of sourcing is necessary to hire managerial
personnel.
Dr. S. R. Shakya 11
 Manpower Planning Process

VRS: Virtual Recruitment System Dr. S. R. Shakya 12

 MPP Demand Forecasting
• It is the process of estimating future quantity and quality of
employees required in an organization. The basis of forecast is the
long-term objective & policy of organization.
• Both internal and external factors must be considered.
– Internal factors: budget constraints, production level, new
products and services etc.
– External factors: business competition, economic environnent,
changes in technologie etc.
• Forecasting Techniques:
a) Managerial judgement
b) Ratio-trend analysis
c) e) Other method
d) Work study techniques
e) Delphi method
f) Other method Dr. S. R. Shakya 13
 MPP Demand Forecasting
a) Managerial Judgement
• Very simple method.
• Managers sits together, discuss and arrive at a figure
which would be the probable future demand of
employees
• Both bottom-up or Top-down approach may be used.
• In bottom-up approach, line managers submit their
departmental requirement to top managers and they
make a forecast.
• In top-down approach, the top-managers prepare
company and departmental forecast.

Dr. S. R. Shakya 14
 MPP Demand Forecasting
b) Ratio –Trend Analysis
– Quickest forecasting method.
– Involves the study of past employees to work ratio like
workers to sales volume, workers to production volume, and
forecasting future ratios.

c) Work-study Techniques
– This method is used when it is possible to calculate the length
of operation by measuring the work.
– The standard hours required per unit output is measured and
it is multiplied by planned volume of units to be produced to
give the total number of planned hours for the period.

Dr. S. R. Shakya 15
 MPP Demand Forecasting
• This is divided by the number of actual working hours of an
individual worker to give the number of workers required.
Example:
– Planned output for next year : 20,000 units
– Standard hour/unit : 5 hour

– Planned hours for the year (20,000 × 5) : 1,00000 hours

– Productive hours per man/year : 2000 hours

– Number of direct workers required : 50

Dr. S. R. Shakya 16
 MPP Demand Forecasting
4. Delphi Technique:
• It involves seeking the opinion from group of experts, usually managers.
The opinions of different experts are summarized and sent back to
experts again. The process is repeated until the experts’ opinions begins
to agree.

5. Other Method:
• Following mathematical model is used to forecast manpower:

– En is the estimated level of manpower in n planning period,

– L is the overall level of current business activity in rupees,
– G is the total growth in business activity in rupees,
– x is the average productivity improvement anticipated within planning period,
– y is the level of current business activity/person in rupees.
Dr. S. R. Shakya 17
 MPP Supply Forecasting
• It is the next step of manpower planning.
• It provides the information regarding the number of people likely to be
available from within and outside an organization.
• The supply analysis includes:
a) Existing Manpower: It involves the analysis of existing manpower
data like their age, sex, marital status, skills, retirement year etc.
b) Internal supply: How many manpower can be availed from within
organization after considering resignation, retirement, promotion
etc.
c) External supply: External supply is necessary to replenish lost
personnel, to provide specific skilled manpower.

Dr. S. R. Shakya 18
 Manpower (MP) Program & Implementation
• After analyzing manpower demand and supply, the next
step is manpower program and implementation.

• Implementation requires converting MP plan into

action.

• Some of the MP program includes recruitment, selection

& placement, training and development, retraining and
redeployment, the retention plan, and the downsizing
plan.

Dr. S. R. Shakya 19
 Control and Evaluation of MPP
• This is the final step of manpower planning process.

• The purpose of this step is to know whether the

objectives of the plan are fulfilled and if any case not
achieved, helps provide the necessary feedback to bring
into the track.

• Therefore, it is necessary to clarify the reporting

procedures which will enable the achievement to be
monitored against the plan.

Dr. S. R. Shakya 20
 Requisites for Successful MPP
• MPP must be recognized as an integral part of corporate
planning.
• Backing of top management is absolutely essential.
• Personnel records must be complete, up-to-date and
readily available.
• Data collection, analysis, techniques of planning and the
plans themselves need to be constantly revised and
improved.
• The time horizon of the plan must be long enough.

Dr. S. R. Shakya 21
Recruitment and Selection of manpower

https://empxtrack.com/blog/recruitment-and-selection-the-most-important-hr-function/

Dr. S. R. Shakya 22
 2.5 Recruitment and Selection of manpower
Recruitment
• In simple terms, recruitment is the process of searching
for and obtaining applicants for jobs, from among
whom the right people can be selected.
• It is the process of finding and attracting capable
applicants for employment.
• The process begins when new recruits are sought and
ends when their applications are received.
• The result is a pool of applicants from which new
employees are selected.

Dr. S. R. Shakya 23
 Purpose and Importance of Recruitment
• The general purpose of recruitment is to provide a pool of
potentially qualified job candidates.
• Increases the pool of job applicants at minimum cost.
• Help increase the success rate of the selection process by
reducing the number of visibly, under-qualified or overqualified
job applicants.
• Help reduce the probability of job applicants once recruited and
selected, will leave the organization only after short period of
time.
• Meet the organization’s legal and social obligations regarding
the composition of its work-force.

Dr. S. R. Shakya 24
 Factors Affecting Recruitment
Both internal and external factors affects the recruitment.
Internal Factors:
a) Recruitment Policy: Whether recruiting from own employees or
from outside the organization. Generally, the policy is to prefer
internal recruitment.
b) Temporary or Part-time employees: An organization hiring
temporary and part-time employees is in a less advantageous
position in attracting sufficient applications.
c) Size of organization: Large organization will find the recruiting
less problematic than a small organization.
d) A growing organization will have more recruiting on hand than
declining one.

Dr. S. R. Shakya 25
 Factors Affecting Recruitment
External Factors:
a) Supply and demand of manpower: Supply & demand of specific
skill manpower in the labor market will affect a lot.
b) Unemployment rate: If the unemployment rate in a given area
is high, the recruitment process may be simpler.
c) Political and legal conditions: Reservations of jobs for woman,
marginalized class of people, scheduled caste, minorities and
backward class will affect the recruitment.
d) Company’s image: It also matters in attracting large number of
applicants. Blue chip companies attract large number of
applicants.

Dr. S. R. Shakya 26
 Recruitment Process
• The recruitment process consists of five interrelated stages
a) Recruitment Planning
b) Strategy Development
c) Searching
d) Screening and
e) Evaluation and Control
• The ideal recruitment program is the one that attracts a
relatively larger number of qualified applicants who will survive
the screening process and accept positions with the
organizations, when offered.
• Recruitment program may fail to attract an adequate applicant
pool or poor screening of applicants.

Dr. S. R. Shakya 27
Recruitment Process

Dr. S. R. Shakya 28
 Recruitment Planning
• The first stage in the recruitment process is planning.
• Planning involves specifying the (1) number and (2)
type of applicants to be contacted.
– Number of Applicants: Organization always plan to
attract more applicants than they will hire.
– Type of Applicants: This refers to the type of people
to be informed about the job openings. Type of
people depends on the tasks and responsibilities
involved and qualifications and experience expected.

Dr. S. R. Shakya 29
 Strategy Development
• Once it is known about the number and type of recruits required,
the next step is to develop the strategy regarding the

a) Make or buy employees: Decision regarding to hire less

skilled employees and invest on training and education
program (make) or hire skilled employees and professionals
(buy).
b) Technological sophistication of recruitment: It is related to
the methods to be used in the recruitment process like
online computer based test, written test etc.
c) Geographic distribution of labor market comprising job
seekers: National market, regional or local market

Dr. S. R. Shakya 30
 Strategy Development
d) Sources of recruitment: There are two sources of
recruitment.
– Internal Recruitment: Applicants from those who
are currently employed in organization like present
employees, employee referrals, former employees

– External Recruitment: It includes advertisement in

newspapers, company’s website, campus
recruitment, manpower companies, contractors,
radio and television etc.

Dr. S. R. Shakya 31
Merits/Demerits of Internal Recruitment

Dr. S. R. Shakya 32
Merits/Demerits of External Recruitment

Dr. S. R. Shakya 33
 Searching
• Once the recruiting plan and strategy are worked out,
the search process can begin.

• Internal or external sources can be used for searching

the potential recruits.

• Advertisement in widely circulated newspapers, trade

magazines, business magazines, television and radios
can be used for conveying the recruiting message.

Dr. S. R. Shakya 34
 Screening
• After having received the pool of applicants, screening
process begins.
• Screening is the process of scrutinizing and sorting the
pool of applicants to find out the eligible applicants.
• The purpose of screening is to remove from the
recruitment process at an early stage, those applicants
who are visibly unqualified for the job.
• After screening the applicants, begins the selection
process.

Dr. S. R. Shakya 35
 Evaluation and Control
• Evaluation and control is necessary as considerable costs are
incurred in the recruitment process. The costs incurred are:
a) Salaries for recruiters
b) Management and professional time spent on preparing job
descriptions, job specifications, advertisement etc.
c) Cost for advertisement etc.
• The recruitment process can be evaluated by the
a) number of applications received.
b) number of suitable candidates for selection.
c) retention and performance of the candidates selected.
d) cost of recruitment process

Dr. S. R. Shakya 36
 Selection of Manpower
• Selection is the process of picking individuals out of the pool of
job applicants with requisite qualifications and competence to fill
jobs in the organizations.

• Recruitment and selection are often used interchangeably,

however, a fine distinction exists between two steps.

• Recruitment refers to the process of identifying and

encouraging prospective employees to apply for job while
selection is concerned with picking the right candidates from a
pool of applicants.

Dr. S. R. Shakya 37
Selection Process

Dr. S. R. Shakya 38
 Interview Questions from Employer
1. Opening Questions:
– May I see your resume?
– Why you are interested in our company?
– Why do you feel you are qualified for this job?
– What do you think you can do for us?
– What attracts you to us?
– Tell me about your experiences.
2. Regarding Motivation
– Why do you want to change your job?
– What caused you to enter your job field?
– What would you like to be doing in five years from now?
– What is the ideal job for you?
Dr. S. R. Shakya 39
 Interview Questions from Employer
3. Regarding Education
– Describe your educational qualifications.
– Why did you choose your major?
– What was your class standing?
– What were your average grades?
– Did your grade adequately reflect your fill capability?
– Have you has any special training for this kind of job?
4. Regarding Experience
– Why should I hire you?
– How do you fit the requirement for this job?
– What duties performed in the past have you liked the most and why?
– What are your greatest strength/weakness for this job?
– What equipment can you work on?
– Why were you out of work for so long?

Dr. S. R. Shakya 40
 Interview Questions from Employer
5. Regarding Pay
– What do you require?
– What is the minimum pay you will accept?
– What is your pay record for the last five years?
– Why do you believe you are qualified for so much more?
– Would you be willing to start lower and work towards for
higher?

Dr. S. R. Shakya 41
 2.6 Training and Development of manpower

• Successful candidates placed on the job need training to

perform the duties effectively.
• Employees must be trained to operate machines, reduce scrap,
and avoid accidents.
• Not only workers but also supervisors, managers, and
executives need training to enable them work effectively.
• In simple terms, training and development refer to imparting of
specific skills, abilities and knowledge to an employee.
• Training and development is an ongoing process in any
organization.

Dr. S. R. Shakya 42
 2.6 Training and Development of manpower

Skills
• Training is conducted to impart skills to employees.
– Basic Skills: Skill to operate machines, equipments
with least damage and scrap.
– Motor Skills: Riding bicycle, driving a car. This skill is
needed for all employees.
– Interpersonal Skills: This skill is needed to work with
others in an organization like listening, persuading,
understanding of others’ feeling etc.

Dr. S. R. Shakya 43
 2.6 Training and Development of manpower
Education
• Any training and development program must contain an
element of education.
• The purpose is to provide the theoretical concepts and
develop a sense of reasoning and judgement.
• Education is more important to managers and
executives than for lower level employees.

Development
• Training involves development, where in more stress is given on
increasing knowledge, rather than the skills.
• It involves understanding of the business environment, human
relations, management, etc.

Dr. S. R. Shakya 44
 2.6 Training and Development of manpower

Ethics
• This is another element of training and development program.
• Ethics are largely ignored in business, malpractices are prevalent
in marketing, finance, production in an organization.
– So ethics should be one of the element of training and
development program.
• 44
Attitudinal Changes
• Negative attitude needs to be converted into positive attitudes.
• Attitude affect motivation, satisfaction and job commitment.

Dr. S. R. Shakya 45
 2.6 Training and Development of manpower

Decision Making and Problem Solving Skills

• This skill focuses on methods and techniques for
making organizational decisions and solving work-
related problems.
• It improves the abilities to analyze the problems and
generate alternative solutions and make optimal
decision among alternatives.
• This training is provided to potential managers,
supervisors and professionals.

Dr. S. R. Shakya 46
 2.6 Training and Development of manpower

Training Inputs Across Employees

Dr. S. R. Shakya 47
 2.6 Training and Development of manpower
Importance of Training and Development
• It helps remove performance deficiencies in employees.
• Accidents, scrap and damage to machinery and equipment can
be avoided or minimized through training.
• Improves the job knowledge and skills at all levels of a firm.
• Improves the morale of the workforce.
• Helps people identify with organizational goals.
• Improves relationship between boss and subordinates.
• Aid in development for promotion from within.
• Aids in developing leadership skills, motivation and positive
attitude.
• Aids in increasing productivity and quality of work.
• Aids in improving organizational communication.
Dr. S. R. Shakya 48
 2.6 Training and Development of manpower
Training Process

Dr. S. R. Shakya 49
 2.6 Training and Development of manpower
Organizational Objectives and Strategies

• The first step in the training process is to understand

the objectives and strategies of an organization.
• What business we are in? At what level of quality do
we wish to provide this product or service?
• Where do we want to be in future?
• It is only after answering these and other related
questions, the strength and weakness of its human
resource is assessed.

Dr. S. R. Shakya 50
 2.6 Training and Development of manpower
Needs Assessment
• The purpose to analyze the present problems and future
challenges to be met through training and development.
• When there is performance deficiency, training for employees is
necessary.
• Need assessment should also focus on anticipated skills of an
employee.

Dr. S. R. Shakya 51
 2.6 Training and Development of manpower

Needs Assessment Methods

Dr. S. R. Shakya 52
 2.6 Training and Development of manpower
Training and Development Objectives
• Once training needs are assessed, training and development
goals must be established.
• Goals must be tangible, verifiable, and measurable.

Designing Training & development Program

• Every training & development program must address certain
issues:
a) Who are the trainees? : Trainees must be selected on the
basis of recommendations of supervisors or PM department
itself.
b) Who are trainers? : Immediate supervisors, co-workers,
specialists, consultant from outside, faculty members etc.
Dr. S. R. Shakya 53
 2.6 Training and Development of manpower
• Designing Training & development Program (contd.)

c) Methods and Techniques of Training: Different training

methods are available.
• On-the job training: methods that are applied in the
workplace while the employee is actually working. The
techniques includes: Orientation, Job-instruction training,
Apprentice training, Internships, Job rotation etc.

• Off-the job training: away from the workplace. The

commonly used techniques includes: Lecture, Special
study, Films, Television, Conference, Case study, Role
playing, Simulation, Laboratory training etc.

Dr. S. R. Shakya 54
 2.6 Training and Development of manpower
Evaluation of Program

• The last stage of training and development process is the

evaluation of the results. Since huge sum of money is spent on
training and development, the program should be evaluated in
terms of its effectiveness.
• It helps determine the results of the training program.
• The main objective of evaluating the training program is to
determine if they are accomplishing specific training objectives
that is, correcting performance deficiencies.
• Evaluation can be done by measuring organizational results,
behavior change, measures of reaction from trainees.

Dr. S. R. Shakya 55
2.7 Job Analysis, Job Evaluation and Merit Rating

Job Analysis
In simple terms, job analysis is a process of studying and collecting
information relating to the operations and responsibilities of a
specific job.
The process of job analysis results in two sets of data:
a) Job description: A statement describing the job such as Job
title, Location, Job summary, Duties & responsibilities,
Machines, tools and equipment, Materials and forms used
b) Job specification: A statement describing the human
qualification necessary to do the job. It includes the items
such as education, experience, training, judgement,
initiative, physical effort, communication skills etc.

Dr. S. R. Shakya 56
2.7 Job Analysis, Job Evaluation and Merit Rating
Required Information for Job Analysis

• As far as data and information collection is concerned, following

issues have to be taken into account:

a) What type of data to be collected?

b) What methods to be employed for data collection?
c) Who should collect the data?

Dr. S. R. Shakya 57
2.7 Job Analysis, Job Evaluation and Merit Rating
Types of Data
• All details about the jobs need to be gathered.
• It depends upon the end use of the information and time and
budget constraints.
• The required information are:
a) Work related activities: Description of work (how, why and when is task
performed?), Interface with other jobs, Procedure used, Behavior
required, Physical movement required etc.
b) Machines/Tools/Equipment: List of machines/tools etc. used, Materials
processed, Product processed, Services rendered etc.
c) Job Content: Physical working conditions, Organizational context, Social
context,Work schedule, Incentives
d) Personal Requirements: Specific skills, education, training, work
experience etc.

Dr. S. R. Shakya 58
2.7 Job Analysis, Job Evaluation and Merit Rating
Method of Data Collection
There are different methods of data collection:
a) Observational Method:
• Simple method and data collected are accurate.
• The job analyst carefully observes the job holder at work and
records what and how he/she does and how much time is need to
complete a given job.
• This method is time consuming and inapplicable to jobs which
involve mental activities.
b) Interview:
• The analyst interviews the job holder and his/her supervisor to
solicit information about the job.
• Structured interview form is used.
• This method is also time consuming.
Dr. S. R. Shakya 59
2.7 Job Analysis, Job Evaluation and Merit Rating
c) Questionnaire:
• Job holders fill in the given structured questionnaire which are then
approved by their supervisors.
• Standard questionnaires are prepared for interview which should
include job title of job holder, job title of job holder’s manager,
number of subordinates of job holder, duties and responsibilities of
job holder etc.
• Its advantage is that large number of data can be collected in a
relatively short period of time
d) Checklists:
• A checklist is similar to a questionnaire and contains yes/no variety.
• Checklists should be prepared very carefully and all the relevant
information about the concerned job should be included in the
checklists.

Dr. S. R. Shakya 60
2.7 Job Analysis, Job Evaluation and Merit Rating
e) Technical Conference Method:
• In this method, a conference of managers and supervisors are
organized. The analyst initiates discussion which provides details
about jobs.
• This method lacks accuracy because the actual job holders are not
involved in conference.
f) Diary Method:
• This method requires the job holders to record in detail their activities
each day.
• If done faithfully, this technique is accurate and eliminates error
caused by memory lapses the job holder makes while answering
questionnaires and check lists.
• This method is time consuming.

Dr. S. R. Shakya 61
2.7 Job Analysis, Job Evaluation and Merit Rating
Purpose of Job Analysis
• Job analysis is useful for overall management of all personnel
activities.

• Job related data obtained from job-analysis program are useful in

a) Personnel Planning
b) Performance Appraisal
c) Hiring
d) Training and Development
e) Job Evaluation and Compensation
f) Health and Safety
g) Career Planning
https://www.economicsdiscussion.net/human-resource-management/job-analysis-in-hrm/31863

Dr. S. R. Shakya 62
2.7 Job Analysis, Job Evaluation and Merit Rating
• Personnel Planning: Manpower Planning (MPP) determines as to
how many and what type of personnel will be needed in future.
The number & the type of personnel are determined by the jobs.
So, job related information is necessary for MPP.
• Training and Development: Job analysis provides the
information about what a given job demands from the
incumbent in terms of knowledge & skills. This information is
useful to design training & development program.
• Job Evaluation: Job evaluation involves determination of relative
value of each job to establish wage and salary . The value of job
is determined on the basis of job analysis (job description &
specification).
• Remuneration: Job evaluation helps determine wage and salary
for all jobs.
Dr. S. R. Shakya 63
2.7 Job Analysis, Job Evaluation and Merit Rating
• Performance Appraisal: It involves assessment of the actual
performance of an employee against what is expected. Job
analysis facilitates performance appraisal as it helps fix standards
for performance.
• Safety and Health: The job analysis provides an opportunity to
identify hazardous conditions and unhealthy environmental
factors.
• Career Planning: Matching an individual’s skills and aspirations
with career opportunities requires that those in charge of career
planning know the skill requirements of the various jobs. This
allows them to guide individuals into jobs in which they will
succeed and be satisfied.

Dr. S. R. Shakya 64
 Job Evaluation
• Job evaluation is the process of analyzing and assessing the
various jobs systematically to ascertain their relative worth or
value in an organization.
• The purpose of job evaluation is to make a hierarchy of jobs
(jobs are ranked) which helps fix satisfactory wage differential.
• In job evaluation, jobs are ranked and not the job holder. Job
holders rated through performance appraisal.

Dr. S. R. Shakya 65
 Job Evaluation
• Job evaluation
process starts with
defining objectives of
evaluation and ends
with establishing
wage & salary
differential.

Dr. S. R. Shakya 66
 Job Evaluation
• The main objective of job evaluation is to establish satisfactory
wage and salary differential.

• Job evaluation proceeds with job analysis which provides job-

related data such as Job Description and Job Specification.

• A job-evaluation program involves answering several questions

– Which jobs are to be evaluated?
– Who should evaluate the jobs?
– How much time is required?
– What should be the criteria for evaluation?
– What methods of evaluation are to be employed?

Dr. S. R. Shakya 67
 Job Evaluation
• After the ranking the job with the help of evaluation method,
the next step is to fix wage & salary differential. Before fixing
such differential, the wage rate must be ascertained and for that
wage survey is done.

• The first step in wage survey is to select key jobs. A sample of

firms in the labor-market is selected and the information
regarding the wage is collected for the similar nature job.

• Finally, a wage and salary differential is established.

Dr. S. R. Shakya 68
 Job Evaluation Methods
There are two types of job evaluation method:
a) Non-analytical Methods:
i. Ranking Method:
• Simplest and the most inexpensive type of method.
• The evaluation committee assesses the worth of each job on
the basis of its title or its contents.
• Each job is compared with others and its place is determined.
• Drawback is that job evaluation may be subjective and jobs are
not broken down into factors.
ii. Job-grading (job-classification) Method:
• As in ranking method, this method does not call for detail or
quantitative analysis of job factors.
• It is based on the job as a whole.

Dr. S. R. Shakya 69
 Job Evaluation Methods
• The difference between the two method is that in the ranking method,
there is no yardstick for evaluation while in the classification, there is
a yardstick in the form of job classes or grades.
• Under the classification method, the number of grades is first decided
upon and the factors corresponding to these grades are then
determined.
• Facts about jobs are collected and are matched with the grades which
have been established.

Example of job-grading:
1. Very simple task of a largely physical nature.
2. Straight-forward task but involving complicated routine and requiring
some knowledge
3. Routine task but requiring high individual responsibility
4. Non-routine task but requiring coordination of several lower-grade
functions.
Dr. S. R. Shakya 70
 Job Evaluation Methods
b) Analytical Method
Point-Ranking Method
• This method starts with the selection of job factors, construction of
degree of each factors and assignment of points to each factors.
• Different factors are selected for different jobs.
• Different job factors are:
a) Skill (Education, Experience, Initiative)
b) Effort (Physical demand, Mental and visual demand)
c) Responsibility (Responsibility for equipment, for material, for safety,
for job)
d) Job conditions (Working hours, Hazards)
• The advantage of this method is that a job is split into a number of
factors. The worth of each job is determined on the basis of its factors
and not by considering the job as a whole.
Dr. S. R. Shakya 71
 Merit Rating (Performance Appraisal)
• In simple terms, performance appraisal may be understood as a
process of assessing an individual’s performance in a systematic
way.

• The performance to be measured are:

a) Job knowledge b) Quality and quantity of output
c) Initiative d) Leadership abilities
e) Supervision f) Dependability
g) Cooperation h) Versatility i) Health etc.

• A formal definition of performance appraisal is “It is the systematic

evaluation of the individual with respect to his or her performance
on the job and his or her potential for development.”
Dr. S. R. Shakya 72
 Merit Rating (Performance Appraisal)

The main objectives/purposes of employee performance assessment

are :
• To effect promotion based on competence and performance.
• To assess the training and development needs of employees.
• To decide upon a pay rise.
• To let the employees know where they stand insofar as their
performance is concerned.
• To confirm the services of probationary employees upon their
completing the probationary period satisfactorily.

Dr. S. R. Shakya 73
 Merit Rating (Performance Appraisal)
Performance
Appraisal Process

Dr. S. R. Shakya 74
 Merit Rating (Performance Appraisal)
Objectives of Appraisal
• The objectives of appraisal should be clearly
stated. The objective may be effecting promotion
and transfers, assessing training needs, pay
increase etc.
• In traditional approach, the performance
appraisal aims at improving the performance of
an individual .
• In system approach, it aims at improving the
performance of the entire organization.
Establishing Job Target
• Second step in the appraisal process is to establish
the expected target. This includes informing the
employees what is expected of him/her on the job.

Dr. S. R. Shakya 75
 Merit Rating (Performance Appraisal)
Design the Appraisal Program
• While designing an appraisal program, the
following questions need to be answered:
a) Formal versus Informal Appraisal
b) Whose performance is to be assessed?
c) Who are the raters?
d) What problems are encountered?
e) How to solve the problem?
f) What should be evaluated?
g) When to evaluate?
h) What method of appraisal to be used?

Dr. S. R. Shakya 76
 Merit Rating (Performance Appraisal)
Formal Versus Informal Appraisal

• The first step in designing an appraisal program is to decide

whether the appraisal should be formal or informal.
• Formal appraisal occurs at specified time periods-once or twice
a year. Formal appraisal is done for the purpose of employee
evaluation.
• Informal appraisal can occur whenever the supervisor feels the
need for communication.
• Many organization uses a mixture of both formal and informal
appraisal.

Dr. S. R. Shakya 77
 Merit Rating (Performance Appraisal)
Whose Performance Should be Rated?
• It is the second most important question. Performance can be rated for
individual, group, division, department or organization.
• It should be clear before going ahead.

Who are Raters?

• Raters can be immediate supervisors, specialists from the PM department,
subordinates, peers, committees, self-appraisal or combination of several.
• Immediate supervisor is the most fit candidate to appraise the performance
of his subordinates.
• Where performance is appraised by superiors, peers, subordinates, and
clients, it is called 360° system of appraisal.
• Whoever may be the rater, the important point is that the rater must be
free from bias.

Dr. S. R. Shakya 78
 Merit Rating (Performance Appraisal)
Problem of Rating
• Performance appraisal is subject to a wide variety of
inaccuracies and biases referred to as ‘rating error’.
• These errors occur in the rater’s observations, judgement and
information processing.
• The most common rating errors are leniency or severity, central
tendency, halo effect, rater effect, primacy and recency, status
effect.
– Leniency or severity: This happens when the rater rates the
employee subjectively in a biased way.
– Central tendency: This happens when employees are incorrectly
rated near the average or middle of the scale. The attitude of rater
is to play.

Dr. S. R. Shakya 79
 Merit Rating (Performance Appraisal)
– Halo error: A halo error takes place when one aspect of an
individual’s performance influences the evaluation of the entire
performance of the individual.
– Rater effect: This includes the favoritism, stereotyping and
hostility. Excessively high or low scores are given only to certain
individuals or groups based on the rater’s attitude towards ratee,
not on the actual outcomes.
– Primacy and Recency: The rater’s ratings are heavily influenced
either by behavior exhibited by the employee during the early
stage of the review period (primacy) or by the outcomes at then
end of the review period (recency).
– Status Effect: It refers to overrating of employees in higher-level
job and underrating employees in lower level job.

Dr. S. R. Shakya 80
 Merit Rating (Performance Appraisal)
What should be evaluated?
• Criteria for assessing performance are:
a) Quality: The degree to which the process or result of carrying
out an activity approaches perfection in terms of either
confirming to some activity’s intended purpose.
b) Quantity: The amount produced , expressed in monetary
terms, number of units.
c) Timeliness: The degree to which an activity is completed or a
result produced at the earliest time desirable.
d) Cost effectiveness: The degree to which the use of the
organization’s resources is minimized to gain highest output.
e) Need for supervision: The degree to which a job performer can
carry out a job function without having to request supervisory
assistance.
Dr. S. R. Shakya 81
 Merit Rating (Performance Appraisal)
When to evaluate?
• How often should an employee be evaluated?
• The general trend is to evaluate once in three months or six months or once
in a year.
• Most of the organizations conduct performance appraisal once in a year.
What method of appraisal to be used?
• There are different methods of performance appraisal .
a) Rating scales
b) Checklists
c) Forced Choice Method
d) Field review method
e) Performance test and observation
f) Essay method
g) Critical incident method
h) Annual confidential reports
i) Cost accounting
j) Comparative evaluation approach
Dr. S. R. Shakya 82
 Merit Rating (Performance Appraisal)
Method of Appraisal
Rating Scales
• This is the simplest and most popular method for appraising performance.
• This system consists of list of factors for performance evaluation such as
dependability, initiative, overall output, attendance, attitude, cooperation
etc and a numerical scale for each factors such as excellent (5), Good (4),
Acceptable (3) , Fair ( 2) and Poor (1).
• Rater checks the appropriate performance level on each factor and the total
numerical score is summed up.
Checklist
• In this method, a checklist of statements on the traits of the employee and
his/her job is prepared in two columns , for example ‘Yes” column and ‘No’
column.
• The rater has just to tick the “Yes” column if the answer is positive and “No”
column if the answer is negative.

Dr. S. R. Shakya 83
 Merit Rating (Performance Appraisal)
Method of Appraisal
Forced Choice Method
• In this method , the rater is given a series of statements about an
employee. The statements are arranged in blocks of two or more and the
rater indicates which statement is most or least descriptive of the
employees.
• The typical statements are :
Learn fast…………….. Works hard…………
Work is reliable……….. Performance is good example for…………
Absents often…………. Others usually tardy…………..
• It is known as forced choice method because the rater is forced to
choose the statements which are readymade.
• Advantage is the absence of personal bias.
• Disadvantage is that the statement may not be properly framed.
Dr. S. R. Shakya 84
 Merit Rating (Performance Appraisal)
Method of Appraisal
Critical Incident Method
• This method has generated a lot of interest these days.
• This method focuses on certain critical behavior of an employee that
make all the differences between effective and non-effective
employees.
• Such incidents are recorded by the supervisor as and when they occur.
• Examples:
a) Schedule production (Usual Duty)
b) Full utilization of personnel, plant/machines, decrease cost (Target)
c) Instituted new production system (Critical Incidents)
• Advantage of this method is that the performance is based on actual
job behavior.

Dr. S. R. Shakya 85
 Merit Rating (Performance Appraisal)
Method of Appraisal
Field Review Method
• This is an appraisal by someone outside the department or
organization.
• The outsiders reviews employee records and holds interview with the
ratee and his or her superior.
• This method is useful when comparable information is needed from
employees in different units.
• Disadvantage is that an outsider is usually not familiar with the
conditions in an employee’s work environment which may affect the
ability of employee.
Performance Test and Observation
• This method involves the written test or an actual demonstration of
skills.
Dr. S. R. Shakya 86
 Merit Rating (Performance Appraisal)
Method of Appraisal
Confidential Record
• Confidential records are maintained mostly in government departments .
• Confidential report may contain the items like attendance, ability to work
with others, leadership, initiative, technical ability, ability to understand new
material, ability to reason, responsibility, judgement etc.
Essay Method
• In this method, the rater describe employee within a number of broad
categories such as
i. the rater’s overall impression of employee’s performance
ii. promotability of employee ,
iii. strength and weakness of employee,
iv. training needs
• The strength of this method depends on the writing skills and analytical
ability of the rater.
Dr. S. R. Shakya 87
 Merit Rating (Performance Appraisal)
Performance Interview
• Performance interview is another step in the
appraisal process.
• Once the appraisal has been made of employees,
the raters should discuss and review the
performance with employees so that they will
receive feedback about where they stand in the
eyes of supervisor.
• Performance interview has three goals:
a) To change behavior of employees whose
performance does not meet organizational
requirements or their own personal goal.
b) To maintain the behavior of employees who perform
in an acceptable manner.
c) To recognize superior performance of employees.
Dr. S. R. Shakya 88
 Merit Rating (Performance Appraisal)
Use of Appraisal Data
• The final step in the evaluation process is the
use of evaluation data.
• The data and information gathered must be
used by personal department .
• The data will be useful in the following areas of
personal management:
a) Remuneration administration
b) Validation of selection program
c) Employee training and development program
d) Promotion, transfer and lay-off decision
e) Grievance and discipline program
f) Manpower planning
Dr. S. R. Shakya 89
Difference Between Job Evaluation and Performance Appraisal

Dr. S. R. Shakya 90
 2.8 Wages and Incentives
Remuneration
• Remuneration is the compensation an employee
receives in return for his or her contribution to the
organization.
• Remuneration occupies an important place in the life
of an employee.
• His/her standard of living, status in the society,
motivation, productivity depends upon the wages he
or she receives.
• Wages and salaries are fix based upon the skill,
experience and performance of employees.

Dr. S. R. Shakya 91
 2.8 Wages and Incentives
Components of Remuneration
• Remuneration of an employee comprises following components:
1. Wages and Salary:
– Wages represents an hourly or daily rate of pay and salary refers to the
monthly rate of pay irrespective of the number of hours put in by an
employee.
– Wages and salaries are subject to annual increment and differ from
employee to employee.
– It depends upon the nature of job , seniority and merit.
2. Incentives:
– Incentives are paid in addition to wages and salary.
– It is also called ‘payment by results’.
– Incentives depends upon productivity, sales, profit, or cost reduction.

Dr. S. R. Shakya 92
 2.8 Wages and Incentives
Components of Remuneration (contd.)
3. Fringe Benefits
– This includes employee benefits such as provident fund,
gratuity, medical care, accident relief, health insurance,
canteen, uniform, recreation and the like.
4. Perquisites
– These are allowed to executives and include company car,
housing, club membership, paid holidays, furnished house,
stock option, and the like Perquisites are offered to retain
competent executives.
5. Non-monetary Benefits
– These include recognition of merit, growth prospect,
comfortable working conditions flexible time and the like.

Dr. S. R. Shakya 93
 2.8 Wages and Incentives
Factors Affecting Employee Remuneration
• A number of external and internal factors affects the
remuneration payable to employees.
External factors:
a) Labor Market: Demand for and supply of labor market influence
wage and salary of an employee. Low wage may be fixed when
supply of labor exceeds the demand for. Higher wage will have to
be paid when there is shortage of labor in the market.
b) Cost of Living: If the cost of living is expensive, the minimum wage
should be enough to provide the basic needs. A rise in the cost of
living is compensated by payment of dearness allowance, without
altering basic pay.
c) Labor Union: The presence of or absence of labor union in
organization often affect the quantum of wages paid to employee.

Dr. S. R. Shakya 94
 2.8 Wages and Incentives
External factors (contd.)
d) Labor Laws: Labor law also affects the remuneration paid to them
employees. Labor law fixes the minimum threshold to be paid to
the employees.
e) Economy: The last external factor that has its impact on wage and
salary is the state of the economy of the country. In most cases,
wages and salary increases when the economy is expanding.

Dr. S. R. Shakya 95
 2.8 Wages and Incentives
Internal factors:
a) Business Strategy: The overall strategy which a company pursues
should determine the remuneration to its employees.
– Where the strategy of the enterprise is to achieve rapid growth,
remuneration should be higher than what competitors pay.
– Where the strategy is to maintain and protect current earnings, because of
the declining fortunes of the company, remuneration level needs to be
average or even below average.
b) Job Evaluation and Performance Appraisal: Job evaluation helps
establish satisfactory wage differentials among jobs. Performance
appraisal helps award pay increases to employees who show
improved performance.
c) The Employee: Several employee-related factors interact to
determine his or her remuneration. These include performance,
seniority, experience, potential, and even sheer luck.
Dr. S. R. Shakya 96
 Class Exercise
Group debate:
Automation of Industries in Nepal
• Group A: Write 10 points in favor of automation of Industries in
Nepal.
• Group B: Do critical comment against Group A and Write 10
points in favor of not adopting automation of Industries in Nepal.

• Concluding remarks

Dr. S. R. Shakya 97
 Class Exercise
Group exercise:
Interview of candidate for Production Manager
• Group A: Write 12 questions covering technical, academic,
financial, and social perspective.
• Group B: Explain the response to the questions.
• Group A: Do critical review and perform evaluation.

Interview of candidate for Sales Manager

• Group B: Write 12 questions covering technical, academic,
financial, and social perspective.
• Group A: Explain the response to the questions.
• Group B: Do critical review and perform evaluation.

Dr. S. R. Shakya 98
 Thank you !
Email: shreerajshakya@ioe.edu.np

Dr. S. R. Shakya 99