Human Capital Management

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: 2nd Semester
Subject Code: 102
Name of the Subject:
HUMAN CAPITAL MANAGEMENT

DEFINITION OF HCM
Human Capital Management is defined as the process of
acquiring, training, managing, retaining employees for them to
contribute effectively in the processes of the organization.
Human capital management (HCM) is an approach to
employee staffing that perceives people as assets (human
capital) whose current value can be measured and whose
future value can be enhanced through investment.

Scope Of HCM
Scope
Of HCM

HRM : Objectives and Functions

Evolution of HRM
Period Development Status Outlook Emphasis Status
1920s to 1930s Beginning Pragmatism of
capitalists
Statutory welfare
paternalism
Clerical
1940s to 1960s Struggling for
recognition
Technical legalistic Introduction
Of Techniques
Administrative
1970s to 1980s Achieving
Sophistication
Professional
Legalistic impersonal
Regulatory, conforming,
imposition of standards
on other function
Managerial
1990s Promising Philosophical Human values,
productivity through
people
Executive
Table: Evolution of HRM in India:

Personnel Management Vs. HRM
• Personnel management is a traditional approach of managing people in the
organization. Human resource management is a modern approach of managing
people and their strengths in the organization.
• Personnel management focuses on personnel administration, employee welfare and
labor relation. Human resource management focuses on acquisition, development,
motivation and maintenance of human resources in the organization.
• Personnel management assumes people as a input for achieving desired output.
Human resource management assumes people as an important and valuable
resource for achieving desired output.
• Under personnel management, personnel function is undertaken for employee's
satisfaction. Under human resource management, administrative function is
undertaken for goal achievement.
Human resource management is the new version of personnel management. There is no
any watertight difference between human resource management and personnel
management. However, there are some differences in the following matters:

Personnel Management Vs. HRM
• Under personnel management, job design is done on the basis of division of labor.
Under human resource management, job design function is done on the basis of
group work/team work.
• Under personnel management, employees are provided with less training and
development opportunities. Under human resource management, employees are
provided with more training and development opportunities.
• Personnel management focuses on increased production and satisfied employees.
Human resource management focuses on effectiveness, culture, productivity and
employee's participation.
• Personnel management is concerned with personnel manager. Human resource
management is concerned with all level of managers from top to bottom.
• Personnel management is a routine function. Human resource management is a
strategic function.

HUMAN RESOURCE PLANNING
DEFINITION
• It includes the estimation of how many qualified people are
necessary to carry out the assigned activities, how many
people will be available, and what, if anything, must be done
to ensure that personal supply equals personnel demand at the
appropriate point in the future.
• Basically it’s the process by which an organization ensures that
it has the right number & kind of people, at the right place, at
the right time, capable of effectively & efficiently completing
those tasks that will help the organisation achieve its overall
objectives.

HUMAN RESOURCE PLANNING
MEANING
• In simple words, HRP is understood as the process of
forecasting an organization's future demand for, and
supply of, the right type of people in the right number.
• After this only the HRM department can initiate the
recruitment and selection process
• Its called by manpower planning, personal planning or
employment planning

IMPORTANCE OF HRP
FUTURE PERSONNEL NEEDS
• Surplus or deficiency in staff strength
• Results in the anomaly of surplus labour with the lack
of top executives
COPING WITH CHANGE
• Enables an enterprise to cope with changes in
competitive forces, markets, technology, products &
government regulations

CREATING HIGHLY TALENTED PERSONNEL
• HR manager must use his/her ingenuity to attract & retain qualified &
skilled personnel • Succession planning
PROTECTION OF WEAKER SECTIONS
• SC/ST candidates, physically handicapped, children of the socially
disabled & physically oppressed and backward class citizens
INTERNATIONAL STRATEGIES
• Fill key jobs with foreign nationals and reassignment of employees
from within or across national borders
FOUNDATION FOR PERSONNEL FUNCTIONS
• Provides information for designing & implementing recruiting,
selection, personnel movement(transfers, promotions, layoffs) &
training & development
IMPORTANCE OF HRP(Contd.)

Job Analysis
Job Analysis is a process to identify and determine in detail the particular
job duties and requirements and the relative importance of these duties for a
given job. It is a process where judgements are made about data collected
on a job. It is an analysis which is conducted of the Job, not the person.
While Job Analysis data may be collected from incumbents through
interviews or questionnaires, the product of the analysis is a description or
specifications of the job.
Job Analysis consists of Job Description and Job Specification.
Job Description describes the information about the job.
Job Specification specifies information about the skills or qualities
required for doing the job.

Stages in Job Analysis Process

Recruitment
Recruitment is a positive process of searching for prospective employees
and stimulating them to apply for the jobs in the organization. When more
persons apply for jobs then there will be a scope for recruiting better
persons .
Recruitment is a linkage activity bringing together those with jobs and
those seeking jobs. In simple words, recruitment refers to discovering the
source from where potential employees may be selected. The scientific
recruitment process leads to higher productivity, better wages, high morale,
reduction in labour turnover and enhanced reputation. It stimulates people
to apply for jobs; hence it is a positive process.

Sources Of Recruitment

Selection
The Selection is the process of choosing the most suitable
candidate for the vacant position in the organization. In other
words, selection means weeding out unsuitable applicants and
selecting those individuals with prerequisite qualifications and
capabilities to fill the jobs in the organization.
It is a negative process as it rejects as many unqualified
applicants as possible so as to hire the right candidate.

Steps In Selection Process

What is induction?
• Once an employee is selected and placed on an appropriate
job, the process of familiarizing him with the job and the
organization is known as induction.
• Induction is the process of receiving and welcoming an
employee when he first joins the company and giving him
basic information he needs to settle down quickly and
happily and stars work.

Job Changes
• Mobility of employees from one job to another
through transfer, promotion and demotion is
internal mobility and some employees leave the
organization due to resignation, retirement and
termination is called external mobility. Taking
internal and external together makes job change.

Why job changes emerge?
* Changes in the structure of the organization involving
job redesign, job regrouping etc.
* Changes in technology.
* Changes in political environment.
* Changes in legal policies.
* Fluctuation in volume of work due to expansion,
diversification etc.
* Changes in demand of trade union.
* Changes in the knowledge, skills and values of
employees.

DEFINE TRAINING
• Training as defined by some experts of the
management as:
• In the words of Dale, I. Beach, “Training is the
organised procedure in which people learn
knowledge and/or skill for definite purpose.”
• According to Jucius, “The term training is used here
to indicate only the process by which the aptitudes,
skill and ability of employee to perform specific jobs
is increased.”

Importance of Training
Increased Productivity
Improvement in Employee Morale
Better Safety
Reduced Supervision
Personal Growth

Types of Training
Job Training Safety Training
Apprenticeship
Training
Internship
Training
Refresher
Training
Promotional
Training
Remedial
Training

Methods Of Training

Training Program Framework
Development

Executive Development
Executive or management development is
a planned, systematic and
continuous process of learning and
growth by which managers develop their
conceptual and analytical abilities to
manage.

Features Of Executive Development

Executive Development Process

Career Planning
Career planning is the ongoing process where
you: Explore your interests and abilities;
Strategically plan your career goals; and.
Create your future work success by designing
learning and action plans to help you achieve
your goals.

Features Of Career Planning
1. It is an ongoing process.
2. It helps individuals develop skills required to fulfill different
career roles.
3. It strengthens work-related activities in the organization.
4. It defines life, career, abilities, and interests of the employees.
5. It can also give professional directions, as they relate to career
goals.

Training & Development
It is any attempt to improve current or future
employee performance by increasing an
employee's ability to perform through
learning, usually by changing the employee's
attitude or increasing his or her skills and
knowledge.

Performance Appraisal
A performance appraisal is a regular review of an
employee's job performance and overall contribution
to a company. Also known as an "annual review,"
"performance review or evaluation," or
"employee appraisal," a performance
appraisal evaluates an employee's skills,
achievements and growth, or lack thereof.

Objective Of Performance Appraisal
• To maintain records in order to determine compensation packages, wage
structure, salaries raises, etc.
• To identify the strengths and weaknesses of employees to place right men
on right job.
• To maintain and assess the potential present in a person for further
growth and development.
• To provide a feedback to employees regarding their performance and
related status.
• To provide a feedback to employees regarding their performance and
related status.
• It serves as a basis for influencing working habits of the employees.
• To review and retain the promotional and other training programmes.

Performance Appraisal Process

Methods of Performance Appraisal

Advantages Of Performance Appraisal
• Promotion: Performance Appraisal helps the supervisors to
chalk out the promotion programmes for efficient
employees. In this regards, inefficient workers can be
dismissed or demoted in case.
• Compensation: Performance Appraisal helps in chalking
out compensation packages for employees. Merit rating is
possible through performance appraisal. Performance
Appraisal tries to give worth to a performance.
Compensation packages which includes bonus, high salary
rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal. The criteria should
be merit rather than seniority.

• Selection Validation: Performance Appraisal helps the
supervisors to understand the validity and importance of
the selection procedure. The supervisors come to know the
validity and thereby the strengths and weaknesses of
selection procedure. Future changes in selection methods
can be made in this regard.
• Employees Development: The systematic procedure of
performance appraisal helps the supervisors to frame
training policies and programmes. It helps to analyse
strengths and weaknesses of employees so that new jobs
can be designed for efficient employees. It also helps in
framing future development programmes.

• Communication: For an organization, effective communication between
employees and employers is very important. Through performance
appraisal, communication can be sought for in the following ways:
– Through performance appraisal, the employers can understand and accept
skills of subordinates.
– The subordinates can also understand and create a trust and confidence in
superiors.
– It also helps in maintaining cordial and congenial labour management
relationship.
– It develops the spirit of work and boosts the morale of employees.
• Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be
determined if the targets are achieved. This very well motivates a person
for better job and helps him to improve his performance in the future.

Limitations Of Performance Appraisal
1. Bias of Appraiser
2. Ambiguity in Standards
3. Insufficient Evidence
4. Several Qualities Remain Without Appraisal
5. Leniency or Strictness Tenancy
6. Average Rating Problem
7. Influence of Man’s Job
8. Similarity Error.

Compensation
Compensation is the total cash and non-
cash payments that you give to an
employee in exchange for the work they
do for your business. It is typically one of
the biggest expenses for businesses with
employees

Types of Compensation
Base pay (hourly or
salary wages)
Sales commission Overtime wages
Tip income Bonus pay
Recognition or merit
pay
Benefits
(insurances, standard
vacation policy,
retirement)
Stock options
Other non-cash
benefits

Job Evaluation
Job evaluation is the rating of jobs in an
organisation. This is the process of
establishing the value or worth of jobs in a job
hierarchy. It attempts to compare the relative
intrinsic value or worth of jobs within an
organisation. Thus, job evaluation is a
comparative process.

Objectives Of Job Evaluation
• Provide a standard procedure for determining the relative worth of
each job in a plant.
• Determine equitable wage differentials between different jobs in
the organization.
• Eliminate wage inequalities.
• Ensure that like wages are paid to all qualified employees for like
work.
• Form a basis for fixing incentives and different bonus plans.
• Serve as a useful reference for setting individual grievances
regarding wage rates.
• Provide information for work organization, employees’ selection,
placement, training and numerous other similar problems.
• Provide a benchmark for making career planning for the employees
in the organization.

Procedure of job evaluation:

Components of Employee
Compensation:

• Basic Compensation: Basic compensation
refers to the basic pay of an employee which is
usually expressed in terms of a pay scale e.g.
5,000-200-10,000- 500 -20000 etc.
• Supplementary Compensation:
Supplementary compensation refers to
payment of allowances and provision of perks
or perquisites. Allowances refers to amounts
of money which are given to employees
regularly for particular purposes

Social Security System in India
• India’s social security system is composed of a
number of schemes and programs spread
throughout a variety of laws and regulations.
Keep in mind, however, that the government-
controlled social security system in India
applies to only a small portion of the
population.

India’s social security schemes cover the
following types of social insurances:
Pension
Health Insurance and Medical
Benefit
Disability Benefit
Maternity Benefit
Gratuity

Employee Grievance Procedure
Timely Action:
Accepting the Grievance:
Identifying the Problem
Collecting the Facts
Analysing the cause of the Grievance
Taking Decision
Implementing the Decision

HRM vs Strategic HRM
HRM
• Human resource management
(HRM) implies the governance of
manpower of the organization in a
thorough and structured manner.
• Responsibility lies with Staff
specialist
• Fragmented Approach
• Concerned with employee
relations
SHRM
• SHRM is a managerial function
which implies framing of HR
strategies in such a way to direct
employees efforts towards the
goals of organization.
• Responsibility lies withLine
manager
• Integrated Approach
• Concerned with internal and
external relations

CONTINUED….
• Short term
• Follows change
• Stringent control over
employees
• Long term
• Initiates change
• It exhibits leniency.

Emotional quotient
Emotional intelligence (EI), also known
as Emotional quotient (EQ) and Emotional
Intelligence Quotient (EIQ), is the capability of
individuals to recognize their own emotions and
those of others, discern between different
feelings and label them appropriately, use
emotional information to guide thinking and
behavior, and manage and/or adjust emotions
to adapt to environments or achieve one's goal.

Mentoring
Mentoring is the Employee training system
under which a senior or more experienced
person (the mentor) is assigned to act as an
advisor, counselor, or guide to a junior or
trainee. The mentor is responsible for
providing support to, and feedback on, the
person in his or her charge.

Employee Stock Ownership Plan (ESOP)
An employee stock ownership plan (ESOP) is an employee-
owner program that provides a company's workforce with an
ownership interest in the company. In an ESOP, companies
provide their employees with stock ownership, often at no
upfront cost to the employees. ESOP shares, however, are
part of employees' remuneration for work performed. Shares
are allocated to employees and may be held in an ESOP
trust until the employee retires or leaves the company. The
shares are then either bought back by the company for
redistribution or voided.

Flextime
Flextime is a flexible hours schedule that allows
workers to alter workday start and finish times.
flextime typically involves a "core" period of the day
during which employees are required to be at work
(e.g., between 11 a.m. and 3 p.m.), and a
"bandwidth" period within which all required hours
must be worked (e.g., between 5:30 a.m. and
7:30 p.m.)

Quality Circle
A quality circle or quality control circle is a group
of workers who do the same or similar work, who
meet regularly to identify, analyze and solve work-
related problems. Normally small in size, the group is
usually led by a supervisor or manager and presents
its solutions to management; where possible, workers
implement the solutions themselves in order to
improve the performance of the organization and
motivate employees.

Kaizen
• Kaizen, also known as continuous improvement, is a long-
term approach to work that systematically seeks to achieve
small, incremental changes in processes in order to improve
efficiency and quality.
• Good processes bring good results
• Go see for yourself to grasp the current situation
• Speak with data, manage by facts
• Take action to contain and correct root causes of problems
• Work as a team
• Kaizen is everybody’s business

Total Quality Management (TQM)
TQM describes a management approach to long–term
success through customer satisfaction. In a TQM effort, all
members of an organization participate in improving
processes, products, services, and the culture in which they
work. Total quality management (TQM) consists of
organization-wide efforts to install and make permanent a
climate in which an organization continuously improves its
ability to deliver high-quality products and services to
customers.

Six Sigma
Six Sigma (6σ) is a set of techniques and tools for process
improvement. It was introduced by engineer Bill Smith while
working at Motorola in 1986.[ Jack Welch made it central to
his business strategy at General Electric in 1995.
It seeks to improve the quality of the output of a process by
identifying and removing the causes of defects and
minimizing variability in manufacturing and business
processes. It uses a set of quality management methods,
mainly statistical methods, and creates a special
infrastructure of people within the organization who are
experts in these methods.

Human Capital Management

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