Human Resource

Management

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Human Resource Management

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TABLE OF CONTENTS

1. Concepts, Role and Functions of HRM .......................................................................................5

Introduction and Definitions ................................................................................................................................................ 5
Evolution of HRM ................................................................................................................................................................. 6
Models of Human Resource Management (HRM) ............................................................................................................... 6
Approach to HRD................................................................................................................................................................ 11
Modern Concept to HRM ................................................................................................................................................... 13
HRD Matrix ......................................................................................................................................................................... 13
Objectives of HRM ............................................................................................................................................................. 15
Functions of HRM ............................................................................................................................................................... 15
2. Strategic Human Resource Management (SHRM) ................................................................... 16
SHRM Process .................................................................................................................................................................... 17
SHRM Theories ................................................................................................................................................................... 17
Types of Strategic HRM Strategy ........................................................................................................................................ 18
5-P Model: Linking Strategic Business needs and Strategic HR.......................................................................................... 18
3. Human Resource Planning & Job Evaluation ........................................................................... 19
HRP Process ........................................................................................................................................................................ 19
HR Demand Forecasting ..................................................................................................................................................... 20
HR Outsourcing .................................................................................................................................................................. 21
Job Analysis ........................................................................................................................................................................ 22
Job Evaluation .................................................................................................................................................................... 24
Job Description ................................................................................................................................................................... 25
Job Specification................................................................................................................................................................. 26
Job Design .......................................................................................................................................................................... 26
4. Recruitment & Selection ......................................................................................................... 28
Sources of Manpower ........................................................................................................................................................ 29
Methods of Recruitment .................................................................................................................................................... 29
Process of Selection ........................................................................................................................................................... 30
Test Methods ..................................................................................................................................................................... 30
Reliability ............................................................................................................................................................................ 32
Validity ............................................................................................................................................................................... 32
Interview Methods ............................................................................................................................................................. 33
Statistical Approach to Selection ....................................................................................................................................... 34
International Recruitment and Placement ......................................................................................................................... 35
5. Induction ................................................................................................................................ 36
Stages of Socialization ........................................................................................................................................................ 36
Types of Induction .............................................................................................................................................................. 37
6. Mobility and Succession Planning ........................................................................................... 37
Separation........................................................................................................................................................................... 38
Exit Interview ..................................................................................................................................................................... 39
Succession Planning ........................................................................................................................................................... 39
7. Performance Appraisal ........................................................................................................... 40
Performance Appraisal Methods ....................................................................................................................................... 40
Management by Objectives ............................................................................................................................................... 43
Bias in Performance Appraisal ........................................................................................................................................... 43
8. Career System ........................................................................................................................ 45
Career Anchors ................................................................................................................................................................... 46
Career Path ........................................................................................................................................................................ 47
Career Choice Model .......................................................................................................................................................... 47

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Human Resource Management

Stages of Career Development .......................................................................................................................................... 48

Career Motivation .............................................................................................................................................................. 49
9. Compensation Management .................................................................................................. 49
Wage Structure in India ..................................................................................................................................................... 50
Compensation Plan Development...................................................................................................................................... 51
Compensation tools ........................................................................................................................................................... 52
Incentives and Rewards ..................................................................................................................................................... 52
International Compensation Management ........................................................................................................................ 57
10. Training & Development ..................................................................................................... 57
Identifying Training Needs ................................................................................................................................................. 57
Steps for Creating Training Programs ................................................................................................................................ 58
Training Design Theories .................................................................................................................................................... 59
Types of Training ................................................................................................................................................................ 60
Management Development Program ................................................................................................................................ 63
Training evaluation models ................................................................................................................................................ 63
Learning and Performance Wheel ..................................................................................................................................... 67
Other Important Terms related to Training ....................................................................................................................... 68
11. Evaluation of HR ................................................................................................................. 68
Approaches to HR Evaluation ............................................................................................................................................. 68
Other key concepts ............................................................................................................................................................ 69
12. Corporate Governance ........................................................................................................ 70
Theories of Corporate Governance ................................................................................................................................. 71
Nature of Corporation ...................................................................................................................................................... 72
Models of Corporate Governance .................................................................................................................................... 73
International Initiatives ................................................................................................................................................... 74
Indian Initiatives ............................................................................................................................................................... 75
Latest committee on Corporate Governance - Uday Kotak - 2017 ............................................................................... 76
Clause 49 ........................................................................................................................................................................... 76
Companies Act 2013 ......................................................................................................................................................... 77
13. Business Ethics .................................................................................................................... 79
Ethical Theories ................................................................................................................................................................ 80
External and Internal Environment ................................................................................................................................ 82
Approaches of Ethics ........................................................................................................................................................ 84
Ethical Decision Making ................................................................................................................................................... 85
14. Workers participation in Management ................................................................................ 86
Works Committees ............................................................................................................................................................. 87
Joint Management Councils ............................................................................................................................................... 88
15. Collective Bargaining .......................................................................................................... 91
Introduction to Collective Bargaining ................................................................................................................................ 92
Tripartite and Bipartite Bodies ........................................................................................................................................... 94
ILC and SLC ......................................................................................................................................................................... 94
Code of Discipline ............................................................................................................................................................... 95
Code of Conduct ................................................................................................................................................................. 96
Settlement Machinery under ID Act 1947 ......................................................................................................................... 96

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Human Resource Management

1. Concepts, Role and Functions of HRM

Introduction and Definitions
The Human Resource Management (HRM) is a process of bringing people and organizations together so that both
can achieve their goals. In short, it may be defined as the art of procuring, developing and maintaining competent
workforce to achieve the goals of an organization in an effective and efficient manner.

The term Human Resource Development (HRD) provides conceptual umbrella under which the field began to unify
using three-fold notion of Training, Education and Development. The HRD concept was first introduced by Leonard
Nadler in 1969 in US. He published his book "Developing Human Resources".

Thus, the HRD is a part of HRM. The HRD focuses on training and development only while HRM covers all aspects
of Human Resources at a firm.

Broadly, there are three fundamental concepts of HRM:

1. People working in an organization are regarded as a valuable resource, implying that there is a need to invest
time and effort in their development
2. They are human resources which mean that they have their own special characteristics and, therefore, cannot
be treated like material resources. The approach focuses on the need to humanise organisational life and
introduce human values in the organisation.
3. Human resources do not merely focus on employees as individuals, but also on other social realities, units and
processes in the organisation. These include the role or the job a person has in the organisation, the dyadic unit,
(consisting of the person and his superior), the various teams in which people work, inter-team processes, and
the entity of the total organisation.

Other Definitions of HRM

 According to Michael Armstrong, Human Resource Management is defined as a strategic and coherent approach
to the management of an organization’s most valued assets – the people working there, who individually and
collectively contribute to the achievement of its objectives. Michael Armstrong introduced the phrase “HRM is
regarded by some personnel managers as just a set of initials or old wine in a new bottle".
 In the words of Edwin B. Flippo, Human Resource Management is the planning, organization, directing and
controlling of the procurement, development, compensation, integration, maintenance and separation of human
resources to the end that individual, organizational and societal objectives are accomplished.
 According to National Institute of Personnel Management of India, Personnel management (or Human
Resource Management) is that part of management concerned with people at work and with their relationship
within the organization. It seeks to bring men and women who make up an enterprise, enabling each to make his/her
own best contribution to its success both as an individual and as a member of a working group.
 John Storey defined Human Resource Management as a distinctive approach to employment management, which
seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable
workforce, using an integrated array of cultural, structural and personal techniques.
 Patricia McLagan defined HRD as the integrated use of training and development, organization development and
career development to improve individual, group and organizational effectiveness.
 Leonard Nadler defined HRD as those learning experiences which are organized, for a specific time, and designed
to bring about the possibility of behavioral change.

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 In the words of Prof. T.V. Rao, HRD is a process by which the employees of an organisation are helped in a
continuous and planned way to
(i) Acquire or sharpen their capabilities required to perform various functions associated with their present or
expected future roles;
(ii) Develop their general capabilities as individual and discover and exploit their own inner potential for their
own and /or organisational development purposes;
(iii) Develop an organisational culture in which superior-subordinate relationship, team work and collaboration
among sub-units are strong and contribute to the professional well-being, motivation and pride of employees.
 According to M.M. Khan, Human Resource Development is the across of increasing knowledge, skills,
capabilities and positive work attitudes and value of all people working at all levels in a business undertaking."

Evolution of HRM
Human Resource Management has evolved considerably over the past century. The evolution of Human Resource
Management can be broadly divided into four schools of thought as given below:

1. Classical School (1880 to 1920s) – Traditional or classical management focuses on efficiency:

 Bureaucracy by Max Weber
 Scientific Management by Frederick Winslow Taylor
 Administrative Management by Henry Fayol’s (14 Principles)
2. Human Relations School (1920s to 1950s) – Focuses on Human aspects of organizations:
 Hawthorne Studies Professor Elton Mayo and Associates
 Acceptance Theory of Authority by Chester Barnard
3. Human Resources School (1950s to 1960s) – Emphasis on motivation and leadership techniques:
 Systems Theory
 Contingency Theory
4. Human Resource Management School (1980s to till date) -
 Human Resources Management was developed in the US in the 1980s. Employees were considered
“assets” and not “costs”.
 Human resource management evolved as a ‘competitive strategy’, of all modern business organizations.

Models of Human Resource Management (HRM)

The conceptual framework of HRM can be explained more clearly by describing the major HRM models:

1. The Fombrun, Tichy and Devanna Model

The early HRM model developed by Fombrun emphasizes the interrelatedness and the coherence of HRM activities.
Being the first model (dates back to 1984), this emphasizes just four functions and their interrelations. The four
functions are: Selection, Appraisal, Development and Rewards. These four constitute components of Human Resource
Management and are expected to contribute to organizational effectiveness. The Fombrun model is incomplete as it
focuses on only four functions of HRM and ignores all environmental and contingency factors that impact HR functions.

It is also called "Michigan model" and was propounded by Fombrun Tichy and Devanna (1984) at the Michigan
Business School. They also named this model a "Matching model of HRM".

Precisely, the matching aspect of this model demonstrates that the model is inclined towards the harder side of HRM.
This is because the matching model emphasizes more on “tight fit” between the HR strategy and the business strategy.
It demands that available human resources must be matched with jobs in the organization. Business strategy takes the

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central stage in this model, hence human resources are taken like any other resource which must be fully utilised
together with the other resources to achieve organizational objectives.

2. The Harvard Model

The Harvard Model was postulated by Beer et al (1984) at Harvard University. This model acknowledges the existence
of multiple stakeholders within the organization. These multiple stakeholders include shareholders various groups of
employees, government and the community at large. The recognition of the legitimacy of these multiple stakeholders
renders this model a neo-pluralist model.

The analytical framework of the Harvard model consists of six basic components namely situational factors,
stakeholder interests, HRM policy choices, HR outcomes, long-term consequences and a feedback loop via which the
output flows directly into the organization and to the stakeholders. This model focuses more on the human/soft side of
HRM. This is because this model emphasizes more on the fact that employees like any other shareholder are equally
important in influencing organizational outcomes. It is thus important to note that the Harvard model is premised on
the belief that it is the organization’s human resources that give competitive advantage through treating them as assets
and not costs.

3. The Guest Model

The Guest model was propounded by David Guest in 1987. This model is a fusion of aspects that resemble both a hard
and a soft approach of HRM.

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This model emphasizes on the assumption that HR manager has specific strategies to begin with, which demand certain
practices and when executed will result in outcomes. The model emphasizes the logical sequence of six components:
HR strategy, HR practices, HR outcomes, Behavioural outcomes, Performance results and financial consequences.

4. The Warwick Model

This model was developed by two researchers, Hendry and Pettigrew of University of Warwick (hence the name
Warwick model). Like other human resource management models, the Warwick proposition centers around five
elements:
 Outer context (macro environmental forces)
 Inner context (firm specific or micro environmental forces)
 Business strategy content
 HRM context
 HRM content
The strength of this model is that it identifies and classifies important environment influences on HRM. It takes
cognizance of business strategy and HR practices, the external and internal content, in which these activities take place
and process by which such changes take place including transactions between changes in both external content and
internal content.

5. The Storey's Model

Another model was given by John Storey, who identified 27 differences between Personnel Management and HRM.
These points are grouped into four categories: beliefs and assumptions, strategic aspects, line management and key
levers.

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A distinction was made by John Storey (1989) between the ‘Hard’ and ‘Soft’ versions of HRM.
The Hard version of HRM emphasizes that people are important resources through which organizations achieve
competitive advantage. These resources have to be acquired, developed and deployed in ways that will benefit the
organization. The focus is on the quantitative, calculative and business-strategic aspects of managing human resources
in as ‘rational’ a way as for any other economic factor. It is a philosophy that appeals to management who are striving
to increase competitive advantage and appreciate that, to do this they must invest in human resources as well as new
technology.

The Soft version of HRM traces its roots to the human-relations school; it emphasizes communication, motivation and
leadership. As described by Storey it involves ‘treating employee as valued assets, a source of competitive advantage
through their commitment, adaptability and high quality. Treat people as ends unto themselves rather than as means to
an end. The soft approach to HRM stresses the need to gain the commitment – the ‘hearts and minds’ – of employees
through involvement, communication and other methods of developing a high-commitment, high-trust organization.

6. The Ten C Model

Ten C model of HRM is regarded as an all-encompassing and a pragmatic HR model. Alan Price is the architect of this
model who presented it in his book titled “Human Resource Management in a Business Context”, published in 1997.
There are 10 essential principles (called 10 C’s of model):
a. Comprehensiveness: The HRM strategy of an organization must include all the aspects of people
management, typically starting from recruitment to post separation programmes.
b. Credibility: The HR practices must build trust between staff and top management and encourage
employees’ belief in HRM strategies.
c. Communication: The objectives of organization and that of HRM must be understood and accepted by all
employees. The operating culture in organization must encourage openness and be free from all barriers.
d. Cost effectiveness: The reward and promotion system must be fair.
e. Creativity: The competitive advantage of the company must stem from its unique HR strategies.
f. Coherence: HRM activities and initiatives must form a meaningful whole.
g. Competence: HRM strategy will be crafted in such a way that organization becomes competent to achieve
its objectives with the support of individual competencies.
h. Control: HRM policies and practices must ensure that performance of HR is consistent with business
objectives.
i. Change: The basic premise of HRM strategy must be that continuous improvement and development is
essential for survival.
j. Commitment: The last C Stresses upon that the employees are to be motivated to achieve organizational
goals.

7. Diagnostic Model of HRM

A sound HRM program can contribute to organizational end results, such as socially responsible and ethical behavior
and high-quality, competitive products and services. The diagnostic approach suggests that before you choose an HRM
program, you should examine the nature of the employees, the external and internal environmental influences on the
organization, and organizational factors. Various factors in the external environment, such as government regulations,
unionization of employees, and competitive pressure, also exert strong influences on the HRM function.
When you’re experiencing pain and must see a physician, you are typically asked a number of questions. Where do you
hurt? When did the pain start? Is the pain sharp or dull? The doctor then examines you and may also run tests. The
doctor is diagnosing the problem by examination and observation. After making a diagnosis, the physician prescribes
medicine or a course of action. In most cases, the patient will implement the prescription, then the doctor will evaluate
how well the prescription is working. Similarly, any HR problem requires the same steps – diagnosis, prescription,
implementation, and evaluation.

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8. Action Research Model

This Model was developed by Kurt Lewin in 1940. The Action research is the process of systematically collecting
research data about an ongoing system relating to some objective, goal, or need of that system; feeding these data back
into the system; taking actions by altering selected variables within the system based on the data and on hypothesis;
and evaluating the results of actions of actions by collecting more data. Thus it is continuous process in cycles. The
Action Research refers to searching of actions with an objective to help the organization achieve its goals.

Five types of Action Research exist:

1. Diagnostic action research: the researcher is acting as a change agent. He/she would intervene in the
existing situation and determine what the problem is. After the researcher diagnosed the problem, he/she would
recommend solutions to fix the problem. Diagnostic action research is not a widely used method, although it
is a feasible, effective and acceptable method for people who are involved in the change process.
2. Participatory action research: people who are undergoing the action are participating actively in the
change process. It is important that they are involved in the change process from the right beginning. The
participants will realise earlier that the change that is being made is of great importance, not only for the
company but also for their own ‘ego investment’. This type of action research provides examples for other
communities, that is why it is one of the most useful forms of action research in particular situations.
3. Empirical action research: was observed in day-today work, ideally the research would be conducted
among a succession of similar groups. The weakness of empirical action research is that the conclusions were
drawn from a single group or from several groups which were differing in numerous ways, without any test
controls. Despite this infirmity, empirical action research could lead to the gradual development of generally
valid principles.
4. Experimental action research: makes use of a controlled study that identifies the effectiveness of various
techniques in nearly identical social situations. This variety of action research was the one with the most
potential to claim scientific knowledge. It is the most difficult form of action research to carry out, but if the
research was carried out among favourable circumstances it could definitely test specific hypothesis.
5. Canonical action research: is a unique form of action research, repetitious, strict and collaborative.
Canonical action research involves a focus on both the organizational development and the generation of
knowledge. The three characteristics of CAR are: involvement of the cyclic process of interventions that are
conducted within the change process can be seen as the characteristic repetitious; the researcher can repeat the
cycles of activities so they make a good picture of the problem situation and at the same time the researcher
can move closer to a solution of this problem; the activities that are being planned to come to a solution of the
problem should be relevant to the problem at that specific moment; the researcher and the clients of the
organization work together in roles that are culturally appropriate given the particular circumstances of the
specific problem

Action Research is primarily “Organizational Development and Change” technique.

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Approach to HRD
There are many approaches to Human Resource Development:

1. Integrated HRD Approach by Pareek and Rao

In 1975, Larsen & Toubro appointed Pareek and Rao (Dr. T.V. Rao is also known as Father of Indian HRD) as two
consultants from the Indian Institute of Management, Ahmedabad to study the performance appraisal system and make
recommendations for improving it. They studied the system through interviews and recommended that Performance
Appraisal, Potential Appraisal, Feedback and Counseling, Career Development and Career Planning and Training
and Development get distinct attention as unique parts of an integrated system which we call the Human Resources
Development System. This system was proposed as a separate system with strong linkages with Personnel (Human
Resources) system.

Pareek and Rao also outlined a philosophy for a new HR system. They outlined 14 principles to be kept in mind in
designing the HRD System. Some of these principles include:
1. HRD systems should help the company to increase enabling capabilities.
2. HRD systems should help individuals to recognize their potential and help them to contribute their best
towards the various organizational roles.
3. HRD systems should help maximize individual autonomy through increased responsibility;
4. HRD systems should facilitate decentralization through delegation and shared responsibility;
5. HRD systems should facilitate participative decision making
6. HRD system should attempt to balance the current organizational culture with changing culture;
7. There should be a continuous review and renewal of the function.
In sum, the Integrated HRD systems approach of Pareek and Rao (1975) has the following elements:
(i) A separate and differentiated HRD department with full time HRD staff.
(ii) 6 HRD subsystems including Organizational Development,
(iii) Interlinkages between the various subsystems,
(iv) Designed with 14 principles in mind, and
(v) Linked to other subsystems of Human Resource Function.

After L&T accepted these recommendations in full and started implementing, the State Bank of India, the single largest
Indian Bank and its Associates have decided to use the Integrated HRD systems approach and decided to create new
HRD Department. Since then, a large number of organizations in India have established HRD Departments.

2. The Strategic HR Framework Approach

This framework formulated by Ulrich and Lake (1990) aims to leverage and/or align HR practices to build critical
organizational capabilities that enable an organization to achieve its goals. This framework offers specific tools and
paths to identify how a firm can leverage its HR practices. The three important elements in this framework are:
(i) Business strategy
(ii) organizational capabilities
(iii) HR practices
Ulrich also presented a framework for HR professions in terms of 4 key roles:
(i) Management of Strategic Human Resource
(ii) Management of Firm Infrastructure
(iii) Management of Employee Contribution
(iv) Management of Transformation and Change.

3. The Integrative Framework

The integrative framework offered by Yeung and Berman (1997) identifies three paths through which HR practices can
contribute to business performance:

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(1) by building organizational capabilities

(2) by improving employee satisfaction
(3) by shaping customer and shareholder satisfaction.
They argued that HR measures should be business driven rather than HR driven; impact driven rather than activity
driven; forward looking and innovative rather than backward looking; and instead of focusing on individual HR
practices should focus on the entire HR system, taking into account synergies existing among all HR practices.

4. Human Capital Appraisal Approach

This approach outlined by Friedman et al (1998) of Arthur Anderson consulting company is based on the belief that
there are five stages in the management of human capital: (a) clarification stage, (b) assessment stage, (c) design stage,
(d) implementation stage and (e) monitoring stage. There are five areas of human capital management: (a) Recruitment,
(b) retention and retirement; (c) Rewards and performance management; (d) career development, succession planning
and training; (e) organizational structure, and human capital enablers. A 5X5 matrix using these five stages and five
areas could be used to evaluate and manage the human capital well.

5. HRD Score Card Approach

An approach formulated by Rao (1999) envisages that HR interventions in order to make the right business impact
should be mature in terms of the HRD Systems, Competencies, Culture (including styles) and Business linkages.

6. The P-CMM Approach

Curtis and team (Curtis et. al 1995) developed this approach for software organizations. The People Capability Maturity
Model (P-CMM) aims at providing guidance on how to improve the ability of software organizations to attract, develop,
motivate, organize and retain the talent needed to steadily improve their software development capability. The P-CMM
is based on the assumptions that organizations establish and improve their people management practices progress
through the following five stages of maturity: initial, repeatable, defined, managed, and optimizing. Each of the maturity
levels comprises of several Key Process Areas (KPAs) that identify clusters of related workforce practices. When
performed collectively, the practices of a key process area achieve a set of goals considered important for enhancing
work force capability.

7. Human Capital Approach

In economic terms, Human Resource Development in the early years (1950s & 1960s) was equated with human capital
formation. Human capital consists of various activities. Schultz analyzed five areas relating to health, on-the-job
training, formal education, adult literacy programme and migration under Human Capital Approach.

8. Social Psychological Approach

David McClelland in his book “The Achieving Society”, published in 1961, examined the factors contributing to the
economic development of various countries in the early 20th Century and even in the ancient history. Based on his
analysis on the children stories and other popular literature of these countries, he concluded that the countries that have
advanced economically, showed evidence of achievement motivation (i.e., a concern to achieve something of
excellence, uniqueness or something different than anything before and to do better than before), in their language and
culture. His analysis suggests that the degree of challenges offered by the environment, child-rearing practices in the
family, interaction patterns of parents with their children, interacting factors associated with religion and social class
and core-religious and asocial values, all influence achievement motivation, which in turn influence economic
development.

9. Poverty Alleviation Approach

Another approach to human development is poverty alleviation, a key focus of the World Development Report of 1980.

10. Queen Bee Approach

In this approach, one particular individual utilizes all available resources for his own development.

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The issues are not always clear-cut. For example, in Heinz’s dilemma, the protection of life is more important
than breaking the law against stealing.
Stage 6: Universal Principles. People at this stage have developed their own set of moral guidelines which
may or may not fit the law. The principles apply to everyone.
E.g., human rights, justice, and equality. The person will be prepared to act to defend these principles even if
it means going against the rest of society in the process and having to pay the consequences of disapproval and
or imprisonment. Kohlberg doubted few people reached this stage.

Moral Development Theory of James Rest

James Rest's (1979, 1983, 1986, 1988) studies center directly on moral development in the context of formal education.
The four component model suggests various inner psychological processes, which together give way to observable
behavior.
1. Moral Sensitivity: The first component of the process starts with a recognition that a moral problem or opportunity
exists.
2. Moral Judgment: The second component of the model is moral judgment. It involves the individual making a
judgment concerning which course of action is morally right and which course of action is morally wrong.
3. Moral Focus (Moral Intention): The third component of the model is moral focus. It is also known as moral
intention, which involves the individual prioritizing choices in response to a given situation.
4. Moral Character: The final component of the model is moral character. This component involves executing and
implementing a morally-based course of action. During this stage, individuals carry out their intentions by keeping the
goals and outcomes of their chosen course of action in mind.

14. Workers participation in Management

Workers Participation in Management, WPM, may take various forms. In "Ascending Participation", workers may be
given an opportunity to influence managerial decisions at higher levels through their elected representatives to works
councils or the Board of the enterprise (integrative participation). In "Descending Participation", they may be given
more power to plan and make decisions about their own works (delegation and job-enrichment). They may participate
through collective bargaining (disjunctive participation). They may also participate informally, for example, when a
manager adopts a participative style of supervision or workers apply unofficial restrictive practices.

Major programs of Workers’ Participation in Management in India are:

(1) Works committee (1947)
(2) Joint management councils (1958)
(3) Board level participation (1970)
(4) Shop council and joint council under old 20- point programme (1975)
(5) Unit and joint councils in commercial and service organizations in the public sector (1977).
(6) Scheme of Employees' participation in Public Sector Undertakings (1983)

The Workers’ Participation in Management, WPM can be dated as far back as 1920 when Mahatma Gandhi suggested
participation of workers in management on the ground that workers contributed labour and brains while shareholders
contributed money to the enterprise and that both should, therefore, share in its property. It was at his instance that, in
1920, the workers and the employers in Ahmedabad Textile Industry agreed to settle their disputes by Joint Workers’
Councils.

First major step in the direction of workers’ participation in management in India was the enactment of the Industrial
Disputes Act, 1947 with the dual purpose of prevention and settlement of industrial disputes.

The Industrial Policy Resolution, 1948 advocated WPM by suggesting that labour should be in all matters concerning
industrial production.

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Article 43 A of the Constitution of India has provided for WPM in these words:
The State shall take steps, by suitable legislation, or in any other way, to secure the participa-tion of workers in
management of undertakings, establishments or other organisations engaged in an industry.

The First Five-Year Plan and the successive plans emphasised the need for workers’ participation in management. The
Second Five Year Plan, accordingly, provides for Joint Managanent Councils, consisting of management, technicians
and workers in large establishments in organised industries.

The Sixth Plan was also in favour of workers participation in management. It stated that workers participation in
management should be an integral part of the industrial relations system. Workers Participation should transform the
attitude of employers and workers and establish a co-operative culture and a stable industrial base. It is necessary to
provide training facilities to workers and managerial personnel so as to motivate them in making the scheme of workers
participation a success.

Works Committees
The Royal Commission on Labour (1929-31) said: “We believe that if these committees (works committees) are given
proper encouragement and the past errors are avoided they can play a useful role in the Indian industrial system”. These
recommendations could, however, be translated into law only in 1947.

As per Section 3 of the Industrial Disputes Act, 1947, Works Committee shall be constituted:
 In case, 100 or more workmen are employed or have been employed on any day in the preceding 12 months,
the appropriate Government may require the employer to constitute a "Works Committee".
 The number of representatives of workmen shall not be less than the number of representatives of the employer.
 It shall be the duty of the Works Committee to promote measures for securing and preserving amity and good
relations between the employer and workmen

The Indian Labour Conference in its 17th session held in 1959 discussed the functions of the works committee and
approved a list of functions which could be assigned to the works committees and a list of functions which should not
be assigned to the works committees. It will be useful to look at the illustrative lists drawn up by the Indian Labour
Conference: -

a) Items which works committees, may normally deal with:

i) Conditions of work, such as ventilation, lighting, temperature and sanitation, including latrines and urinals.
ii) Amenities such as drinking water, canteens, dining rooms, crèches, rest rooms, medical and health services.
iii) Safety, and accident prevention, occupational diseases and protective equipment.
iv) Adjustment of festival and national holidays.
v) Administration of welfare and funds.
vi) Educational and recreational activities such as, libraries, reading rooms, cinema shows, sports, games,
picnic parties, community welfare and celebrations.
vii) Promotion of thrift and savings.
viii) Implementation and review of decisions reached at meetings of works committees.

b) Items which the works committees should NOT normally deal with:
i) Wages and allowances.
ii) Bonus and profit sharing schemes
iii) Rationalisation and matters connected with the fixation of workloads.
iv) Matters connected with the fixation of the standard labour force.
v) Programmes of planning and development.
vi) Matters connected with retrenchment and lay-off.
vii) Victimisation for trade union activities.

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viii) Provident fund, gratuity schemes and other retiring benefits.

ix) Quantum of leave, and national and festival holidays.
x) Incentive schemes.
xi) Housing and transport service.

Joint Management Councils

The Second Industrial Policy Resolution adopted by the Government in 1956 declared that in a socialist democracy,
labour was a partner in the common task of development, and should be asked to participate in it with enthusiasm. A
tripartite committee (named “Study Group on Workers Participation in Management”) that visited the UK, Sweden,
France, Belgium, West Germany and Yugoslavia came to an agreement on the constitution, functions and
administration of Joint Management Councils, JMCs. The committee recommended the setting up of JMCs in all
undertakings.

The above recommendations were accepted by 15th Indian Labour Conference, ILC held in July 1957. The Conference
appointed a 12 member sub-committee to look into further details of the scheme. The recommendations made by the
sub-committee were discussed in a “Seminar on Labour-Management Co-operation” held in New Delhi on January 31
and February 1, 1958. It drew up a “Draft Model Agreement” between labour and management for the establishment
of the Joint Management Councils (JMCs) which would have the following three sets of functions:
 First, to fulfill its functions as an advisory body.
 Second, to receive information on certain matters.
 Third, to fulfill administrative responsibilities.

Thus, the Joint Management Councils (JMCs) were set up in 1958.

The National Commission on Labour (1966-69), which reviewed the working of the JMCs, observed that there was not
much support for the institutions of the JMCs. The Commission held the view that “when the system of recognition of
Trade Unions becomes an accepted practice both management and unions would themselves gravitate towards greater
cooperation and set up JMCs”.

A committee set up by the Government on the suggestion of the Assam Government made further recommendations in
relations to the JMCs in public sector undertakings.

The beginning of these joint committees can be traced back to 1920 when the Government of India constituted joint
committees in Govt. printing presses. A similar joint committee was formed by TATA in the TATA Iron & Steel Works,
Jamshedpur. A joint committee was constituted in the Carnatik Mill in Madras in 1922.

Workers’ Participation in Public Sector Banks

While nationalising banks it was announced that a scheme would be formulated to provide for workers’ participation
in management. Accordingly, the Nationalised Banks (management and miscellaneous) Scheme 1970 was notified by
the Government. The scheme provided for the appointment of a Workman Director and a Director representing the
Officers’ cadre of each bank on the Board of each nationalised banks. The union of workmen and the association of
officers which were identified as the representative union/ association after verification of membership were entitled to
nominate one office bearer each on the Board of Directors of the Bank.

Following the recommendations of the Administrative Reforms Commission, the Government of India accepted the
inclusion of the representatives of workers on the Board of Directors of Public Sector Undertakings. Following this,
the Nationalised Banks (Management and Miscellaneous Provi-sions) Scheme 1970 also provided for the appointment
of worker director to their Board. One director was from among employees (who are workmen) and another from
among officers for tenure of 3 years.

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Thus up to July 1975, there had been three forms of workers’ participation in management intro­duced in India: Works
Committees, Joint Management Councils and Workers-Directors (public sector) on Boards of Directors.

Amendment of the Constitution

In 1976, the Constitution was amended (Forty-second 42nd Amendment) by the introduction of Article 43A. The
purpose of this amendment was to raise productivity, promote industrial peace and create a sense of involvement
amongst the workers. The inserted article that formed part of the Directive Principles of State Policy provided that “The
state shall take steps by suitable legislation or in any other way to secure participation of workers in the management
of undertakings, establishments or other organisations engaged in the industry”. It has thus become incumbent on the
state to work towards the effective participation of workers in the management of industrial establishments.

Shop and Joint Councils-1975

Under the Government of India’s 20-Point Economic Programmes, a new scheme for WPM was introduced in 1975,
after the emergency was declared in June 1975.

In the year 1975, the Government formulated a scheme of workers’ participation in industry at Shop Council and Joint
Councils. The scheme was to be implemented in the first instance in enterprises in the manufacturing and mining
industries, whether these were in the public, private or cooperative sector or departmentally run units irrespective of
whether joint consultative machineries had been set up and were functioning in them. The scheme was applicable to
such units as were employing 500 or more workers.

Shop Council: The scheme provided for setting up of shop councils at the shop/departmental levels and joint councils
at the enterprise levels. Each council was to consist of an equal number of representatives of employers and workers.
The employers’ representatives were required to be nominated by the management from among the persons employed
in the unit concerned and all representatives of workers were required to be from amongst the workers engaged in the
shop or department concerned. The employer was expected to set up the council in consultation with the recognised
union or various registered Trade Unions or workers as that would be appropriate in the local conditions.

The employer was to determine the number of members in each council, but he had to take the decision in consultation
with the unions. Decisions were to be based on consensus, and not by a process of voting, and a decision once taken
was required to be implemented within one month. The shop councils were required to meet as frequently as necessary,
and at least once in a month. Each Shop Council was supposed to work for 2 years.

Joint Councils: Similarly Joint Councils were required to be set up for each plant covered under the scheme. The chief
executive of the unit was to be the chairman. The vice chairman was to be nominated by the worker members of the
council. The joint council was to meet at least once in a quarter.

The functions included not merely discussing production and productivity, achieving efficiency, eliminating wastage,
arresting absenteeism, ensuring safety measures etc. but also the physical condition of workings, and welfare measures.
The Councils were also expected to ensure a two way flow of communication between the management and the workers.
The Council could also make creative suggestions for improving the skills of workers, and providing adequate facilities
for training.

Another Scheme of WPM -1977

Soon afterwards, in 1977, the Government of India introduced another scheme for participation. This scheme of
workers’ participation in management was meant for commercial and service organisations having large scale public
dealings such as hospitals, post and telegraphs, railway stations/booking offices, government provident fund and
pensions organisation, road transportation, electricity boards, insurance, institutions like FCI, Central Warehousing
Corporations, State Warehousing Corporations, Public Distribution System including Fair Price Shops, Super Bazar,
all financial institutions, educational institutions, air and inland water transport, ports and docks, handlooms and
handicrafts export corporations, municipal services, milk distribution services, the irrigation system, tourist
organisations, public hotels and restaurants, and establishments for public amusements, etc.

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The scheme was to cover organisations employing 100 or more persons in these activities. However, the
organisations/services desiring to apply this scheme to units with lesser employment were free to do so. Under this
scheme, unit councils and the joint councils were to be set up. The objective was to promote confidence between the
workers and the management, which it was believed would in turn promote the active involvement of the workers and
secure greater satisfaction and better customer service through improved work processes. The functions of the unit
councils and joint councils under this scheme were almost similar to those laid down under the 1975 scheme, with the
exception that in the new scheme emphasis was also laid on discipline, elimination of pilferage and all forms of
corruption.

While both the schemes i.e. of 1975 and 1977 initially generated considerable enthusiasm with large number of
organisations setting up such forums, there was sharp decline in the number of units/enterprises having shop and joint
councils after 1979. Apart from the on going controversy about the criteria for determining representation at the
participative forum, the exclusion of grievance redressal, the restrictions imposed on consideration of work related
issues, the inadequate sharing of information, the lack of a supportive participative culture, the indifference of the
management, the involvement of second rung union officialdom contributed to the ineffective functioning of many
forums and their eventual decline.

Sachar Committee
In June 1977, the Janata Party Government set up a High-powered Expert Committee on Companies and MRTP Acts
under the chairmanship of Rajender Sachar. The Committee was asked to consider the provisions of the Companies
Act and MRTP Act and to suggest measures by which workers' participation in the share capital and management of
companies can be brought about. The report was submitted in 1978. The main recommendations of the Committee
were:
(1) The workers' participation should be limited to companies which employ 1,000 or more employees
(excluding causal or badli workers).
(2) Such participation at the Board level should be introduced if at least 51 per cent of the workers voted in a
secret vallot in favour of such participation.
(3) Before fixing the proportion of Worker Director on the Board, more detailed consideration should be given
to the issue by the Central Government.
(4) The Worker Director must be from amongst workmen employed by the Company and not an outsider.

Verma Committee
The Janata Government was keen about the effective implementation of the scheme of labour participation in
management. It, therefore, set up another Committee in September 1977, under the Chairmanship of Rabindra Verma,
the then Union Minister for Labour, to recommend an outline of a comprehensive scheme for workers' participation
and to recommend the manner in which the concept of trusteeship in industry and participation of workers in equity
can be given a practical shape in a scheme of workers' participation. Main Recommendations of the Committee:
(1) Adoption of three-tier system of participation, viz., at the shop, plant and corporate or board level.
(2) Legislation on workers' participation covering all undertakings employing 400 or more workers.
(3) There should be provision for extending the scheme to units employing at least 100 workers.
(4) The representatives at the participative forums should be elected through secret ballot.
(5) The issue of equity should be optional.
(6) Supervisor and middle management should have representation in the participative forums.
(7) At the shop level, the participative arrangement should cover common production facilities, storage
facilities, materials economy, errors in documents, operational problems, wastage control, safety problems,
quality improvement, monthly production programmes, technological innovation in the shop, etc.
(8) At the plant level, the participation should be enlarged to cover areas such as operations, economies,
finance, personnel, welfare measures and environment.
(9) At the corporate levels, issues relating to finance, wage structure, fringe and other benefits, housing,
medical facilities, overall recruitment and personnel policies, etc. should be covered.

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(10) An agency should be set up at the Central and State levels for monitoring the implementation of the
scheme of workers' participation.
Workers’ Participation in Management Scheme
The Government accepted the recommendations made by the 21-Member Committee on Workers’ Participation in
Management and Equity. Based on a review of the working of the various schemes of workers’ participation in
management and experiences so gamed the Government formulated and notified a new comprehensive scheme on a
voluntary basis for ‘Workers’ Participation in Management’ on 30th December, 1983. The salient features of the
scheme were:
1. The scheme will be non-legislative.
2. It will apply to all central public sector enterprises, expect those specifically exempted.
3. It envisaged constitution of bipartite forums at shop and plant levels.
4. The mode of representation of workers representatives was to be determined by consulta-tion with the
concerned unions.
5. A wide range of work related issues were brought within the ambit of the councils.

However, a host of constraints such as multiplicity of unions, inter-union rivalry, lack of proper knowledge on the part
of workers about the scheme, etc., served as stumbling blocks in the successful working of the scheme.

Participation of Workers in Management Bill 1990

So far, all the schemes pertaining to the workers’ participation in management have been non--statutory which failed
to provide meaningful participation to workers in management. To remedy the situation, the Government, therefore,
introduced a Bill in the Parliament (Rajya Sabha) on 25th May 1990 to provide for:
1. Meaningful three-tier participation of workers in management in all industrial establish-ments.
2. Formulation of scheme specifying criteria regarding nomination of representatives from workers.
3. The principle of secret ballot for determining the representation of workers on the shop floor and
establishment level councils.
4. Rules for monitoring the scheme.
5. Deletion of Section 3 of the Industrial Dispute Act, 1947.
6. Rules for appointment of Inspector.
7. Imprisonment up to 2 years or a fine up to Rs. 20,000 or both for contravention of the provisions.
The Parliamentary Standing Committee in its meeting held in April 2005 said that the Participation of Workers in
Management Bill, 1990 needs to be pursued.

Workers Participation in management in TISCO

After several years of study and discussions with the recognised unions in 1997, Tata Iron and Steel Company at
Jamshedpur set up a three-tier machinery for consultation.
I. Joint Departmental Councils
II. Joint Works Councils
III. Joint Consultative Council of Management

Grievance Redressal Committee

The Industrial Disputes Act, 1947 has been amended in 2010, and now there is new provision of composition of the
“Grievance Redressal Committee”.

15. Collective Bargaining

An Industrial Dispute means any dispute or difference:
 between employers and employers
 between employers and workmen
 between workmen and workmen
which is connected with the terms and conditions of employment of any person.

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