hrm in insurance

HRM IN INSURANCE SECTOR

HRM IN INSURANCE INTRODUCTION Competitive advantage of a company can be generated from human resources (HR) and company performance is influenced by a set of effective HRM practices. In this study, we intended to assess the HR practices in insurance companies. Every organization is composed of people and utilizing their services, developing their skills, motivating them to enhance their levels of performance and ensuring that they remain committed to the organization are essential for the accomplishment of organizational objectives. This is true for all types of organizations - government, business, education, health, recreation or social action. Organizations that can do this will be both effective as well as efficient. Inefficient or ineffective organizations face the danger of stagnating or going out of business. The emphasis on proper and effective human resource management has increased in the recent times. It has come to be identified as an important factor in the successful management of an organization. With the growing importance of knowledge workers to organizations and the rising expectations of employees, it is essential to have a good human resource management system in place. Human Resource Management (HRM) consists essentially of four functions – acquiring, developing, motivating and retaining human resources. The acquisition function starts with planning for the number and categories of employees required, and end with staffing. The development function has three dimensions – employee training, management development, and career development. The motivation function includes identifying the individual motivational needs of employee’s and finding ways to motivate them. The retention function is concerned with providing a work environment conducive to the employees and nurturing them to make them feel committed and attached to the organization. Human resources are the most valuable and unique assets of an organization. The successful management of an organization's human resources is an exciting, dynamic and challenging task, especially at a time when the world has become a global village and economies are in a state of flux. The

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HRM IN INSURANCE SECTOR scarcity of talented resources and the growing expectations of the modern day worker have further increased the complexity of the human resource function. Even though specific human resource functions/activities are the responsibility of the human resource department, the actual management of human resources is the responsibility of all the managers in an organization. It is therefore necessary for all managers to understand and give due importance to the different human resource policies and activities in the organization. Human Resource Management outlines the importance of HRM and its different functions in an organization. It examines the various HR processes that are concerned with attracting, managing, motivating and developing employees for the benefit of the organization. The insurance sector employers are indulging into aggressive recruitments. With around 15million new policies being sold every year, the insurance sector is picking up fast in India. Due to its robust growth there is a need of skilled professionals in the sector. The employers are looking forward to hire fresher’s at junior levels as they are quite flexible and ready to work as part time employees as well. Apart from hiring actuaries and underwriters, the industry is focusing on hiring agents. These agents represent the front end of the customer chain and are responsible for bringing in new business. Under present market forces and strict competition, the insurance companies are forced to be competitive. Contemporary companies must seek ways to become more efficient, productive, flexible and innovative, under constant pressure to improve results. The traditional ways of gaining competitive advantage have to be supplemented with organizational capability i. e. the firm’s ability to manage people. Organizational capability relates to hiring and retaining competent employees and developing competencies through effective human resource management practices. Indeed, developing a talented workforce is essential to sustainable competitive advantage. High performance work practices provide a number of important sources of enhanced organizational performance.

Human Resource Management 2


“Human resource management (HRM) is planning personnel needs; recruiting, selecting, training, and developing capable employees; placing them in productive work environments; and rewarding their performance. “Thus, human resource management refers to a set of programmes, functions and activities designed and carried out to maximize both, employee as well as organizational effectiveness. It is concerned with the people dimensions in the management. Since every organization is made up of people, acquiring their services developing their skills motivating them to higher levels of performance and ensuring that they continue to maintain their commitment to the organization are essential to achieving organizational objectives. This is true, regardless of the type of organization -government, business, education, health, recreation or social actions. Human resource is one of the natural resources of any country's economy. It is the wealth of the country. In the context of banking, human resource is of greater importance. The deployment of human resource through proper and efficient selection, training and development, is called Human Resource Management. The success of any organization largely depends on efficient human resource management, apart from operations, marketing and sales, the HR department manages all the efficient people working in operations and marketing divisions in any organization. Thus, HRM refers to a set of programmes, functions and activities designed and carried out in order to maximize both employees as well as organizational effectiveness.

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HRM IN INSURANCE SECTOR An organization is driven by human capital and the quality and effectiveness of the organization i s d e t e r mi n e d by t h e q u a l i t y o f t h e p e o p l e t h a t a r e e mp l o y e d . T h e r e s o u r c e s o f m e n mo n e y material and machine are collected and coordinated through people. Without people organization can not exist. Success for most organizations depends on finding the employees with the skills to successfully perform the tasks required to attain the company’s strategic goals. Management decisions and processes for dealing with employees are critical to ensure that the organization gets and keeps the right staff. HRM may be defined as a set of policies practices and programs designed to maximize both personal and organizational goals and the process of binding people and organizations together so that the objectives of the each are achieved. Some definitions of HRM are as follows • “HRM is the management function that is concerned with getting, training,

motivating and keeping competent employees.” • “HRM is a most advanced approach in the field of resource mgmt. talks about

optimal utilization of human capital. The approach is integrative and supportive.”

Features/Characteristics/Nature of HRM •

HRM involves management functions like planning, organizing, directing and controlling.

•

It involves procurement, development, maintenance of human resource

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It helps to achieve individual, organizational and social objectives •

HRM is a mighty disciplinary subject. It includes the study of management psychology communication, economics and sociology.

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It involves team spirit and team work.

Evolution of HRM

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HRM IN INSURANCE SECTOR The evolution of HRM can be traced back to Kautilya Artha Shastra where he recommends that government must take active interest in public and private enterprise. He says that government must provide a proper procedure for regulating employee and employee relation. The international institute of personnel management and national institute of labour management were set up to look into problems faced by workers to provide solutions to them. The Second World War created awareness regarding workers rights and 1940’s to 1960’s saw the introduction of new technology to help workers. The 1960’s extended the scope of human resource beyond welfare. Now it was a combination of welfare, industrial relation, administration together it was called personnel management. With the second 5 year plan, heavy industries started and professional management became important. In the 70’s the focus was on efficiency of labour wile in the 80’s the focus was on new technology, making it necessary for new rules and regulations. In the 90’s the emphasis was on human values and development of people and with liberalization and changing type of working people became more and more important there by leading to HRM which is an advancement of personnel management.

Objectives of HRM 1. Societal objective: To be socially responsible to the needs and challenges of

society while minimizing the negative impact of such demands upon the organization. The failure of organizations to use their resources for society's benefit may result in restrictions. For example, societies may pass laws that limit human resource decisions. 2. Organizational objective: To recognize that HRM exists to contribute to

organizational effectiveness. HRM is not an end in itself; it is only a means to assist the organization with its primary objectives. Simply stated, the department exists to serve the rest of the organization. 3. Functional objective: To maintain the department's contribution at a level

appropriate to the organization’s needs. Resources are wasted when HRM is

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HRM IN INSURANCE SECTOR more or less sophisticated than the organization demands. A department's level of service must be appropriate for the organization it serves. 4. Personal objective: To assist employees in achieving their personal goals, at

least insofar as these goals enhance the individual's contribution to the organization. Personal objectives of employees must be met if workers are to be maintained, retained and motivated. Otherwise, employee performance and satisfaction may decline, and employees may leave the organization.

Scope/Functions of HRM in Insurance 1. Human Resources Planning: Human resource planning or HRP refers to a

process by which the company to identify the number of jobs vacant, whether the company has excess staff or shortage of staff and to deal with this excess or shortage. 2. Job Analysis Design: Another important area of HRM is job analysis. Job

analysis gives a detailed explanation about each and every job in the company. Based on this job analysis the company prepares advertisements. 3. Recruitment and Selection: Based on information collected from job analysis

the company prepares advertisements and publishes them in the news papers. This is recruitment. A number of applications are received after the advertisement is published, interviews are conducted and the right employee is selected thus recruitment and selection are yet another important area of HRM. 4. Orientation and Induction: Once the employees have been selected an

induction or orientation program is conducted. This is another important area of HRM. The employees are informed about the background of the company, explain about the organizational culture and values and work ethics and introduce to the other employees. 5. Training and Development: Every employee goes under training program

which helps him to put up a better performance on the job. Training program is also conducted for existing staff that have a lot of experience. This is called refresher

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HRM IN INSURANCE SECTOR training. Training and development is one area were the company spends a huge amount. 6. Performance Appraisal: Once the employee has put in around 1 year of

service, performance appraisal is conducted that is the HR department checks the performance of the employee. Based on these appraisal future promotions, incentives, increments in salary are decided. 7.

Compensation Planning and Remuneration: There are various rules

regarding compensation and other benefits. It is the job of the HR department to look into remuneration and compensation planning. 8.

Motivation, Welfare, Health and Safety: Motivation becomes important to

sustain the number of employees in the company. It is the job of the HR department to look into the different methods of motivation. Apart from this certain health and safety regulations have to be followed for the benefits of the employees. This is also handled by the HR department. 9.

Industrial Relations: Another important area of HRM is maintaining co-

ordinal relations with the union members. This will help the organization to prevent strikes lockouts and ensure smooth working in the company.

Human Resource Development Human Resource Development is the part of human resource management that specifically deals with training and development of the employees in the organization. Human resource development includes training a person after he or she is first hired, providing opportunities to learn new skills, distributing resources that are beneficial for theemployee's tasks, and any other developmental activities. Human Resource Development (HRD) is the framework for helping employees develops their personal and organizational skills, knowledge, and abilities. Human Resource Development includes such opportunities as employee training, employee career development, performance management and

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HRM IN INSURANCE SECTOR development, coaching, mentoring, succession planning, key

employee

identification, tuitionassistance,and organization development.

Definitions of HRD: According to Leonard Nadler, "Human resource development is a series of organized activities, conducted within a specialized time and designed to produce behaviouralchanges." Difference between HRD and HRM •

The human resource management is mainly maintenance oriented whereas human resource development is development oriented.

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Organization structure in case of human resources management is independent whereas human resource development creates a structure, which is inter-dependent and inter-related.

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Human resource management mainly aims to improve the efficiency of the employees whereas aims at the development of the employees as well as organization as a whole.

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Responsibility of human resource development is given to the personnel/human resource management department and specifically to personnel manager whereas responsibility of HRD is given to all managers at various levels of the organization.

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HRM motivates the employees by giving them monetary incentives or rewards whereas human resource development stresses on motivating people by satisfying higher-order needs.

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CHAPTER 2 JOB ANALYSIS, JOB DESIGN AND JOB EVALUATION Job Analysis • Process of job analysis • Methods • Importance/uses of job analysis Job Design •

Factors affecting job design

•

Techniques of job design

Job Evaluation •

Job Evaluation Methods

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. Job Analysis is a process where judgments are made about data collected on a job.

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HRM IN INSURANCE SECTOR The Job; not the person: An important concept of Job Analysis is that the analysis is conducted of the Job, not the person.

Process of job analysis 1. Planning and organizing of Programme: The first step is to plan and organize

the job analysis programme. A person is designated as in-charge of programme and required authority and responsibility is assigned to him. Schedule of the programme and budget estimation is prepared. 2. Obtaining current information: Current job design information is collected

and study of job description, job specification, process used, manuals and organization flow charts is done by the analyst. 3. Conduct needs research: The analyst determines that which manager,

department requires the job analysis. Purpose of the job analysis is determined, extent to which job analysis is to be done is decided and how the information will be used concluded. 4. Establishing priorities: Identification and priorities of the jobs to be analyzed

should be established by the human resource department executives with help of various executives of the related departments 5. Collecting Job Data: The next step is to collect the data related to the job

selected for the analysis as they are being performed in the organization at present. 6. Preparation of Job Description: Using job information obtained from job

analysis job descriptions is being prepared. It states the full information of job including working conditions nature of job, processes used machines and materials used. 7. Developing

Job Specification: Job specifications are developed using

information given in job description. Job specification is statement regarding human qualities that are required for a particular job. Such information is used to select the person matching the requirements of the job.

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Methods There are different methods used by organization to collect information and conduct the job analysis. These methods are1. Personal observation: In this method the observer actually observes the

concerned worker. He makes a list of all the duties performed by the worker and the qualities required to perform those duties based on the information collected, job analysis is prepared. 2. Interview method: In this method an interview of the employee is conducted.

A group of experts conduct the interview. They ask questions about the job, skilled levels, and difficulty levels. They question and cross question and collect information and based on this information job analysis is prepared. 3. Critical incident method: In this method the employee is asked to write one or

more critical incident that has taken place on the job. The incident will give an idea about the problem, how it was handled, qualities required and difficulty levels etc. critical incident method gives an idea about the job and its importance. 4. Questioner method: In this method a questioner is provided to the employee

and they are asked to answer the questions in it. The questions may be multiple choice questions or open ended questions. The questions decide how exactly the job analysis will be done. The method is effective because people would think twice before putting anything in writing. 5. Log records/Daily Diary: Companies can ask employees to maintain log

records or daily diary and job analysis can be done on the basis of information collected from the record. A log record is a book in which employee records /writes all the activities performed by him on the job. The records are extensive as well as exhausted in nature and provide a fair idea about the duties and responsibilities in any job. In this method worker actually does the work himself and idea of the skill required, the difficulty level of the job, the efforts required can be known easily.

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HRM IN INSURANCE SECTOR 6. HRD records: Records of every employee are maintained by HR department.

The record contain details about educational qualification, name of the job, number of years of experience, duties handled, any mistakes committed in the past and actions taken, number of promotions received, area of work, core competency area, etc. based on these records job analysis can be done.

Importance/uses of job analysis 1. Organizational structure and design: Job analysis helps in preparing the

organization chart and the organizational structure. Classification of the jobs relation of each job with one another and various positions and hierarchy of the positions is determined. 2. Man power planning: Job analysis provides the qualitative aspect of the jobs in

the organization. It determines the demands of job in terms of duties to be performed, qualification of person skills required in the employee. It is a tool which is used for matching job with men. 3. Recruitment and selection: Job analysis helps to hire future human resource. It

helps to recruit and select the right kind of people for the jobs available in the organisation. It provides information necessary to select the right person by its immediate products i.e. job description and job specification. 4. Performance

appraisal and training/development: Based on the job

requirements identification of the training needs of the persons can be done easily. Training is given in those areas which will help to improve the performance on the job. Training programme can be designed according to the need and can be made effective. 5. Job evaluation: Job evaluation refers to studying in detail the job performance

by all individual. The difficulty levels, skills required and on that basis the salary is fixed. Information regarding qualities required, skilled levels, difficulty levels are obtained from job analysis and worth (price) of the job is determined.

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HRM IN INSURANCE SECTOR 6. Promotions and transfer: When we give a promotion to an employee we need

to promote him on the basis of the skill and talent required for the future job. Similarly when we transfer an employee to another branch the job must be very similar to what he has done before. To take these decisions we collect information from job analysis. 7. Career path planning / Employee counseling: Many companies have not

taken up career planning for their employees. This is done to prevent the employee from leaving the company. Employees are informed about the limitations of jobs in terms of development and are guided to take required steps for their future development. Job analysis provides such information regarding the areas in which a person requires modification for better career options. 8. Health and safety: Job analysis provides the risk factor related to particular job

and thus action required for the safety of the employees can be taken. Unsafe operations can be eliminated or can be replaced by safe one or the safety equipments can be installed. 9. Performance Appraisal: By comparing actual performance of the employees

to the standard established organization can decide the personnel activities like promotion increments incentives or corrective actions to enhance job performance. These standards are established using information provided by job analysis.

JOB DESIGN Job design refers to the way that a set of tasks, or an entire job, is organized. Job design helps to determine: what tasks are done, how the tasks are done, how many tasks are done, and in what order the tasks are done. It takes into account all factors

Factors affecting job design 1. Organizational factors: Organizational factors to refer to factors inside the organization which affect job design they are the following:

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HRM IN INSURANCE SECTOR a) Task characteristics: Task characteristics refer to features of the job that is depending on the type of job and the duties involved in it the organization will decide, how the job design must be done. Incase the company is not in a position to appoint many people; a single job may have many duties and vice versa. b) The process or flow of work in organization: There is a certain order in which jobs are performed in the company. Incase the company wishes it could combine similar job and give it to one person this can be done if all the jobs come one after the other in a sequence. c) Ergonomics: Ergonomics refers to matching the job with physical ability and characteristics of the individual and in providing an office environment which will help the person to complete the jobs faster and in a comfortable manner. d) Work practices: Every organization has different work practices. Although the job may be the same the method of doing the job differs from company to company. This is called work practice and it affects job design. 2. Environmental factors: Environmental factors which affect job design are as follows: a) Employee availability and ability: Certain countries face the problem of lack of skilled labour. They are not able to get employees with specific education levels for jobs and have to depend on other countries due to this job design gets affected. b) Social and cultural expectations: The social and cultural conditions of every country is different so when an MNC appoints an Indian it has to take into account like festivals, auspicious time, inauspicious time, etc. to suit the Indian conditions. This applies to every country and therefore job design will change accordingly. 3. Behavioral factors: Design is affected by behavioral factors also.

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HRM IN INSURANCE SECTOR a) Feedback: Job design is normally prepared on the basis of job analysis and job analysis requires employee feedback based on this employee feedback all other activities take place. Many employees are however not interested in providing a true feedback because of fear and insecurity. This in turn affects job deign. b) Autonomy: Every worker desires a certain level of freedom to his job effectively. This is called autonomy. Thus when we prepare a job design we must see to it that certain amount of autonomy is provided to the worker so that he carries his job effectively. c) Variety: When the same job is repeated again and again it leads to burden and monotony. This leads to lack of interest and carelessness on the job. Therefore, while preparing job design certain amount of variety must be provided to keep the person interested in the job.

Techniques of job design 1. Simplification of Job: In job simplification jobs are broken in to very small

parts

as

in assembly

line operations

and

work

can

be

done

by

same individual repeatedly and it will increase productivity and proficiency of individual. However it produces boredom and monotony in worked. 2. Job Rotation: Job rotation is the systematic and planned rotation of individuals

in pre-determined jobs (other than their own) so they can gain additional knowledge or skills. It is done quite a bit for developing managers (because they need to be familiar with operations overall) and also used with others who want to advance to a new role or become more knowledgeable in their current job role. 3. Job Enlargement: Job enlargement expands job horizontally. It increases job

scope; that is, it increases the number of different operations required in a job

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HRM IN INSURANCE SECTOR and the frequency with which the job cycle is repeated. By increasing the number of tasks an individual performs, job enlargement, increases the job scope, or job diversity. Instead of only sorting the incoming mail by department, for instance, a mail sorter’s job could be enlarged to include physically delivering the mail to the various departments or running outgoing letters through the postage meter. 4. Job Enrichment: Job enrichment is an approach to job design. The focus is to

increase the depth of the job (by the amount of discretion and responsibility the job holderhas). It is different from job enlargement In job enrichment, additional tasks are not the focus for the goal, but an increase in tasks could be a result of giving the job holder more authority, discretion, and responsibility for decision making in their current role. It is the most effectively motivating tool used by the organizations which enhances the decision making skills of the managers and helps in their overall development.

JOB EVALUATION: Job evaluation is the process of systematically determining a relative internal value of a job in an organization. In all cases the idea is to evaluate the job, not the person doing it. Job evaluation is the process of determining the worth of one job in relation to that of the other jobs in a company so that a fair and equitable wage and salary system can be established.

Job Evaluation Methods 1. Ranking Method: Perhaps the simplest method of job evaluation is the ranking method. According to this method, jobs are arranged from highest to lowest, in order of their value or merit to the organization. Jobs also can be arranged according to the relative difficulty in performing them. The jobs are examined as a whole rather than on the basis of 16

HRM IN INSURANCE SECTOR important factors in the job; and the job at the top of the list has the highest value and obviously the job at the bottom of the list will have the lowest value. 2. Classification Method: According to this method, a predetermined number of job groups or job classes are established and jobs are assigned to these classifications. This method places groups of jobs into job classes or job grades. Separate classes may include office, clerical, managerial, personnel, etc. The job classification method is less subjective when compared to the earlier ranking method. The system is very easy to understand and acceptable to almost all employees without hesitation. One strong point in favor of the method is that it takes into account all the factors that a job comprises. This system can be effectively used for a variety of jobs. 3. Factor Comparison Method: A more systematic and scientific method of job evaluation is the factor comparison method. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors. These factors include mental effort, physical effort, skill needed, supervisory responsibility, working conditions and other relevant factors. Pay will be assigned in this method by comparing the weights of the factors required for each job, i.e., the present wages paid for key jobs may be divided among the factors weighed by importance (the most important factor, for instance, mental effort, receives the highest weight). In other words, wages are assigned to the job in comparison to its ranking on each job factor. 4. Point method This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are assigned to each factor after prioritizing each factor in the order of importance. The points are summed up to determine the wage rate for the job. Jobs with similar point totals are placed in similar pay grades.

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CHAPTER 3 HUMAN RESOURCE PLANNING, RECRUITMENT, SELECTION AND INDUCTION Human Resource Planning •

Objectives of Human Resource Planning

•

Process of Human Resource Planning

• Limitations of Human Resource Planning RECRUITMENT • Objectives of Recruitment •

SOURCES OF RECRUITMENT

SELECTION • Process of Selection • Types of Selection Test INDUCTION

Human Resource Planning Human resource planning has traditionally been used by organizations to ensure that the right person is in the right job at the right time. Human resource

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HRM IN INSURANCE SECTOR planning can be defined as the process by which management determines how the organization should move from its current manpower position to its desired position. Through planning, management strives to have the right number and the right kinds of people, at the right places, at the right time, doing things which result in both the organization and the individual receiving maximum long-run benefits.

Objectives of Human Resource Planning The important objectives of manpower planning in an organization are 1. To recruit and retain the human resources of required quantity and quality. 2. To foresee the employee turnover and make the arrangements for minimizing turnover and filling up of consequent vacancies 3. To meet the needs of the program of expansion, diversification etc. 4. To foresee the impact of technology on work, existing employees and future human resources requirements. 5. To improve the standards skill, knowledge, ability, disciplines etc. 6. To assess the surplus or shortage of human resources and take measures accordingly. 7. To maintain congenial industrial relations by maintaining optimum level and structure of human resources; 8. To minimize imbalances caused due to non-availability of human resources of right kind, right number in right time and right place; 9. To make the best use of its human resources; and 10. To estimate the cost of human resources.

Process of Human Resource Planning 1. Analysing the Corporate Level Strategies: Human Resource Planning should start with analysing corporate level strategies which include expansion, diversification, mergers, acquisitions, reduction in operations, technology to be used, method of 19

HRM IN INSURANCE SECTOR production etc. Therefore Human Resource Planning should begin with analysing the corporate plans of the organisation before setting out on fulfilling its tasks. 2. Demand forecasting: Forecasting the overall human resource requirement in accordance with the organisational plans is one of the key aspects of demand forecasting. Forecasting of quality of human resources like skills, knowledge, values and capabilities needed in addition to quantity of human resources is done through the following methods: -a. Executive or Managerial Judgment, b. Statistical Techniques, c. Work Study method, d. Delphi Technique 3. Analysing Human Resource Supply: Every organisation has two sources of supply of Human Resources: Internal & External. Internally, human resources can be obtained for certain posts through promotions and transfers. In order to judge the internal supply of human resources in future human resource inventory or human resource audit is necessary. Human resource inventory helps in determining and evaluating the quantity of internal human resources available. Once the future internal supply is estimated, supply of external human resources is analysed. 4. Estimating manpower gaps: Manpower gaps can be identified by comparing demand and supply forecasts. Such comparison will reveal either deficit or surplus of Human Resources in the future. Deficit suggests the number of persons to be recruited from outside, whereas surplus implies redundant employees to be re-deployed or terminated. Employees estimated to be deficient can be trained while employees with higher, better skills may be given more enriched jobs. 5. Action Planning: Once the manpower gaps are identified, plans are prepared to bridge these gaps. Plans to meet the surplus manpower may be redeployment in other departments and retrenchment. People may be persuaded to quit voluntarily through a golden handshake. Deficit can be met through recruitment, selection, transfer and promotion. In view of shortage of certain skilled employees, the organisation has to take care not only of recruitment but also retention of existing employees. Hence, the organisation has to plan for retaining of existing employees.

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HRM IN INSURANCE SECTOR 6. Modify the Organisational plans: If future supply of human resources form all the external sources is estimated to be inadequate or less than the requirement, the manpower planner has to suggest to the management regarding the alterations or modifications in the organisational plans. 7. Controlling and Review: After the action plans are implemented, human resource structure and the processes should be controlled and reviewed with a view to keep them in accordance with action plans.

Limitations of Human Resource Planning 1. The future is uncertain: The future in any country is uncertain i.e. there are political, cultural, technological changes taking place every day. This effects the employment situation. Accordingly the company may have to appoint or remove people. Therefore HRP can only be a guiding factor. We cannot rely too much on it and do every action according to it. 2. Conservative attitude of top management: Much top management adopts a conservative attitude and is not ready to make changes. 3. Problem of surplus staff: HRP gives a clear out solution for excess staff i.e. Termination, layoff, VRS, However when certain employees are removed from company it mostly affects the psyche of the existing employee, and they start feeling insecure, stressed out and do not believe in the company. 4. Time consuming activity: HRP collects information from all departments, regarding demand and supply of personnel. This information is collected in detail and each and every job is considered. Therefore the activity takes up a lot of time. 5. Expensive process: The solution provided by process of HRP incurs expense. E.g. VRS, overtime, etc. company has to spend a lot of money in carrying out the activity. Hence we can say the process is expensive.

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RECRUITMENT Recruitment is defined as, “a process to discover the s o u r c e s o f m a n p o w e r t o m e e t t h e r e q u i r e me n t s o f t h e s t a f f i n g s c h e d u l e a n d t o e mp l o y e f f e c t i v e me a s u r e s f o r a t t r a c t i n g t h a t manpower in adequate numbers to facilitate effective selection of an efficient workforce.” Recruitment is the process of hiring talented employees for certain jobs by motivating them to apply for those jobs which are available in organization.

Objectives of Recruitment 1. It reviews the list of objectives of the company and tries to achieve them by promoting the company in the minds of public. 2. It forecasts how many people will be required in the company. 3. It enables the company to advertise itself and attract talented people. 4. It provides different opportunities to procure human resource.

SOURCES OF RECRUITMENT: •

INTERNAL SOURCES:

Internal sources of recruitment refer to obtaining people for job from inside the company. There are different methods of internal recruitment:

1. Promotion: Companies can give promotion to existing employees. This method of recruitment saves a lot of time, money and efforts because the company does not have to train the existing employee. Since the employee has already worked with the company. He is familiar with the working culture and working style. It is a method of encouraging efficient workers. 2. Departmental examination: This method is used by government departments to select employees for higher level posts. The advertisement is put up on the notice

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HRM IN INSURANCE SECTOR board of the department. People who are interested must send their application to the HR department and appear for the exam. Successful candidates are given the higher level job. The method ensures proper selection and impartiality. 3. Transfer: Many companies adopt transfer as a method of recruitment. The idea is to select talented personnel from other branches of the company and transfer them to branches where there is shortage of people. 4. Retirement: Many companies call back personnel who have already retired from the organization. This is a temporary measure. The method is beneficial because it gives a sense of pride to the retired when he is called back and helps the organization to reduce recruitment selection and training cost. 5. Internal advertisement: In this method vacancies in a particular branch are advertised in the notice board. People who are interested are asked to apply for the job. The method helps in obtaining people who are ready to shift to another branch of the same company and it is also beneficial to people who want to shift to another branch. 6. Employee recommendation: In this method employees are asked to recommend people for jobs. Since the employee is aware of the working conditions inside the company he will suggest people who can adjust to the situation. The company is benefited because it will obtain. •

EXTERNAL SOURCES

External sources of recruitment refer to methods of recruitment to obtain people from outside the company. These methods are: 1. Management consultant: Management consultant helps the company by providing them with managerial personnel, when the company is on the look out for entry level management trainees and middle level managers. They generally approach management consultants.

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HRM IN INSURANCE SECTOR 2. Employment agencies: Companies may give a contract to employment agencies that search, interview and obtain the required number of people. The method can be used to obtain lower level and middle level staff. 3. Campus recruitment: When companies are in search of fresh graduates or new talent they opt for campus recruitment. Companies approach colleges, management, technical institutes, make a presentation about the company and the job and invite applications. Interested candidates who have applied are made to go through a series of selection test and interview before final selection. 4. News paper advertisement: This is one of the oldest and most popular methods of recruitment. Advertisements for the job are given in leading news papers; the details of the job and salary are also mentioned. Candidates are given a contact address where their applications must be sent and are asked to send their applications within a specified time limit. The method has maximum reach and most preferred among all other methods of recruitment. 5. Internet advertisement: With increasing importance to internet, companies and candidates have started using the internet as medium of advertisement and search for jobs. There are various job sites like naukri.com and monster.com etc. candidates can also post their profiles on these sites. This method is growing in popularity. 6. Walk in interview: Another method of recruitment which is gaining importance is the walk in interview method. An advertisement about the location and time of walk in interview is given in the news paper. Candidates require to directly appearing for the interview and have to bring a copy of their C.V. with them. This method is very popular among B.P.O and call centers.

SELECTION Selection is the process of picking individuals who have relevant qualifications to fill jobs in an organization. The basic purpose is to choose

24

HRM IN INSURANCE SECTOR the individual who can most successfully perform the job from the pool of qualified candidates. The size of the labour market, the image of the company, the place of posting, the nature of job, the compensation package and a host of other factors influence the manner of aspirants a r e l i k e l y t o r e s p o n d t o t h e r e c r u i t i n g e f f o r t s o f t h e c o mp a n y . T h r o u g h t h e pr o c e s s o f recruitment the company tries to locate prospective employees and encourages them to apply for vacancies at various levels. Recruiting, thus, provides a pool of applicants for selection.

Process of Selection 1. Job analysis: The very first step in the selection procedure is the job analysis. The HR department prepares the job description and specification for the jobs which are vacant. This gives details for the jobs which are vacant. This gives details about the name of the job, qualification, qualities required and work conditions etc. 2. Advertisement: Based on the information collected in step 1, the HR department prepares an advertisement and publishes it in a leading news papers. The advertisement conveys details about the last date for application, the address to which the application must be sent etc. 3. Application blank/form: Application blank is the application form to be filled by the candidate when he applies for a job in the company. The application blank collects information consisting of the following four parts: 1. Personal details, 2. Educational details, 3. Work experience, 4. Family background 4. Written test: The applications which have been received are screened by the HR department and those applications which are incomplete are rejected. The other candidates are called for the written test. Arrangement for the written test is looked after the HR department i.e. question papers, answer papers, examination centers and hall tickets etc.

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HRM IN INSURANCE SECTOR 5. Interview: Candidates who have successfully cleared the test are called for an interview. The entire responsibility for conducting the interview lies with the HR department i.e. they look after the panel of interviewers, refreshments, informing candidates etc. 6. Medical examination: The candidates who have successfully cleared the interview are asked to take a medical exam. This medical exam may be conducted by the organization itself (army). The organization may have a tie up with the hospital or the candidate may be asked to get a certificate from his family doctor. 7. Initial job offer: Candidates who successfully clear the medical exam are given an initial job offer by the company stating the details regarding salary, terms of employment, employment bond if any etc. The candidate is given some time to think over the offer and to accept or reject. 8. Acceptance/ rejection: Candidates who are happy with the offer send their acceptance within a specified time limit to show that they are ready to work with the company. 9. Letter of appointment/final job offer: Candidates who send their acceptance are given the letter of appointment. The letter will state the name of the job. The salary and other benefits, number of medical leaves and casual leaves, details of employment bond if any etc. It will also state the date on which the employee is required to start duty in the company. 10. Induction: On the date of joining the employee is introduced to the company and other employees through am elaborate induction program.

Types of Selection Test

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HRM IN INSURANCE SECTOR Different selection test are adopted by different organization depending upon their requirements. These tests are specialized test which have been scientifically tested and hence they are also known as scientific test. 1. Aptitude test: Aptitude tests are test which assess the potential and ability of a candidate. It enables to find out whether the candidate is suitable for the job. The job may be managerial technical or clerical. The different types of aptitude test are the following: a) Mental ability/mental intelligence test: This test is used to measure the over all intelligence and intellectual ability of the candidate to deal with problems. It judges the decision making abilities. b) Mechanical aptitude test: This test deals with the ability of the candidate to do mechanical work. It is used to judge and measure the specialized knowledge and problem solving ability. It is used for technical and maintenance staff. c) Psycho motor test: This test judges the motor skills the hand and eye co-ordination and evaluates the ability to do jobs lie packing, quality testing, quality inspection etc. 2. Intelligence test: This test measures the numerical skills and reasoning abilities of the candidates. Such abilities become important in decision making. The test consists of logical reasoning ability, data interpretation, comprehension skills and basic language skills. 3. Personality test: In this test the emotional ability or the emotional quotient is tested. This test judges the ability to work in a group, inter personal skills, ability to understand and handle conflicts and judge motivation levels. This test is becoming very popular now days. 4. Performance test: This test judges and evaluates the acquired knowledge and experience of the knowledge and experience of the individual and his speed and

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HRM IN INSURANCE SECTOR accuracy in performing a job. It is used to test performance of typist, data entry operators etc.

INDUCTION It involves familiarizing the new employees with company, the work environment and existing employees so that the new people feel at home. 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. Induction is designed to achieve following objectives: 1) To give new comer necessary information. 2) To build new employee confidence in the organization. 3) It helps in reducing labor turnover and absenteeism. 4) It reduces confusion and develops healthy relations in the organization. 5) To ensure that the new comer do not form false impression and negative attitude towards the organization. 6) To develop among the new comer a sense of belonging and loyalty to the organization. 7) To help the new comer to overcome his shyness and overcome his shyness nervousness in meeting new people in a new environment. The advantages of formal induction are: 1) Induction helps to build up a two-way channel of communication between management and workers. 2) Proper induction facilitates informal relation and team work among employee. 3) Effective induction helps to integrate the new employee into the organization and to develop a sense of belonging. 4) Induction helps to develop good relation.

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HRM IN INSURANCE SECTOR 5) A formal induction programme proves that the company is taking interest in getting him off to good start. 6) Proper induction reduces employee grievances, absenteeism and labor turnover. 7) Induction is helpful in supplying information concerning the organization, the job and employee welfare facilities.

CHAPTER 4 TRAINING AND DEVELOPMENT • Definition of Training and Development Program

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HRM IN INSURANCE SECTOR • Objectives/Purpose/Goals of Training and Development •

Training Process

•

Techniques of Training and Development

• Evaluation of Training Program

TRAINING AND DEVELOPMENT Definition of Training and Development Program Training is the process of planned programs and procedures undertaken for the improvement of employee's performance in terms of his attitude, skills, knowledge and behavior. These training and development programs can significantly improve the overall performance of organization. Training is normally viewed as a short process. It is applied to technical staff, lower, middle, senior level management. When applied to lower and middle management staff it is called as training and for senior level it is called managerial development program/executive development program/development program. Training and development managers and specialists create, procure, and conduct training and development programs for employees.

Objectives/Purpose/Goals of Training and Development

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HRM IN INSURANCE SECTOR 1. Improving quality of workforce: Training and development programs can help in improving the quality of work produced by the workforce of organization. Mostly, training is given in a specific area like finance, marketing or HR, which helps in improving the quality of work in that particular area. 2. Enhance employee growth: By attending these training and development programs, employees are able master the work of their jobs and that's how they develop and grow themselves in a professional way. 3. Prevents obsolescence: These programs help employees to keep themselves up to date with the new trends in latest technology, which reduces the chances of termination of the job. 4. Assisting new comer: These programs help new employees to adjust themselves in a new working environment, culture and technology. They feel themselves as regular employees of that organization. 5. Bridging the gap between planning and implementation: It helps organizations to easily achieve their targets and goals what they actually planned for. Employees know their job better and they deliver the quality performance according to needs of top management. That's why organizations can easily implement their plans. 6. Health and safety measures: Training and development program clearly identifies and teaches employees about the different risk involved in their job, the different problems that can arise and how to prevent such problems. This helps to improve the health and safety measures in the company.

Training Process 1. Determining training needs of employee: In the very 1st step of training procedure, the HR department, identifies the number of people required training, specific area in which they need training, the age group of employee, the level in 31

HRM IN INSURANCE SECTOR organization etc. in some cases the employee may be totally new to the organization. Here the general introduction training is required. Some employees may have problems in specific areas; here the training must be specific. This entire information is collected by HR department. 2. Selecting target group: Based on information collected in step 1 the HR department divides employee into groups based on the following:i. The area of training, ii. Level in the organization, iii. The intensity of training 3. Preparing trainers: Once the employees have been divided into groups, the HR department arranges for trainers. Trainers can be in house trainers or specialized trainers from outside. The trainers are given details by HR department, like number of people in group, their age, their level in organization, the result desired at the end of training, the area of training, the number of days of training, the training budget, facilities available etc. 4. Preparing training packages: Based on the information provided by trainers, he prepares entire training schedule i.e. number of days, number of sessions each day, topics to be handled each day, depth of which the subject should be covered, the methodology for each session, the test to be given for each session, handout/printed material to be given in each session. 5. Presentation: On the first day of training program the trainer introduces himself and specifies the need and objective of the program and then actually stars the program. The performance of each employee is tracked by the trained and necessary feedback is provided. 6. Performance: At the end of training program the participants reports back to their office or branches. They prepare report on the entire training program and what they have learned. They the start using whatever they have learned during their training.

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HRM IN INSURANCE SECTOR Their progress and performance is constantly tracked and suitable incentives are given if the participant is able to use whatever he has learned in training. 7. Follow up: At the end of training program the participants reports back to their office or branches. They prepare report on the entire training program and what they have learned. They the start using whatever they have learned during their training. Their progress and performance is constantly tracked and suitable incentives are given if the participant is able to use whatever he has learned in training.

Techniques of Training and Development On-the-job training and development techniques •

Job rotation means moving management trainees from department to broaden their understanding of all part of the business and to test their abilities. A manager may spend several months in each department. The person may just bean observer in each department but more commonly gets fully involved in its operations.

•

Coaching/understudy approach: Here the person workers directly with the senior manager or with the person he or she is to replace; the latter is responsible for the executive of certain responsibilities, giving the trainee a chance to learn the job.

•

Action learning programmers give managers and others released time to work full time on projects, analysis and solving problems in departments other than their own trainees meet periodically in four or five person project groups to discuss their findings. Several trainees may work together as a project group or compare notes and discuss each other’s projects.

Off the job training and development techniques: •

Case Study method: Case study method presents a trainee with a written description of an organizational problem. The person then analyzes the case,

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HRM IN INSURANCE SECTOR diagnoses the problem and presents his or her findings and solutions in discussion with other trainees. •

Management Games: With management games trainees are dividend in to give or six persons group, each of which competes with the others in a stimulated marketplace. Management games can be good development tools. People learn best by getting involved, and the games can be useful for gaining such involvement. They help trainee develop their problem solving skills, as well as to focus attention on planning rather than just putting out fires. The group also usually elects their own officers and organize themselves; they can thus develop leadership skills and faster cooperation and team work.

•

Roll Playing: The aim of role playing is to create a realistic situation and then have the trainees assume the role of specific persons in that situation. When combined with the general instruction and other roles for the exercise, role playing can trigger spirited discussions among the role player trainees. The aim is to develop trainee’s skills in areas like leadership and delegation.

Evaluation of Training Program Criteria used for the evaluation of training programs1. Reaction: Reaction refers to attitude of employee about the training, whether the employee considers training to be positive or negative one. If reaction is positive then people have accepted the program and changes will be possible. 2. Learning: Another method of judging effectiveness is to identify levels of learning i.e. how much the people have learnt during the training. This can be found out by trainers mark sheet, the report submitted by the employee, and actual performance. 3. Behavior: The HR department needs to understand behavior of the employees, to understand the effectiveness of training. The behavioral change can be seen in how the

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HRM IN INSURANCE SECTOR person interacts with juniors, peer groups and seniors. They mark change in behavior and inform the HR department of the success of training program. 4. Result: Results provided by employee in monetary terms also determines effectiveness of training program i.e. employee success in handling the project, the group performance before and after training etc.

CHAPTER 5 PERFORMANCE APPRAISAL • Definition • Process of Performance Appraisal • Methods of Performance Appraisal

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PERFORMANCE APPRAISAL Definition Performance appraisal is defined by Wayne Cascio as “the systematic description of employee’s job relevant, strength, weakness. Performance appraisal may be conducted once in every 6 months or once in a year. The basic idea of the appraisal is to evaluate the performance of the employee, giving him a feed back. Identify areas where improvement is required so that training can be provided. Give incentives and bonus to encourage employees etc.

Process of Performance Appraisal 1. Setting performance standards: In this very first step in performance appraisal the HR department decides the standards of performance i.e. they decide what exactly is expected from the employee for each and every job. Sometimes certain marking scheme may be adopted eg. A score 90/100 = excellent performance, a score of 80/100 = good. And so on. 2. Communication standard set to the employee: Standards of performance appraisal decided in 1st step are now conveyed to the employee so that the employee will know what is expected from him and will be able to improve his performance.

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HRM IN INSURANCE SECTOR 3. Measuring performance: The performance of the employee is now measure by the HR department, different methods can be used to measure performance i.e. traditional and modern method. The method used depends upon the company’s convenience. 4. Comparing performance with standard: The performance of the employee is now judged against the standard. To understand the score achieved by him. Accordingly we come to know which category of performance the employee falls into i.e. excellent, very good, good, satisfactory etc. 5. Discussing result: The results obtained by the employee after performance appraisal are informed or conveyed to him by the HR department. A feedback is given to the employee asking him to change certain aspects of his performance and improve them. 6. Collective action: The employee is given a chance or opportunity to improve himself in the areas specified by the HR department. The HR department constantly receives or keeps a check on the employee’s performance and notes down improvements in performance. 7. Implementation and review: The performance appraisal policy is to be implemented on a regular basis. A review must be done from time to time to check whether any change in policy is required. Necessary changes are made from time to time.

Methods of Performance Appraisal •

Graphic rating scale method: - The graphic rating scale method is the simplest and most popular technique for appraising performance. A graphic rating scale lists traits (such as quality and reliability) and a range of performance values (from unsatisfactory to outstanding) for each trait. Subordinates are rated by circling of checking the score that best describes his or her performance for each trait. Then the total of assigned value is calculated.

37

HRM IN INSURANCE SECTOR •

Alternate ranking method: -This method involves ranking employees from best to worst on a particular trait, choosing highest, then lowest until all are ranked. Since it is easier to distinguish between the worst and best employees and alternate ranking is quite popular. First, list all subordinates to be rated. Then indicate the employee who is the highest on the characteristic being measured and also the one who is lowest. The process continues till all the employees are ranked on similar fashion.

•

Paired comparison method: -Paired comparison method helps make the ranting method more precise. For every trait (quality of work, quality etc), Pairs are made and every subordinate is compared with every other subordinate.

•

Forced distribution method: -Forced distribution method is similar to grading on a curve. With this method, manager place predetermined percentage or rates in to performance categories. Forced distribution means tow things for employee: Not everyone can get an A; and ones performance is always rated relative to ones peers. One practical, one practical, if low-tech, way to do this is to write each Employee’s name on a separate index card. Then for each trait managers place the employee’s card in the appropriate performance category.

•

Critical Incident Method: -Critical incident method involves keeping a record of uncommonly good or undesirable examples of an employee’s work related behavior and reviewing it with the employee at predetermined time.

•

Narrative Forms: -The final written appraisal is often in narrative form. A person’s supervisor is asked (i) to rate the employees performance for each performance factor or skill (ii) to write down examples and (iii) an important plan. This aids the employee to understand where his or her performance was good or bad and how to improve that performance.

•

Behaviorally Anchored Rating Scales: - is an appraisal method that aims at combining the benefits of narrative critical incidents and quantified ratings by anchoring a quantified scale with specific narrative example of good and poor performance.

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Assessment centers: Assessment centers (AC) are places where the employee’s are assessed on certain qualities talents and skills which they possess. This method is used for selection as well as for appraisal. The people who attend assessment centers are given management games, psychological test, puzzles, questioners about different management related situations etc. based on their performance in these test an games appraisal is done.

•

Management by objective: This method was given by Petter Druckard in 1974. It was intended to be a method of group decision making. It can be use for performance appraisal also. In this method all members of the of the department starting from the lowest level employee to the highest level employee together discus, fix target goals to be achieved, plan for achieving these goals and work together to achieve them. The seniors in the department get an opportunity to observe their junior- group efforts, communication skills, knowledge levels, interest levels etc. based on this appraisal is done.

•

360* appraisal: In this method of appraisal and all round approach is adopted. Feedback about the employee is taken from the employee himself, his superiors, his juniors, his colleagues, customers he deals with, financial institutions and other people he deals with etc. Based on all these observations an appraisal is made and feedback is given. This is one of the most popular methods.

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CHAPTER 7 COMPENSATION MANAGEMENT- WAGES, INCENTIVES, FRINGE BENEFITS, EMPLOYEE WELFARE •

Wages and salary administration Factors Affecting Wages Salary

1. •

INCENTIVES, REWARDS, REMUNERATION AND PUNISHMENTS

•

Employee benefits

•

Health, Safety and Welfare health

1.

Health

2.

Safety

3.

Welfare

40


COMPENSATION It refers to fair and equitable remuneration to employees for their contribution to the attainment of organizational objectives. Compensation is all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. An effective set of choices about compensation systems plays a major role in determining firm performance. It is paid in form of wages, salaries, and employee benefits such as paid vacations, insurance, maternity leave, free travel facility, retirement benefits etc. monetary payments are a direct form of compensating employees & have a great impact in motivating employees. The system of compensation should be designed in such a way that it achieves following objectives: (1) Capable employees are attracted towards organization. (2) Employees are motivated for better performance. 3) Employees do not leave employer frequently.

A) Wages and salary administration Base compensation includes monetary benefits to employees in form of wages or salaries. The term ’wage’ is used to denote remuneration to workers doing manual or physical work. Thus wages are given to compensate the unskilled workers for their services rendered to organization Wages may be based on hourly, daily, weekly or even monthly basis The term ‘salary’ means compensation to office employees, foremen, managers & professional& technical staff. It is based on weekly, monthly &yearly basis. Thus time period for which salaries are paid is generally higher than in case of wage payments. Wages may be based on number of units produced (i.e. piece wage system) or time spent on job. But salary is always based on time spent on job.

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Factors Affecting Wages Salary 1) Demand and supply: -Wage rates of workers depends upon demand and supply force in labour market. If the labour is in short supply, the workers will offer the services only if they are paid well. On the other hand, if the supply is more then workers available might get ready work at cheaper rates. 2) Bargaining Power: -Where labour unions are strong enough to force the hand of employers, the wages will be determined at a higher level in comparison to other units where unions are weak. 3) Cost of living: -Wages of workers also depends upon the cost of living of the worker so as to ensure him a decent living wage. Cost of living varies under deflationary and inflationary pressures. Where labour unions are strong and employer do not show enough awareness, here wage are adjusted according to cost of living index numbers. 4) Condition of product market: -Degree of competitions prevailing in the market for the product of the industry will also influence the wage level. For e.g. if there is perfect competition in the market the wage level may be at par with the value of net additions made by the workers to the total output, but may not reach this level in case of imperfect competition in the market. 5) Comparative Wages: -Wages paid by the other firms for the same work also influence the wage levels. Wage rates must also be in consistent with the wages paid by the other firms in the same industry so as to increases the job satisfaction among the workers. 6) Ability to Pay:-Wage rates are influenced by the paying ability of industry or firms to its workers. Those firms which are earning huge profits may afford to pay high wages and can provide more facilities to its workers in comparison to the firms earning comparatively low profits. (7)Productivity of labour: -Higher productivity will automatically fetch more profit to the firm, where in turn workers will be paid high wages in comparison to other firms with low productivity.

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HRM IN INSURANCE SECTOR (8)Job Requirements: -If a job requires higher skill, greater responsibility and risk, the worker placed on that job will naturally get higher wages in comparison to other jobs which do not require the same degree of skill, responsibility or risk. (9)Govt. Policy: -Since the bargaining power of the workers is not enough to ensure fair wages in all industries, the Govt. has to interfere in regulating wage rate to guarantee minimum wage rates in order to cover the essentials of a decent living. (10)Goodwill of the company: -A few employers want to establish themselves as good employer in the society and fix higher wages for their workers. It attracts qualified employees. In addition there are other important factors which affect the individual differences in wage rates.. B) INCENTIVES , REWARDS, REMUNERATION AND PUNISHMENTS HR department should make efforts to provide appropriate incentives, rewards and increase remuneration to employees. Otherwise, dissatisfaction may creep into all levels of the bank, resulting in" inefficiency, perfunctory attitude, and poor service standards. These will ultimately affect the functioning of the organization. Therefore, the HR department has to formulate policies with utmost care taking into account all these facets. Radical changes are required in the performance appraisal system to avoid nepotism. HR policies with regard to manpower and career planning, and placement policies have to he revamped. A level of professionalism with the help of technology and scientific management has to be brought in by the HR departments. Clear policies regarding performance rewards, incentives and increase in remuneration have to be outlined and implemented. With regard to the accountability for nonperformance and for the mistakes, the HR department's intervention is a must for establishing the facts of each case. Proper judgment "with impartial attitude helps develop satisfaction among the staff members. Before punishing for mistakes and non-performance, a certain kind of enquiry is required by the H R d e p a r t m e n t . I n t h e pr e s e n t s c e n a r i o , p ar t i c u l a r l y i n t h e n e w p r i v a t e s e c t o r i n s u r a n c e companies, dismissals are taking place

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HRM IN INSURANCE SECTOR arbitrarily without proper enquiry for accountability. This w i l l i mp a r t t h e efficiency of

the existing

staff

and

lower

dy n a mi s m

in their

p e r f o r m a n c e , ultimately leading to reduced productivity due to fear and insecurity of losing the job. It is the first and foremost duty of the HR department to formulate appropriate policies with regards to p u n i s h m e n t s . A set of guidelines and procedures has to be formulated and f o l l o w e d f o r punishments to staff in case of any indiscipline.

C) Employee benefits Also called benefits in kind; also called fringe benefits, perquisites, or perks are various non-wage compensations provided to employees in addition to their normal wages or salaries. Some of these benefits are: housing (employer-provided or employer-paid), group insurance(health, dental, life etc.),disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation(paid and nonpaid),social security, profit sharing, funding of education, and other specialized benefits. The purpose of the benefits is to increase the economic security of employees.

Perquisites: The term perks is often used colloquially to refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are take-home vehicles, hotel stays, free refreshments, leisure activities on work time (golf , etc.),stationery, allowances for lunch, and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling. They may also be given first chance at job promotions when vacancies exist.

D) HEALTH, SAFETY and WELFAREHEALTH The well- being of the employee in an organization is affected by accidents and ill health – both physical and mental.

1. Health

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PHYSICAL HEALTH: health of employees results in reduced productivity. Healthy employees are more productive, more safety conscious, and are more regular to work. This realization has made many management to provide health services to their employees like first-aid, complete medical care, etc. Many progressive organizations have well equipped dispensaries with full-time and part-time doctors.

•

MENTAL HEALTH: In recent years, mental health of employees, particularly that of executives, has engaged the attention of management. Mental breakdowns are common in modern days because of stress and tension. This results in reduced productivity and lower profits for the organization. A mental health service is rendered in following ways:

1. Psychiatric counseling 2. Co operation and consultation with outside psychiatrics 3. Education of company personnel in importance of mental Health. 4. Development and maintenance of effective human resource Programme.

2.SAFETY: Safety refers to absence of accidents. It is protection of workers from the dangers of accidents. NEED FOR SAFETY MEASURES COST SAVING: Two types of cost are incurred by the management when an accident occurs. These are direct costs in form of compensation payable and medical expenses incurred in treating the patients. INCREASED PRODUCTIVITY: Safety promotes productivity. Employees in a safe environment can devote time to improving quality and quantity of output. MORAL and LEGAL: Safety is important on humane grounds too. There are legal provisions relating to safety measures which have to be undertaken by the management. 3. WELFARE: Welfare includes anything that is done for the comfort and improvement of employees and is provided over and above the wages. Welfare helps in keeping the morale and motivation of the employees high so as to retain

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HRM IN INSURANCE SECTOR the employees for longer duration. The welfare measures need not be in monetary terms only but in any kind/forms. Employee welfare includes monitoring of working conditions, creation of industrial harmony through infrastructure for health, industrial relations and insurance against disease, accident and unemployment for the workers and their families. Labor welfare entails all those activities of employer which are directed towards providing the employees with certain facilities and services in addition to wages or salaries. Labor welfare has the following objectives: 1. To provide better life and health to the worker 2 . T o m a k e t h e w o r k e r s h a p py a n d s a t i s f i e d 3. To relieve workers from industrial fatigue and to improve intellectual, cultural and material conditions of living of the workers. The basic features of labor welfare measures are as follows: 1. Labor welfare includes various facilities, services and amenities provided to workers for improving their health, efficiency, economic betterment and social status. 2. Welfare measures are in addition to regular wages and other economic benefits available to workers due to legal provisions and collective bargaining 3. Labor welfare schemes are flexible and ever-changing. New welfare measures are added to the existing ones from time to time. 4. Welfare measures may be introduced by the employers, government, employees or by any social or charitable agency. 5. The purpose of labor welfare is to bring about the development of the whole personality of the workers to make a better workforce.

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CHAPTER 8 PARTICIPATIVE MANAGEMENT •

Meaning

• Objectives of Participative Management •

Benefits of Participative Management

PARTICIPATIVE MANAGEMENT: Participation of employees: Employees should be given a chance to participate in the working of the firm. Their suggestion should be taken into consideration. Worker participation in management is an effective tool for prevention of industrial disputes. The level of workers’ participation can vary from organization to

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HRM IN INSURANCE SECTOR organization. The basic objective of worker participation is to provide an opportunity to the workers to participate in the organizational decision-making. By virtue of their participation, employees are bound to abide by all the decisions taken. This also helps in boosting the employee morale and enhancing their commitment to the organization. Some of the common forms of worker participation in management in India are Works committees, joint management councils, joint councils, plant councils, shop councils etc. Worker participation in India has achieved only partial success due to factors like lack of proper education among workers, lack of understanding between the management and the workers and multi-unionism. A good organizational environment built on mutual trust and confidence between the management and the workers would help in effective and successful worker participation in management.

Objectives of Participative Management  To

Make Best Use of Human Capital: Participative management does not

restrict organizations to exploit only physical capital of employees. Rather it makes the best use of human intellectual and emotional capital. It gives employees an opportunity to contribute their ideas and suggestions to improve business processes and create a better working environment.  To

Meet the Psychological Needs of Employees: When employees have a

say in decision making process, it gives them a psychological satisfaction. It is a simple force that drives them to improve their performance, create a proper channel of communication and find practical solutions to design better organizational processes.  To

Retain the Best Talent: Participatory management is one of the most

effective strategies to retain the best talent in the industry. It gives employees a sense of pride to have a say in organizational decision making process. Once they are valued by their seniors, they stick to the organization and become management’s partners in meeting specific goals and achieving success.

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HRM IN INSURANCE SECTOR  To

Increase Industrial Productivity: In today’s competitive world,

motivation, job security and high pay packages are not enough to increase industrial productivity. Leadership, flexibility, delegation of authority, industrial democracy and employee say in decision making are important to increase annual turnover of any organization.  To

Establish Harmonious Industrial Relationship: Participatory from of

management is an unbeatable tact to establish and maintain cordial relationships with employees and workers union. The success of an organization depends on its human resources. Employee empowerment acts as a strong force to bind the employees and motivate to give them their best to the organization.  To

Maintain

a

Proper

Flow

of

Communication: Two-way

communication plays an important role in the success of any organization. Employee participation in decision making ensures proper flow of communication in the organization. Everyone contributes their best and tries to strengthen the organization by contributing their best to improve business processes.

Benefits of Participative Management 

Innovation and increased efficiency: The problem solving process and

openness to new ideas can result in innovation. Apart from this as mentioned above there is also knowledge sharing amongst the workers and the managers. This means that those who are part of a certain process at the ground level give inputs for improved efficiency of the same. This has dual implications, helping improve the quality of product and curtailing the cost of manufacture. 

Timeliness: There is improved communication between the managers and the

workers and between workers across different units. A loophole or flaw is reported in time.

49

HRM IN INSURANCE SECTOR 

Employee satisfaction and Motivation: Empowering the employees

increases their ownership or stake in their work. This increases efficiency and productivity. Consequently there is decreased absenteeism and less employee turnover. This also works in attracting more people towards the organization and the job. 

Product quality: A say in decision making means that workers can

immediately pin point and suggest remedial measures for improving the efficiency of the process they are apart of. This means that quality control in product or service is exercised for the lowest level. 

Less supervision requirements: There is greater focus on management of

self with due emphasis of widening one’s skill set. One of the major benefits of this is that there is a lesser need of supervision and support staff. 

Better grievance redressal: Increased communication paves way for reduced

number of grievances and quick and effective resolution of dispute (often on the spot). Union - management relationship is also benefited and strengthened. 

Hiring Flexibility: Hiring flexibility is increased as a result of cross training.

Increased coordination among team members also offers a comfort zone for the newly hired.

IMPORTANCE OF HRM IN INSURANCE SECTOR

Human resource is one of the natural resources of any country's economy. It is the wealth of the country. In the context of insurance, human resource is of greater importance. The deployment of h u m a n

r e s o ur c e

t hr o u g h

proper

and

50

HRM IN INSURANCE SECTOR efficient

selection,

training

Resource Management. T h e

and

success

d e v e l o p me n t , of

any

is

called

insurance

Human

company

l a r g e l y d e p e n d s o n e f f i c i e n t h u m a n r e s o u r c e management, apart from operations, marketing and sales, the HR department manages all the efficient people working in operations and marketing divisions in any organization. Need for HRD and Its Management in insurance sector 1. There are many changes in the insurance sector on account of changes in the industry due to the entry of new insurance companies. Therefore, it has become a necessity to recruit, train and d e p l o y p e o p l e a t a l l l e v e l e f f i c i e n t l y , f o r b e t t e r p e r f o r m a n c e a n d s u c c e s s . T h i s i s t h e b a s i c function of HRD, which includes the concept of HRM. 2. In view of the changes in the political scene in the recent past, seeping changes are expected to take place in the insurance industry. It is expected that only a few insurance companies will remain after a series of amalgamations and mergers, not only in the Indian insurance industry, but also at the international level. 3. Emergence of new private sector insurance companies, competition and selfregulation has necessitated efficient Human Resources Management in insurance companies. HRM is a continuous process, involving selection, recruitment and training on an "on going basis" for the staff and their deployment in the right place. The activity is called HR development.

EFFICIENCY IN INSURANCE SECTOR WITH HRM

1. The crucial factors behind successful insurance companies will be continuous and sustained build up of skills, knowledge, education and attitudes among people working in the companies, particularly the frontline staff, working in the branches.

51

HRM IN INSURANCE SECTOR 2. It is possible through professionalization, which is an internal part of HRM. The staff should be motivated and encouraged to practice professionalism for their personal growth and thus contribute to the organization's growth. 3. Building efficiency is, therefore largely dependent on the best selection process adopted by the H R d e p a r t me n t . T h e r e i s i mp e r a t i v e n e e d t o b u i l d u p s k i l l s w i t h i n a n o r g a n i z a t i o n f o r t h e successful managing of available HR. 4 . I n s u r a n c e c o mp a n i e s h a v e v a s t h u ma n r e s o u r c e s p e c i a l i z e d i n mu l t i p l e d i s c i p l i n e s l i k e technology, law, sales, underwriting, administration, risk management etc. For building up better efficiency in insurance sector, HRM have t o f o l l o w t h e b e l o w two functions:1. EMPHASIS ON JOB DESCRIPTION AND JOB ASSIGNMENT One of the important functions of HR department is to ensure proper definition for workers in the insurance companies. The staff should know about the vacant positions and the skills required for those particular jobs. Accordingly, people should be recruited to that particular job. The allotment of a job to a right person, who has the required skills, is called job assignment. If this function is not properly performed by the HR department, people in all departments will be in a chaotic situation. This will impair their performance and subsequently customer service. Improvement in performance and skills of existing employees can be achieved through recruiting the right person for the right place. Thus, job description and job assignment are parallel concept requiring attention. 2. RESPONSE TO THE CHALLENGES IN FUTURE Insurance companies should chalk out a wide range of s t r a t e g i c r e s p o n s e s t o t h e f u t u r e challenges. They have to look into the structure, procedures and processes of the systems and make policies

52

HRM IN INSURANCE SECTOR accordingly, to ensure necessary changes. It is the foremost function of HRM. Insurance companies have to convince their employees that that a challenge is an opportunity to prove oneself. This requires the HR department to work efficiently. Insurance companies are in the service industry, where the raw material is HR. HRM, therefore, emerges as a very basic and important element for strategic response to the changes that are taking place in the insurance sector. H R d e p a r t m e n t s s h o u l d t a k e i t s e r i o u s l y t o f o r mu l a t e p o l i c i e s t o m e e t t h e s e c h a l l e n g e s . HRD is a critical management function. Each manager should have initiative, awareness, co-ordination and facilitation to perform his role. This is critical function of HRM.

THE CHANGING INSURANCE ENVIRONMENT AND THE ROLE OF HRM

O w i n g t o t h e c h a n g i n g i n s ur a n c e e n v i r o n m e n t H R d e p a r t m e n t s h o u l d c a l l f o r a p p r o p r i a t e response in equipping people who have to perform in the new environment. People should be p r e p a r e d t o ' a c c e p t c h a n g e s . T h e u p g r a d e d t e c h n o l o gy mi g h t cr e a t e f e a r a mo n g t h e s t a f f r e g a r d i n g their adaptability to the new environment. It is the responsibility of

53

HRM IN INSURANCE SECTOR the HR department to properly counsel people and prepare them to face the challenges before them. T h e i r m i n d s h o u l d b e f i n e - t u n e d t o w o r k i n t h e new technological environment. The main function of HRM is to build up capabilities in people working and intensify their sense o f b e l o n g i n g t o t h e o r g a n i z a t i o n . T o i m p r o v e t h e i r p e r f o r m a n c e a n d i n c r e a s e t h e b a n k ' s productivity HR must incorporate challenges in routine work. Team spirit has to be inculcated in the branches and greater focus should be on customer care.

CASE STUDIES 1) FUTURE GENE RALI INDIA LIFE I NSURANCE

54


The company chosen for the project is “FUTURE GENERALI INDIA LIFE INSURANCE”. The head office of the company is located in Mumbai. ABOUT COMPANY: Future Generali India Life Insurance Co. Ltd. is one of the rapidly growing Insurance companies in India. The Company is a joint venture between the India-based Future Group and the Italy-based Generali Group. Future Generali group is present in both the Life and Non-Life businesses in India as Future Generali India Life Insurance Co. Ltd. and Future Generali India Insurance Co. Ltd. Generali Group was established in Trieste on December 26, 1831. It is an international group working in more than 40 countries with insurance companies, financial companies and real estate sectors. After doing business in Central Eastern Europe, Generali Group has started to develop business in the principal markets of the Far East, including China and India. Generali Group r a n k s a mo n g t h e t o p t hr e e i n s u r a n c e g r o u p s i n E u r o p e a n d t h e 3 0 t h l a r g e s t c o m p a n y i n t h e Fortune 500 international ranking.

RECRUITMENT & SELECTION PROCESS: Their recruitment process includes both internal and external methods. INTERNAL METHODS: The company uses: -

55

HRM IN INSURANCE SECTOR 1. EMPLOYEE REFERRALS- It is a recruitment method in which the

current employees are encouraged and rewarded for introducing suitable recruits from among the people they know. The logic behind employee referral is that “it takes one to know one”. The post for which they prefer this process is SALES MANAGER, SENIOR SALES MANAGER, and ASSISTANT SALES MANAGER. Benefits of this method are as follows: •Quality Candidates •Cost savings •Faster recruitment cycles. •Incentives to current employees On the other hand it is important for an organization to ensure that nepotism or favoritism does not happen, and that such aspects do not make inroads into the recruitment process. 2. JOB POSTING-For job posting they use ‘Intranet’. Job Posting is an

arrangement in which a firm internally posts a list of open positions (with their descriptions and requirements) so that the existing employees who wish to move to different functional areas may apply. It is also known as Job bidding. It helps the qualified employees working in the organization to scale new h e i g h t s , i n s t e a d o f l o o k i n g f o r b e t t e r p e r s p e c t i v e s o u t s i d e . I t a l s o h e l p s organization to retain its experienced and promising employees. EXTERNAL METHODS: 1. FORMER EMPLOYEES- the Company hires back its best ex-employees especially for Senior Sales Manager post. 2. C O L L E G E S -

From

colleges

they

recruit

candidates

for

S a l e s M a n a g e r & S a l e s Executives posts. The minimum salary package for the fresher’s is 1.8 lacs for Area Sales Manager, 2.5 lacs for Sales Manager, 3.5 lacs for Senior Sales Manager.

56

HRM IN INSURANCE SECTOR 3. JOB FAIR -Recruiting method engaged in by a single employer or group of employers to attract the large number of applicants to one location for interviews. 4. ADVERTISING-Advertisements are the most common form of external recruitment. They can be found in many places (local and national newspapers, notice boards, recruitment fairs) and should include some important information relating to the job (job title, pay package, location, job description, how to apply-either by CV or application form, etc). Where a business chooses to advertise will depend on the cost of advertising and the coverage needed i.e. How far away people will consider applying for the job. Advertising can be through both PRINT and ELECTRIC MEDIA. SELECTION The company uses PASSES technique for selection. P-Prospect -They check whether the candidate is fit for the job or not. A-Approach -T h e

Company

approaches

with

the

candidates

t h r o u g h e m a i l s o r telephone. S-Seminar -The Company then conducts seminar. For major seminars they hire hotels but for small ones they prefer company’s training room. S-Screening - They communicate the job profile to the filtered candidates. E-Evaluation -They give them basically the sales target, or evaluate them on the basis o f e x p e r i e n c e , a g e f a c t o r , c o m mu n i c a t i o n s k i l l s . T h i s i s a k i n d o f W O R K S A M P L E TESTING. S-Selection -Finally they select the candidate on the basis of the results of evaluation.

INTERVIEWS:

57

HRM IN INSURANCE SECTOR They prefer STRUCTURED INTERVIEWS in which they prefer questions regarding family background, work experience and interpersonal skills. METHODS OF INTERVIEWS: ONE-ON-ONE INTERVIEW-Applicant meets one by one with the interviewer. Interview process takes place as follows: •INITIAL BRANCH LEVEL INTERVIEW-Branch manager takes such interviews mainly to select the localities and decide who are best suited for the job. •REGIONAL BRANCH INTERVIEW-Regional branch manager takes the interview & his decision to select or reject the candidate is final.

2.) MAX NEW YORK LIFE INSURANCE

Max New York Life Insurance Company Ltd. is a joint venture between Max India Limited, one of India's leading multi-business corporations and New York Life International, the international arm of New York Life, a Fortune 100 company. The company has positioned itself on the quality platform. In line with its vision to be the most admired life insurance company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. Incorporated in 2000, Max New York Life started commercial operation in April 2001. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The Company's paid up capital as on 30thApril, 2009 is Rs 1,786 crore. 58

HRM IN INSURANCE SECTOR Max New York Life has multi-channel distribution spread across the country. Agency distribution is the primary channel complemented by partnership distribution, bancassurance, alliance marketing and dedicated distribution for emerging markets. The Company places a lot of emphasis on its selection process for agent advisors, which comprises four stages - screening, psychometric test, career seminar and final interview. The agent advisors are trained in-house to ensure optimal control on quality of training. The company currently has around 71,229 agents, advisors at 715 offices across 389 cities. The company currently has more than 10,494 employees. The SIX Differentiators 1) SELECTION PROCESS The selection process of Max New York Life is designed to help the candidate and the organization make a decision in mutual best interest. The first step in the process is an initial interview this is followed by a test of numerical ability. Candidates who make the cut are invited to attend a career seminar. The procedure facilitates a process of discovery, as both sides develop an understanding of each other’s profile and requirements. The final stage in the selection process is an assessment of the candidate's natural market and potential for growth. 2) TRANING PROCESS Max New York Life has the finest training program for agents in the industry. They run training and development programs for agents throughout their career. The training consists of a two-year formal classroom based program. Max New York Life has two full-time professional trainers in each office whose sole job is to train and guide new agents. The success of their training programs owes a lot to the strength of their partner, New York Life. The training program developed by New York Life in the United States is widely recognized as the best in the insurance industry. They have customized this outstanding program for the Indian market. In the United States, New York Life had more members in the Million Dollar Round Table, the worldwide organization of top professionals in the insurance industry, for 50 consecutive years.

59

HRM IN INSURANCE SECTOR Since 2001, Max New York Life has had more qualifiers for the prestigious Million Dollar Round Table than all the other private sector insurance companies taken together. 3) MANAGEMENT LOYALTY One of the many advantages of working with Max New York Life is that managers are not allowed to sell insurance products to their own customers. Compensation in management is derived entirely from the success of agents and the overall growth of the organization. Managers at all levels are totally committed to the success of agents and do not pursue any conflicting goals. 4) PRODUCT RESEARCH No organization can claim to have the number one product in the insurance industry for a long period of time. It is a matter of great pride that our products have always been rated among the best in the industry. These products have been developed after extensive research of the Indian market and are designed to meet an individual’s needs at every life stage. 5) CONTRACT The Agent's Contract is designed to attract efficient professionals and retain them for a long time by compensating them generously. As an agent you can count on the support of Max New York Life at all times to help you earn a good income today and create a secure retirement for tomorrow. 6) GREAT WORK ENVIRONMENT Max New York Life is committed to working in a high-tech environment. In the United States, New York Life is noted for its leadership in using technology to provide the very best in customer service and employee support. The same systems have been adapted for India to offer simple, easy-to-understand illustrations for the most complex products. Work Profile This is an entrepreneurial opportunity with flexible working hours and the potential to earn unlimited income without any capital investment. As an agent with Max New

60

HRM IN INSURANCE SECTOR York Life, you are a financial advisor, businessperson and your own boss. The only limit to your growth is your own imagination and drive. The Role: •Identify prospects and conduct need analysis •Provide customized solutions for long term financial protection and wealth creation •Close sales •Deliver the policy •Provide after sales service and build references for future sales Benefits A career at Max New York Life has innumerable advantages. With low start up investment you can become a part of a world-class organization and make a positive difference to people’s lives. Our agents sell more policies and make more money than agents of any other life insurance company. The financial rewards are in the form of •Commissions on new sales •Ongoing renewal commissions •Performance linked bonus •Referral commissions •Training reimbursement

CONCLUSION The core function of HRM in the insurance industry is to facilitate performance improvement, measured not only in terms of financial indicators of operational efficiency but also in terms of the quality of financial services provided.

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HRM IN INSURANCE SECTOR Factors like skills, a t t i t u d e s a n d k n o w l e d g e o f t h e h u m a n c a p i t a l p l a y a c r u c i a l r o l e i n determining the competitiveness of the financial sector. The quality of human resources indicates the ability of insurance companies to deliver value to customers. Capital and technology are replicable but not the human capital which needs to be valued as a highly valuable resource for achieving that competitive edge. The primary emphasis needs to be on integrating human resource management strategies with the business strategy. H R M s t r a t e g i e s i n c l u d e ma n a g i n g c h a n g e , c r e a t i n g c o m mi t me n t , a c h i e v i n g f l e x i b i l i t y a n d improving teamwork. The other processes representing the overt

aspects

of

HRM,

viz.

recruitment, placement, performance

management are complementary. HRM has a crucial role to play in insurance sector. It acts as backbone for the insurance sector, because it only lays the structure for the organizations operations, functioning and working. Even with the advent of high technology it will have a prominent role to portray. As it can be seen from the data collected and from the case studies that majority of the insurance companies believe that investing in HRM is necessary in order to strengthen the insurance sector. Investing in HRM practices allows companies to strengthen their human resources. Human resources are one of the most important resources in any organization. Efficient management of human resources is necessary for the success of an organization. Efficient HRM practices leads to employee satisfaction. Employee’s performance improves which benefits the entire organization. Employees are motivated and they perform better. This will in turn lead to increase in customer satisfaction and the organization will be able to increase its customer base.

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hrm in insurance

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