Traditionally, the policies of HR and Accounting have operated on opposite sides of the spectrum. This is unfortunate. Instead of operating as one, they have sometimes caused more trouble than help.
This would be not so, there must be a way to combine the two policies so the organization as a whole can prosper.
Well, there actually is a way.
Read more below to find out how…
The dictionary meaning of policy is a “plan of action” and that “Plan” is a policy. According to Flippo ‘policy’ is a man-made rule of a pre-determined course of action that is established to guide the performance of work toward the organization’s objectives. It is a type of standing plan that serves to guide subordinates in the execution of their tasks. Yoder observes A policy is a pre-determined, selected course established as a guide towards accepted goals and objectives. In general, policies constitute guides to action.
They offer the standards based on which decisions are reached. They serve as a road map for managers in the organization. Therefore, it is the responsibility of top management to formulate and develop a basic creed that should contain a clear-cut statement of the possibility.
The statement of specific objectives should refer to the various activities of personnel administration connecting with staffing training, developing, wage and salary administration, motivation, employee services and benefits, employee records, labor relations and personnel research.
In general, HR policies should respect human dignity and personal integrity, ensure fair treatment for all, irrespective of caste, creed, or color, and offer reasonable social and economic security to employees. Policies do not include detailed statements describing specifically how the policy is to be implemented. Policies are implemented by procedures.
The basic objectives of the policy is to ensure that work and accomplishment are properly recognized, safe and healthy conditions of work are established that common interests of personnel are considered and employee participation is encouraged, employees motivation and their development are properly looked after, and that the role of trade unions are recognized and their functions and responsibilities are respected.
Peter Drucker has rightly said, The management must gear its policies and objectives in such a fashion that the employees perform their work and do their assigned tasks. It implies a consideration of human being as a resource, i.e. as something having peculiar psychological properties, abilities, and limitations that require the same amount of engineering attention as the properties of any other source, e.g., copper.
It implies also a consideration of the human resources as having, unlike any other resources, personality, citizenship, control over whether they work how much and how well, and thus requiring motivation participation, satisfaction, incentives, rewards, leadership, status, and function. It is management, and management alone, that can satisfy their requirements. For they must be satisfied through work and through the job within the organization and management is the activating organ of the organization.
The policy is rules of conduct, therefore it is based on the following principles:
1. Place the right person in the right place at the right time.
2. Train every employee for current and future jobs.
3. Establish organization as a whole a co-ordination team.
4. Ensure proper and adequate supply of tools and equipment.
5. Create better working conditions
6. Give security with opportunity, incentive, and recognition.
7. Look forward, plan ahead for more and better things.
8. Ensure the principle of equity and natural justice.
HR Policies – Definition Given by Eminent Authors: Flippo, Calhoon, Jucius and Armstrong
According to Edwin B. Flippo, a ‘policy is a rule or pre-determined course of action established to guide an organization towards its objectives’. Thus, a policy guides the course of future actions of the management. Similarly, an HR policy also indicates the line of action or the attitude the management is likely to adopt in the future towards its personnel and their problems.
An industrial organization should form and declare its HR policy well in advance so that it may have a basis to make decisions with regard to future HR problems.
According to Calhoon, Personnel policies constitute guides to action. They furnish the general standards or bases on which discussions are reached. Their genesis lies in an organization’s values, philosophy, concepts, and principles.
Thus, an HR policy will also be helpful in making decisions routine on frequently occurring HR problems.
Michael J. Jucius has also expressed his opinion on the nature and purposes of personnel policies. According to him, ‘policies are basic rules established to govern functions so that they are performed in line with desired objectives’. While clarifying this definition, Jucius has pointed out that policies are guides to action and not the action.
It is the functions and procedures that constitute the action. This point can be illustrated with the help of an example. Suppose a selection policy states – ‘For the posts of Clerks, only graduates or the equivalent are eligible’. Here, hiring would be done through the selection process; the policy simply restricts those going through the hiring process.
Another point of clarification suggested by Jucius is that policies simply guide action towards objectives, they are not the objectives. Thus, in the aforementioned example, a policy is helpful in achieving effectiveness in hiring as it restricts some candidates from the selection process who presumably are not suitable.
The third point of clarification mentioned by the learned author is that while personnel policies are a tool of management, they cannot think for or replace management. As a matter of fact, management is supposed not only to design appropriate policies but also to see that they are properly applied.
We can say that policies serve two main purposes. First, policies restrain subordinates from performing undesirable functions or from mishandling specified functions. In order to illustrate the former, we can quote an example. Suppose, a policy states that the office-bearers of the trade union shall not collect membership subscription from the member workers on company premises.
Here, the policy restrains such an activity from being performed. Second, policies are positive in nature as they provide standard decision when an action has to be taken. In this way, the subordinates are not required to enquire from the superiors how a given problem is to be tackled.
For example, suppose a personnel policy states that all employees should be medically checked up after every six months to ascertain their physical suitability for the post occupied by them. Thus, this policy states definitely when the employees can expect to be medically examined which, of course, in the absence of such a policy, is not definite. Thus, with the help of this policy, any personnel executive can give a prompt and definite answer if asked about the frequency of medical check-up.
Another important thing with regard to the nature of policies is that they should not be construed as fundamental or unchanging truth. Policies should be based on the principle of flexibility so that whenever a change in policies is necessary to accomplish the organisational objectives, it may be effected.
HR policies should be prescribed and implemented in the organization. While HR policies cover various aspects of human resource functions, here conceptual framework of HR policy is presented. This will help you to understand HR policies to be discussed at various places easily.
Policy is the statement or general understanding which provides guidelines in decision making to members of an organization in respect to any course of action. Thus, human resource policy provides guidelines for making decisions on matters relating to management of human resources.
Armstrong has defined HR policies as follows:
“Human resource policies are continuing guidelines on the approach the organization intends to adopt in managing its people. They define the philosophies and values of the organization on how people should be treated, and from these are derived principles upon which managers are expected to act when dealing with human resource matters.”
From the above definitions, we can identify the features of an HR policy as follows:
1. A policy provides guidelines to the members of the organization for deciding a course of action and, thus, restricts their freedom to action. Policy provides and explains what a member should do rather than what he is doing. A policy, when enforced, permits prediction of roles with certainty. Since a policy provides guidelines to thinking in decision making, it follows that it must allow some discretion, otherwise it will become a rule.
2. Policy limits an area within which a decision is to be made and assures that the decision will be consistent with and contributive to objectives. A policy tends to pre- decide issues, avoid repeated analysis, and gives a unified structure to other types of plans, thus, permitting managers to delegate authority and still retaining control of action.
For example, if the organization has framed a policy that higher positions in the organization will be filled by internal promotion, the managers concerned can deal with the situation in this light whenever a vacancy at higher level arises. Thus, organization gets assurance that higher positions are filled by internal members without further control.
3. Policies are generally expressed in qualitative, conditional, or general way. The verbs most often used in stating policies are to maintain, to continue, to follow, to adhere, to provide, to assist, to assure, to employ, to make, to produce, or to be. Such prescriptions may be either explicit or these may be interpreted from the behaviour of organization’s members, particularly at the top level.
When such a behaviour is interpreted as policy guideline, it is normally known as precedent, that is, what has happened in the past on a particular issue if there is no clearly specified declaration.
4. Policy formulation is a function of all managers in the organization because some form of guidelines for future course of action is required at every level. However, higher is the level of a manager, more important is his role in policy making. Similarly, policies may exist in all areas of the organization from major organizational policies to minor policies applicable to the smallest segment of the organization.
HR Policies – Scope of HR Policies in Companies: Employment, Training & Development, Transfers & Promotions, Compensation and a Few Others
Scope implies subject matter, the subject matter of human resource policies is as wide as the scope of human resource management.
In most companies, policies are formulated regarding various functions of human resource management which are as under:
Scope # 1. Employment:
Policies concerning with recruitment, selection and separation of employees.
These policies should provide mandatory guidelines for:
(i) Qualifications – Minimum hiring qualifications.
(ii) Selection Devices – Dependence on various selection devices such as university degrees, tests, interviews, reference checks, physical examination, etc.
(iii) Basis – Basis (length of service or efficiency) to be followed in discharging an employee.
(iv) Sources – Preferred sources of recruitment.
(v) Reservation – Reservation of seats for scheduled castes, scheduled tribes, handicapped persons, and ex-servicemen.
(vi) Local Employment of local people and relations of existing staff.
(vii) Probation – Probation period.
(viii) Layoff – Layoff and retiring.
Scope # 2. Training and Development:
(i) Attitude – Attitude towards training-whether it is regarded as a device to overcome specific problems or as a continuing relationship between superior and subordinate.
(ii) Executive Development – Programmes of executive development.
(iii) Orientation – Orientation of new employees.
(iv) Objectives – Objectives of training.
(v) Development – Opportunities for career development.
(vi) Training – Basis of training.
(vii) Methods – Methods of training-on-the-job or off-the-job.
Scope # 3. Transfers and Promotions:
(i) Rationale – Rationale of transfer.
(ii) Periodicity – Periodicity of transfer.
(iii) Promotion – Promotion from within or outside the organisation.
(iv) Seniority – Seniority required for promotion.
(v) Weightage – Relative weightage to seniority and merit in promotion.
(vi) Seniority – Seniority rights.
(vii) Channel – Channels of promotion.
Scope # 4. Compensation:
(i) Evaluation – Job evaluation system.
(ii) Wages – Minimum wages and salaries.
(iii) Mode – Method of wage payment.
(iv) Profit Sharing – Profit sharing and incentive plans.
(v) Non-monetary – Non-monetary rewards.
(vi) Executive – Executive stock option plan.
(vii) Procedure – Procedure for getting payment.
(viii) Condition – Whether to pay prevailing or more than prevailing salary scales.
Scope # 5. Working Conditions:
(i) Time – Working hours.
(ii) Duration – Shift work.
(iii) Breaks – Number and duration of rest intervals.
(iv) Extras – Overtime work.
(v) Leave – Leave rules.
(vi) Safety – Safety rules and regulations.
Scope # 6. Employee Services and Welfare:
(i) Types – Types of services-housing, transportation, medical facilities, education of children, group insurance, credit facilities, purchase of company’s products at discount, company stores, social security, etc.
(ii) Finance – Financing of employee services.
(iii) Motivation – Incentives to motivate.
Scope # 7. Industrial Relations:
(i) Grievances – Handling of grievances.
(ii) Trade union – Recognition of trade union.
(iii) Suggestions – Suggestions schemes.
(iv) Discipline – Discipline and conduct rules.
(v) Participation – Workers’ participation in management.
(vi) Journals – Employees’ news sheet and house journals.
HR Policies – Need: Achieve the Objectives of the Organization, Uniformity in Decisions, Delegate Authority, Achieve Better Control and a Few More
1. To Achieve the Objectives of the Organization:
Policies guide the employees to take action for achieving the objectives of the organization. Hence, they must be known and well understood by everyone in order to concentrate efforts on the objectives.
2. To Bring Uniformity in Decisions:
HR policies furnish the general standard on which decisions are taken. Various line authorities take decisions in an organization keeping in view the HR policies. Thus, uniformity of action is maintained in similar cases.
If the person in authority is transferred and some other person takes charge of the office the decisions to be taken by the new authority are similar to those which have already been taken in comparable circumstances by the former authorities due to the predetermined policies of the organization. This brings simplicity and uniformity in action.
3. To Delegate Authority:
HR policies make delegation of authority possible, which means assigning the work to others and give them authority to do it. HR policies help executives at various levels of decision centres to act with confidence without consulting the superiors every time. HR policies give a manager liberty to choose the alternatives provided and to decide upon the action.
4. To Achieve Better Control:
HR policies specify relationships among organization, management and workers. Therefore, each group works for the achievement of the larger objectives of the organization without any policy conflicts. Thus, HR policies provide better control.
5. To Evaluate Efficiency:
HR policies serve as standards in execution of work. Efficiency of a group may be evaluated by its performance in the light of the policy. After assessing whether organization has achieved the desired results set in the policy, HR policy may be amended or a new policy may be formulated in the light of the actual performance.
6. To Create Confidence among Employees:
HR policies provide the workers a security against exploitation and create confidence in employees who may know where they stand in the organization.
7. To Motivate:
HR policies introduce the employees to the objectives of the organization. It guides the workers in achieving the objectives. They work enthusiastically and with loyalty to get those objectives.
8. To Guide the Management:
HR policies provide guidance to management in relation to the HR problems. HR policies decide how to get the work done by the people or how to behave with them.
HR Policies – 7 Important Components: Policies, Status & Records, Benefits, Payroll, Workplace Guidelines, Conduct and E-Policies
i. Employment Policies – These are the policies that guide hiring practices, orientation of new employees, compliance with employment laws and confidentiality.
ii. Employment status and records – These are the policies that define such issues as employment classifications access to personnel files and guidance on how background checks and performance reviews are to be performed.
iii. Employee benefits – These are policies that explain employee benefits such as insurance, vacations, holidays, leave and employee reimbursements.
iv. Payroll – These are policies that are related to salary and wage administration including deductions, pay advances and time keeping.
v. Workplace guidelines – These policies are quite varied and their purpose range from defining certain work arrangements such as flex time and telecommuting to offering guidelines on the use of company assets and record retention.
vi. Employee conduct – These policies are guidelines that control employer behaviour and conduct on the job. The mainstay of this section is a code of conduct but also important are policies regarding substance abuse, smoking, harassment and workplace violence.
vii. E-policies – These policies guide staff in the use of the organization’s information technology. Policies defining acceptable and prohibited activities and use of e-mail and the Internet make up a majority of these policies.
HR Policies – Main Characteristics of Sound Policies: Organizational Objectives, Planned Formulation, Clarity, Consistency, Balanced, Written & Communication
A policy is somewhat a permanent feature of an organization. It being a standing plan, provides guidelines to managerial decisions. Therefore, policies should be developed on a sound basis. If this is not done, managers have to make decisions again and again. However, what features constitute a sound policy cannot be prescribed universally because situations vary so greatly and an organization may differ in respect of policy formulation and implementation from others.
However, the soundness of policy can be judged on the basis of the following criteria:
1. Does it reflect present or desired organizational practices and behaviour?
2. Is it clear, definite, and explicit leaving no scope for misinterpretation?
3. Does it exist in the area critical to the success of the organization?
4. Is it consistent with other policies and does it reflect the timing needed to accomplish the objectives?
5. Is it practical in a given existing or expected situation?
A sound policy will- (i) specify more precisely how the decision will come what is to be done, who is to do it, how it is to be done, and when it is to be finished; (ii) establish a follow- up mechanism to make sure that the decision intended will take place; and (iii) lead to new strengths which can be used for decisions in future.
Based on these questions and specifications, some major characteristics of a sound policy can be identified as follows:
1. Relationship to Organizational Objectives:
A policy is formulated in the context of organizational objectives. It tries to contribute towards the achievement of these objectives. Therefore, in formulation of a policy, those functions or activities which do not contribute to the achievement of objectives should be eliminated.
For example, if a policy of filling higher positions from within produces hindrance in attracting talents at higher level but the organization needs them, the policy can be changed because in the absence of suitable manpower, the organization may not be able to achieve its objectives.
2. Planned Formulation:
A policy must be the result of careful and planned formulation process rather than the result of opportunistic decisions made on the spur of the moment. Since policies are relatively permanent features of the organization, ad hocism should be avoided because it is likely to create more confusion.
It is true that it is not possible to solve every problem in the organization on the basis of policies because new situations may arise, however, for matters of recurring nature, there should be well-established policies.
3. Fair Amount of Clarity:
As far as possible, policy should be clear and must not leave any scope for ambiguity. If there is a problem of misinterpretation, the organization should provide the method for overcoming the ambiguity. Further, policy provides some discretion for managerial decisions but it should minimize the number of cases where decisions are based on personal judgement. If this happens frequently, there should be close scrutiny of the policy and suitable amendments should be made.
The policy should provide consistency in the operation of organizational functions. Often the organization formulates policies in various functional areas and each function is related to other functions of the organization. If the policy in one area is inconsistent with another area, there may be conflict resulting in inefficiency.
This happens very frequently in functions having close relations such as production and marketing or finance and other functions. Therefore, the formulation of policies should be taken in an integrated way so that policies in each area contribute to other areas also.
A sound policy maintains balance between stability and flexibility. On the one hand, a policy is a long-term proposition and it must provide stability so that members are well aware about what they are required to do in certain matters. On the other hand, the policy should not be so inflexible that it cannot be changed when the need arises.
In a changed situation, the old policy becomes obsolete. Therefore, there should be a periodic review of policies and suitable changes should be incorporated from time to time. The changes may be in the form of addition, deletion, or substitution of the existing policy.
A policy may be in the form of a statement or it may be interpreted by the behaviour of the people at the top level. However, clearly-specified policy works better than the one which has to be interpreted by the organization’s members. When the policy is in writing, it becomes more specific and clear. It creates an atmosphere in which individuals can take actions with confidence knowing fully the impact of a particular action.
A written policy is easier to communicate through the organizational manuals. However, written policy has certain disadvantages in the form of being inflexible, too much emphasis on written words and their interpretation, and leakage of confidential policy. However, if the policy has been formulated carefully, many of the dangers will be overcome. Of course, confidential policies cannot be made part of organizational manuals.
It is not just sufficient to formulate policies. Unless these are communicated properly to the persons concerned, no meaningful purpose will be served. Therefore, a system should be developed to communicate the policies to those who are to make decisions in the light of those policies.
While written policies can be communicated easily, problems exist for communicating unwritten ones. In such cases, there should be more interaction between policy framers and policy implementers.
HR Policies – Why are HR Policies Important: Delegation, Speedy Decisions, Coordinating Devices, Better Control, Standards of Efficiency, Uniformity and Confidence
The importance and significant of HR policies:
The HR Policies help managers operating at different levels to act with confidence without the need for consulting superiors every time.
2. Speedy Decisions:
Policies can accelerate decision-making by providing a blanket framework within which personnel decisions can be made. They condense past experience.
3. Coordinating Devices:
HR policies help in achieving coordination. In case organisational members are guided by the same policies, they can forecast more accurately the actions and decisions. They ensure a steady course of action and prevent unwarranted deviations from planned operations.
4. Better Control:
As HR policies specify the relationship that is shared between the organisation, management and its employees besides they allow members to work towards achievement of the objectives of the organisation without friction/conflict, paving the way for better control.
5. Standards of Efficiency:
Policies serve as standards in the execution of work. They enable the management to view if they have been translated into action by various organisation or not. On the basis of the light of actual performance, existing policies may be subjected to amendment/refinement.
The HR Policies increase the chances of different people at different levels of the organisation making similar choices, when independently facing similar situations. They make the actions of organisational members more consistent.
Policies create confidence in employees while confronting routine and recurring problems as they make them aware where they stand in an organisation. They reduce chances of misinterpretation, misrepresentation and consequent friction.
HR Policies – Top 6 Principles: Common Interest, Development, Recognition of Work & Accomplishment, Recognition of Trade Unions and a Few Others
Principle # 1. Common Interest:
The principle of common interest must be given due recognition in designing HR policies. Factors like economic success of the enterprises, the interest of the employer and the employees should all be taken into account. It should benefit all the concerned parties’ employees, employer and the government.
Employees must have a chance for a better standard of living, better security and opportunity for living a fuller and better life. In return, the employer must be able to get the maximum possible regain. A successful business enterprise contributes substantially to the national exchequer and creates propriety all around.
Principle # 2. Development:
The organization must provide ample opportunities for the growth of employee’s personality. People want to improve their status, to earn more, and to shoulder higher responsibility. HR Policies should lay down rules for the opportunities for development to those who are willing to contribute something to the prosperity of the organization and to sacrifice their time and efforts for undergoing training to improve themselves on the job.
Principle # 3. Recognition of Work and Accomplishment:
There must be a direct relationship between work and accomplishment. A job should provide for sufficient wages and benefits that will enable an employee to lead a comfortable life. The HR policies should take into consideration the employee’s expectations such as reasonable security on the job against accidents, sickness and old age.
Principle # 4. Recognition of Trade Unions:
As the trade unions play an important role in the development of industrial relations, therefore, the management must recognize them. The HR policies should incorporate the clause for amicable settlement of disputes with the trade unions through negotiations and collective bargaining.
Principle # 5. Participation in Management:
Employees’ representatives should be given participation in decision-making bodies of the organization so that they may realize their responsibilities towards the management and workers. The success of any programme or policy depends considerably upon its wilful acceptance by the employees.
If the decisions regarding HR affairs are taken in the presence of workers’ representatives, there shall be better employees’ satisfaction and morale. It will also minimise resistance to change.
Principle # 6. Facing the Changes:
Employees always resist changes that may seem inconvenient or unpleasant to them. Changes may relate to loss of income, loss of status, transfers, reassignment or retraining activities and broken friendships. Therefore, the employees should be prepared by the management well in advance to face the change as and when warranted.
This may be done through bulletin boards, company magazines and newspapers, committee meetings, union-management meetings, broadcasting system and so forth. In this regard management’s viewpoints should be reflected in HR policies.
HR Policies – 4 Important Types: Formulated, Implied, Imposed and Appealed Policies
Policies relating to management of human resources may be either formulated by the managers specifically and explicitly or these may be implied, or sometimes these may be imposed by outside agencies. Therefore, there may be formulated, implied, and imposed policies.
Besides, there may be situations where no such policy exists and the managers concerned may face difficulty in arriving at a decision and appeal for guidelines. Thus, there may be appealed policy.
Type # 1. Formulated Policy:
A formulated policy is one which is specified by the organization for providing guidelines to its members. Most of the policies in large organizations fall in this category as every organization formulates various policies on different aspects including HRM. Such a policy flows from higher levels to lower levels in the organization.
This policy may be broad giving general guidance for the action or may be spelled completely so as to leave little scope for definition and interpretation.
Type # 2. Implied Policy:
Sometimes, policies may not be clearly stated, and the actions of managers particularly at the higher levels provide guidelines for actions at lower levels. These actions might constitute the policy. Sometimes, the organization has clearly expressed policies for its image but it is not able to enforce these.
In such a case, the action of a decision maker, consciously or unconsciously, depends on his own guidelines, prejudices, and whims. Moreover, in the absence of any specific guidelines, decision is based on individual interpretation of the situations and consequent actions. However, such actions may create chaos in the organization.
Type # 3. Imposed Policy:
Imposed policy arises from the influence of some outside agencies. Such agencies may be government which provides HR and other policies for all public-sector organizations, parent organizations overseas in the case of multinational companies operating in a country, apex company of a business house, or trade association with which a particular organization is attached.
These agencies may either provide complete guidelines on a subject matter or provide a broad framework for devising specific policies. For example, in public sector commercial banks, recruitment and selection is done by Banking Service Commission, and individual banks do not have any control over this aspect, or a holding company may provide compensation policy for its subsidiary companies, and so on.
Type # 4. Appealed Policy:
An appealed policy arises from the appeal made by a subordinate manger to his superior for deciding an important case. The need for such an appeal may arise because the particular case has not been covered by any policy. The appeal is taken upward and the decision made on the case sets a precedent which becomes policy providing guidelines for deciding similar cases in future.
However, appealed policies are mostly incomplete and uncoordinated. As such, if frequent appeals are made, managers should visualize and review their policy formulation, its communication, and interpretation so that policy guidelines become more clear and specific.
HR Policies – How to Frame HR Policies: 2 Ways
HR policies may be of two types, namely formal and informal. About informal HR policies, Michael J. Jucius has rightly observed that many personnel policies undoubtedly have just grown. In such instances, everyone seems to know, without being told and without knowing where it originated, that a certain type of decision will be made in certain situations. Such policies are informal, and as such their framing or establishment cannot be analysed.
However, some useful comments can be made about formal policies.
Most of the HR policies should be framed by the higher level of management with the advice and assistance of staff of the HR department. Framing of HR policies is also affected by the consultation and advice of employees, day-to-day problems by the management, social and political changes, international happenings and so on.
It is the responsibility of an efficient and effective HR manager to frame HR policies and make necessary changes and amendments from time to time, whenever necessary. In the framing of HR polices, weightage should be given to the views, advice and suggestions of such people who are likely to be impacted by those HR policies.
Such people make a lot of relevant information available for the formation of HR policies. When the rough draft is made, it should be sent to the representatives of employees, departmental heads and experts for their perusal, comments and suggestions, if any.
Maximum attention should be paid to the comments, criticism and observations made by the employees because these are the people who are most effected by HR policies. Then ultimately, the HR policies should be finally drafted and declared. There is every justification for framing the HR policies by the higher level of management in consultation with other agencies.
It brings consistency and uniformity in the decisions and actions of the organisation. It can be illustrated with an example. Take the matter of awarding punishment for the acts of indiscipline. In an organisation, practically every executive has to take disciplinary actions at one time or another.
In case there is no HR policy laying down the nature and quantum of punishment for different types of acts of indiscipline, every executive will have to use his/her own discretion in awarding the punishment. Obviously, it will differ from executive to executive, and cases will not be wanting in which the nature and quantum of punishments may differ widely, though the offence may be the same.
This may lead to discontentment among employees and, thus, may prove an obstacle in the way of the accomplishment of the desired objectives of the organisation. Hence, it will be a better proposition if policies on such matters are framed by higher-level management to cover all parts of the organisation so that there may be uniformity and consistency in the decisions and acts of the management.
While framing HR policies, we should also keep in view the objectives, cost and utility of the policies as also the reaction of trade unions. The successful implementation of a policy needs the sincere cooperation of trade unions. Hence, trade union leaders should also be taken into confidence while framing HR policies or for that matter any policy.
The principles of justice, democracy and equality, and the recognition of the needs of employees, should also be taken care of in the preparation of HR policies. The policies framed having kept in view the aforementioned points, more often than not, prove effective.
Once the HR policies are framed, there comes the problem of their transmission and application. As a matter of fact, it is the middle management and the first-line supervisors who will be more concerned with the transmission and application of HR policies.
Middle management should be responsible for communicating the policy formulation to operating levels. Here, communication involves a lot of functions such as interpretation of policies, clarification of areas of uncertainty and misunderstanding and also imparting training to lower-level staff in policy application.
Regarding the form in which HR policies should be communicated, it may be mentioned that many policies are stated in oral or may be informal, but it is better if policies are in writing. Written policies are definitely an improvement over oral or informal policies. There is no doubt that written policies need more time and labour to prepare, but they are worth it, because written policies impart precision, permanence and ease of transmission.
They can be produced for auditing or evaluation whenever required without any loss of time. They can also be used as training manuals. Hence, it may be suggested that it is always desirable to prepare policies with a careful selection of words and having clarity and should be in printed form.
So far as the line supervisors are concerned, they should be responsible for applying HR policies. In some cases, the HR department should also be responsible for applying HR policies in their respective fields.
HR Policies – How to Formulate HR Policies? (Process)
Most of the HR policies are the results of deliberate and conscious formulation. Since a policy is a kind of standing plan, it should be formulated after taking into consideration different factors which have impact on the workability of the policy. A policy formulation for managing human resources in an organization proceeds through a sequence of activities.
Formulation of HR policies considers a number of factors- organizational philosophy, HR philosophy, external factors, and internal factors. When all these factors are taken into consideration, there may be a number of policy alternatives in relation to a particular matter, for example, recruitment, development, compensation, etc. That alternative is chosen which matches with the maximum number of factors.
After the choice, a policy is put into action and its results are known. If the policy is workable, it is adopted as a long-term measure. However, each policy should be reviewed periodically to incorporate necessary changes because of changes in any of the factors influencing HR policies. Let us discuss this process.
1. Organizational and HR Philosophy:
Organizational philosophy is based on the philosophy of those who create and manage an organization. Philosophy is the set of beliefs and assumptions about how things happen and how they should happen. HR philosophy is derived out of organizational philosophy which reflects the approach that would be adopted in managing human resources in the organization.
2. External Factors:
HR polices are formulated not in vacuum but take into consideration various external factors on which the organization does not have control. These external factors are government’s policy towards management of people in the form of various relevant laws, guidelines, and other specifications; nature of competition for human resources, socio- cultural attitudes towards work, productivity of human resources, and image of the organization in the human resource market.
3. Internal Factors:
Besides the external factors, there are various internal factors in the organization which influence the applicability of a particular HR policy. These factors are the nature of work in the organization — a computer software company may not have the same HR policies as a manufacturing organization with low-level technology, sudden change in the organization like large-scale diversification or contraction of business activities, pressures from trade unions, etc.
4. Policy Alternatives:
When these factors are taken into consideration, various policy options may emerge on a particular issue. For example, when a vacancy arises at a middle management, the issues that emerge are- whether the position should be filled-up by promotion of internal person or it should be filled-up by appointing a new manager.
If the policy states that the position should be filled-up by internal promotion, another issue arises whether the promotion should be made on the basis of merit or seniority and defining the yardsticks for measuring merit or seniority. Similar such issues arise on other matters too.
5. Policy Choice:
The identification of various policy alternatives leads to the level where managers can consider some alternatives seriously and choose one of these which is most acceptable in the light of various factors which influence the workability of HR policies. The chosen policy is not necessarily the best one but it is best one in a given situation. That is why it is referred to as the most acceptable one.
6. Policy in Action:
When a particular policy is chosen, it is put in action for the guidelines to managers concerned and results are obtained. If the results are in accordance with the objectives of the policy, the policy is workable. However, if the results do not match with the objectives, the same process of policy formulation proceeds with new information inputs regarding all those factors which influence applicability of HR policies.
HR policies are formulated in the light of given situation. However, the situational variables are not static but they are dynamic and change with the time. Therefore, in order to integrate these changes, there should be periodic review of HR policies in the light of these factors and suitable changes must be incorporated.
For example, when Madura Garments, a division of Madura Coats, was taken over by Kumarmangalam Birla Group, many managerial personnel left the division which created a managerial vacuum and employee morale turned to be quite low.
In order to rebuild the division, many actions were taken in which change in compensation was one of these and there was a hefty salary hike of 50-60 per cent of all employees.
Because of changed situations, Hindustan Unilever, once the choice employer of managerial talents, has incorporated many changes in its HR policies to attract and retain managerial talents such as provision of 2-3 months training abroad for all new recruits in management cadre, direct entry of experienced managerial talents at the middle management level, offering of stock option scheme, and special emphasis on recruiting woman employees.
HR Policies – Benefits and Limitation
Benefits of HR Policies:
Policies help in achieving the following benefits:
(i) Facilitates decision-making. Policy helps managers at various levels to act with confidence without the need of consulting the superiors every time. It gives them alternatives to choose from.
(ii) Promptness of action- When situations arise that call for decisions, policy will ensure prompt action within the overall framework of the objectives of the organisation.
(iii) Consistency of action- Effective policies ensure uniform and consistent treatment of all employees throughout the organisation. Sound personnel policies are, therefore, an essential base for sound personnel practices. Policies provide the base for management by principle as contrasted with management by expediency.
(iv) Continuity and stability- Written policies are a means of transmitting the company’s heritage from one generation of executives to another. There would be stability in decision making in the organisation even if some key executives retire or leave the organisation.
(v) Better control- Policy provides a rational and continuous system of achieving results which facilitates better control.
(vi) Eliminates personal hunch and bias- Clearly laid down policy liberates decision-maker from his personal bias and self-interest.
(vii) Welfare of people- By removing momentary and hasty decisions, policy ensures long-term welfare of people involved in the organisational activities.
(viii) Confidence in employees- Policy makes the employees aware of where they stand in relation to the organisation. This will create confidence in them.
Limitations of HR Policies:
HR policies may suffer from some limitations which are as follows:
(i) Policies are repeatedly used plans. They bring about rigidity in operations as they leave no room for initiative by the subordinates.
(ii) Policies may not cover all the problems. Sometimes, unforeseen situations arise which are not covered by the existing policies.
(iii) Policies are no substitute for human judgement. Policies only delimit the areas within which decisions are to be made.
(iv) Policies may not be ever-lasting as they lose their utility with the changes in the internal and external environment of the business.
HR Policy – How to Make HR Policies Effective?
For making the HR policies more effective, it is necessary that they are established in accordance with good standards. They should be reviewed from time to time. There should be a set of standards to check the effectiveness of a particular HR policy.
Michael J. Jucius has suggested some guidelines to check whether a policy will be effective or not.
According to him, the checks or guidelines may be whether the policy is based upon a careful analysis of the objectives and ideals of the company; whether it is definite, unambiguous, complete and accurately stated; whether it is reasonably stable and not subject to change because of temporary changes in existing conditions; whether it has sufficient flexibility to handle normal variations in changed conditions; whether it is related to policies of other sections of the company so that proper balance of complementary policies is established; and whether it is known and understood by all who must work with it or are affected by it. In case the answers are in affirmative, it means the policy would be good and vice versa.
HR policies must match employee expectations. Policies aiming to cultivate inclusion must match up with the daily reality of employees.
How Accounting Policies Are Used
Accounting policies are a set of standards that govern how a company prepares its financial statements. These policies are used to deal specifically with complicated accounting practices such as depreciation methods, recognition of goodwill, preparation of research and development (R&D) costs, inventory valuation, and the consolidation of financial accounts. These policies may differ from company to company, but all accounting policies are required to conform to generally accepted accounting principles (GAAP) and/or international financial reporting standards (IFRS).
Accounting principles can be thought of as a framework in which a company is expected to operate. However, the framework is somewhat flexible, and a company’s management team can choose specific accounting policies that are advantageous to the financial reporting of the company. Because accounting principles are lenient at times, the specific policies of a company are very important.
Looking into a company’s accounting policies can signal whether management is conservative or aggressive when reporting earnings. This should be taken into account by investors when reviewing earnings reports to assess the quality of earnings. Also, external auditors who are hired to review a company’s financial statements should review the company’s policies to ensure they conform to GAAP.
Company management can select accounting policies that are advantageous to their own financial reporting, such as selecting a particular inventory valuation method.
Example of an Accounting Policy
Accounting policies can be used to legally manipulate earnings. For example, companies are allowed to value inventory using the average cost, first in first out (FIFO), or last in first out (LIFO) methods of accounting. Under the average cost method, when a company sells a product, the weighted average cost of all inventory produced or acquired in the accounting period is used to determine the cost of goods sold (COGS).
Under the FIFO inventory cost method, when a company sells a product, the cost of the inventory produced or acquired first is considered to be sold. Under the LIFO method, when a product is sold, the cost of the inventory produced last is considered to be sold. In periods of rising inventory prices, a company can use these accounting policies to increase or decrease its earnings.
For example, a company in the manufacturing industry buys inventory at $10 per unit for the first half of the month and $12 per unit for the second half of the month. The company ends up purchasing a total of 10 units at $10 and 10 units at $12 and sells a total of 15 units for the entire month.
If the company uses FIFO, its cost of goods sold is: (10 x $10) + (5 x $12) = $160. If it uses average cost, its cost of goods sold is: (15 x $11) = $165. If it uses LIFO, its cost of goods sold is: (10 x $12) + (5 x $10) = $170. It is therefore advantageous to use the FIFO method in periods of rising prices in order to minimize the cost of goods sold and increase earnings.