Download - Unit IV Sustaining Employee Interest
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UNIT IV
SUSTAINING EMPLOYEE INTEREST
by
Ramya Rajendran
Asst Professor
VIMSUNIT IV: SUSTAINING EMPLOYEE INTEREST
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CHAPTER OUTLINE
Compensation plan
Reward
Motivation
Application of theories of motivation
Career management
Development of mentor Protg relationships
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COMPENSATION PLAN
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WHAT IS COMPENSATION?
Deals with every type of reward individuals receive in exchange for performing organizational tasks.Chief reason why most individuals seek employment.An exchange relationship.UNIT IV: SUSTAINING EMPLOYEE INTEREST
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OBJECTIVES OF COMPENSATION
AdequateEquitableBalancedCost-effectiveSecureIncentive-providingAcceptable to the employeeUNIT IV: SUSTAINING EMPLOYEE INTEREST
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COMPENSATION METHODS/PLANS
FLAT RATESPAYMENT FOR TIME WORKEDVARIABLE PAY: INCENTIVE COMPENSATIONOWNERSHIPPEOPLE BASED PAYEXECUTIVE PAYUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Flat rates
Uniform wage ratesEx: Administrative assistants - $11/hourBonus/incentives (sales professions)For satisfied workforceUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Payment for time worked
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S. NOWAGESSALARY1Pay calculated at hourly ratesAnnual or monthly rates2Overtime payNo overtime*
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Payment for time worked
General, across-the-board increase for all employees (WAGES)Merit increases paid to some employees (SALARY)based on some indicator of job performanceCost-of-living adjustment (COLA)based on the consumer price index (CPI)SeniorityUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
Definition for variable pay:
Any compensation plan that emphasizes
a shared focus on org. success, broadens opportunities for incentives to nontraditional groups & operates outside the base pay increase system.UNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
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Variable Pay: Key Design Factors
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VARIABLE PAY: INCENTIVE COMPENSATION
TYPES:
Merit incentivesIndividual incentivesTeam incentivesOrg. IncentivesUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
Merit incentives:
Performance increasesPay increasesHigher base salary after annual performance evaluationISSUES:
Employees fail to make the connection between pay and performanceThe secrecy of the reward is perceived by other employees as inequityThe size of the merit award has little effect on performanceUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
INDIVIDUAL INCENTIVES:
PieceworkPay fluctuates based on production units/timeEg: sewing mills 25 shirtsProduction bonusesPays a bonus when a employee exceeds the standard (labor savings)CommissionsCompensation on Sales % in units/money (marketing professions)UNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
TEAM INCENTIVES
When it is difficult to measure individual outputWhen cooperation is needed to complete a task or projectWhen management feels this is a more appropriate measure on which to base incentivesUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
Organization wide Incentives
Usually based on one of two performance concepts:
A sharing of profits generated by all employees altogetherA sharing of money saved as a result of employees' efforts to reduce costsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
SUGGESTION SYSTEMS:
Formal methodObtain employee advice on improvements in org effectivenessRewarded on successful application of the idea.UNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
Gain sharing:
Employees earn bonuses tied to unit-wide performance as measured by a predetermined, gain sharing formulaCommonly used gain sharing plans:
Lincoln Electric Plan
Scanlon Plan
Rucker Plan
ImproShare
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VARIABLE PAY: INCENTIVE COMPENSATION
PROFIT SHARING PLANS:
Cash or current distribution plans provide full payment to participants soon after profits have been determinedDeferred plans credit a portion of current profits to employees accounts with cash payments made at the time of retirement, disability, severance, or deathA combination of both incorporates aspects of current and deferred optionsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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VARIABLE PAY: INCENTIVE COMPENSATION
ISSUES OF VARIABLE PAY:
Percentage of an employees paycheck is put at riskIf business goals are not met, the pay rate will not rise above the lower base salaryAnnual raises are not guaranteedHelps manage labor costsDoes not guarantee equitable treatment of employeesUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Ownership
Employee stock ownership plan (ESOP) employees receive stock in the companyInvests in the stock of the employer companyTo increase worker commitment & performanceUNIT IV: SUSTAINING EMPLOYEE INTEREST
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People based pay
Skill-Based PayKnowledge-Based PayCredential-Based Pay (qualifications)Feedback PayCompetency based pay(skill, knowledge & credential)UNIT IV: SUSTAINING EMPLOYEE INTEREST
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Executive pay
Dramatic growthVariable performance-based pay is emphasized over guaranteesCEOs are encouraged to invest in company stockCEOs are held responsible for the cost of capitalUNIT IV: SUSTAINING EMPLOYEE INTEREST
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REWARDS
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WHAT IS A REWARD?
Somethinggivenorreceivedinreturnor recompenseforservice, merit, hardship,etc.
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INTRINSIC VERSUS EXTRINSIC REWARDS
Intrinsic rewards
Satisfactions derived from the job itself, such as pride in ones work, a feeling of accomplishment, or being part of a team.job enrichmentUNIT IV: SUSTAINING EMPLOYEE INTEREST
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INTRINSIC VERSUS EXTRINSIC REWARDS
Extrinsic rewards
Benefits provided by the employer, usually money, promotion, or benefitsEg: a salary increase or a write-up in the company magazineUNIT IV: SUSTAINING EMPLOYEE INTEREST
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FINANCIAL VERSUS NONFINANCIAL REWARDS
FINANCIAL REWARDS
through wages, bonuses, or profit sharingNONFINANCIAL REWARDS
indirectly, through employer-subsidized benefits such as retirement plans, paid vacations, paid sick leaves, and purchase discounts.One persons food is another persons poison
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PERFORMANCE-BASED VERSUS MEMBERSHIP-BASED REWARDS
MEMBERSHIP-BASED REWARDS
paid on the basis of being a member of an organization. reward goes to all employees irrespective of their performance include salary increases attributable to labor-market conditions, seniority or time in rankUNIT IV: SUSTAINING EMPLOYEE INTEREST
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PERFORMANCE-BASED VERSUS MEMBERSHIP-BASED REWARDS
PERFORMANCE-BASED REWARDS
basis of an employee's job performance ability.use commissions, piecework pay plans, incentive systems, group bonuses, merit pay, or other formsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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- What makes people do what they do? Why do some people succeed
while others fail?
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MOTIVATION
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MOTIVATION - MEANING
Internal andexternal factorsthat stimulate desire andenergyin people to be continually interested and committed to ajob,roleor subject, or to make an effort to attain agoal.
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TYPES OF MOTIVATION
Positive vs negativeRational vs emotionalIntrinsic vs extrinsicFinancial vs non-financialUNIT IV: SUSTAINING EMPLOYEE INTEREST
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THEORIES OF MOTIVATION
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Maslows
Hierarchy
of Needs
Self-
actualization
Esteem
Social needs
Safety and security needs
Physiological needs
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According to Abraham Maslow, within every human being, the following hierarchy of needs exists. The first three are deficiency needs because they must be satisfied if the individual is to be healthy and secure. The last two are growth needs because they are related to the development and achievement of ones potential. As each of these needs becomes substantially satisfied, the next higher need becomes dominant.
1.Physiological needs. Hunger, thirst, shelter, sex, and other survival needs.
2.Safety needs. Security, stability, and protection from physical or emotional harm.
3.Belongingness needs. Social interaction, affection, companionship, and friendship.
4.Esteem needs. Self-respect, autonomy, achievement, status, recognition, and attention.
5.Self-actualization needs. Growth, self-fulfillment, and achieving ones potential.
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McGregors
Theory X & Theory Y
Theory X
Workers
Dislike Work
Avoid Responsibility
Little Ambition
Theory Y
Workers
Enjoy Work
Accept Responsibility
Self-Directed
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Douglas McGregor said that managers hold one of two sets of assumptions about human nature: either Theory X or Theory Y. Seeing people as irresponsible and lazy, managers who follow Theory X assume the following:
1.Employees inherently dislike work and, when they can, will try to avoid it.
2.Since employees dislike work, they must be coerced, controlled, or threatened to achieve goals.
3.Employees avoid responsibilities and seek formal direction, if possible.
4.Most workers place security above all other work-related factors and will display little ambition.
Seeing people as responsible and conscientious, managers who follow Theory Y assume the following:
1.Employees can view work as being as natural as rest or play.
2.When committed to their objectives, people will exercise self-direction and self-control
3.The average person can learn to accept, even seek, responsibility.
4.Many workers besides managers have innovative decision-making skills.
Unfortunately, no hard evidence confirms that either set of assumptions is universally true. It is more likely that the assumptions of Theory X or Theory Y may be situationally appropriate.
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Herzbergs Two-Factor Theory
Job dissatisfaction and Job satisfaction are not opposite to each othersUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Herzbergs Two-Factor Theory
Hygiene Factors
Motivational Factors
Quality of supervision Rate of pay Company policies Working conditions Relations with others Job security Career Advancement Personal growth Recognition Responsibility AchievementHigh
High
Job Dissatisfaction
Job Satisfaction
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Frederick Herzberg asked workers to describe situations in which they felt either good or bad about their jobs. His findings are called motivation-hygiene theory. Herzberg asserted that intrinsic factors are related to job satisfaction whereas extrinsic factors are associated with dissatisfaction. So, he called company policy, supervision, interpersonal relations, working conditions, and salary hygiene factors. When these factors are adequate, people will not be dissatisfied; however, they will not be satisfied either. He believed that achievement, recognition, the work itself, growth, and responsibility are motivational because people find them intrinsically rewarding.
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McClellands Needs Theory
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Need for
Achievement
Need for
Power
Need for
Affiliation
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Specific Goals
Goal-Setting
Theory
Challenging
Goals
Goals and
Participation
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Effective Goal Setting
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Specific
Relevant
Challenging
Task
Effort
Task
Performance
Challenging
Participation
Commitment
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Area of
Optimal
Goal
Difficulty
High
Task Performance
Low
Moderate
Challenging
Impossible
Effect of Goal Difficulty on Performance
Goal Difficulty
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Reinforcement Theory
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Consequences
Rewards
No Rewards
Punishment
Behavior
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Perceived
Ratio Comparisona
Employees
Assessment
Outcomes A
Inputs A
Outcomes A
Inputs A
Outcomes A
Inputs A
Outcomes B
Inputs B
Outcomes B
Inputs B
Outcomes B
Inputs B
Inequity (Under-Rewarded)
Equity
Inequity (Over-Rewarded)
aPerson A is the employee, and person B is a relevant other or referent.
Equity Theory
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Negative and Positive Inequity
A. An Equitable Situation
Self
Other
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$2
1 hour
= $2 per hour
$4
2 hours
= $2 per hour
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Negative and Positive Inequity (cont)
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$2
1 hour
= $2 per hour
$3
1 hour
= $3 per hour
B. Negative Inequity
Self
Other
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Negative and Positive Inequity (cont)
C. Positive Inequity
Self
Other
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$2
1 hours
= $1 per hour
$3
1 hour
= $3 per hour
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Expectancy Theory of Motivation
Personal
Goals
Organizational
Rewards
1
2
Outcome 1
+ or -
Outcome 3
+ or -
Outcome 2
+ or -
3
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E-to-P
Expectancy
P-to-O
Expectancy
Outcomes
& ValencesIndividual
Effort
Individual
Performance
3. Rewards-personal goals relationship
1. Effort-performance relationship
2. Performance-rewards relationship
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Vrooms Expectancy Theory
Expectancy: Belief that effort leads to a specific level of performance
Instrumentality: A performance outcome perception.
Valence: The Value of a reward or outcome
Motivational force = Expectancy * Instrumentality * Valence
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ALDERFERS ERG THEORY
Extension & refinement of Maslows model.UNIT IV: SUSTAINING EMPLOYEE INTEREST
Self-
Actualization
Esteem
Belongingness
Safety
Physiological
Growth
Relatedness
Existence
ERG
TheoryNeeds Hierarchy
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PORTER & LAWLER MODEL
Extension Of Vrooms Expectancy TheoryUNIT IV: SUSTAINING EMPLOYEE INTEREST
Individual
Effort
Individual
Performance
satisfaction
Organizational
Rewards
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Theory Z
William Ouchi, integrates Japanese and American business practicesTheory Z Type Organization should beLong-term employment
participative decision-making
Slow evaluation and promotion
informal control measures
Greater workers involvement
Stable work environment
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APPLICATION OF THEORIES OF MOTIVATION
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APPLICATION OF THEORIES OF MOTIVATION
MBOEmployee Recognition ProgramsEmployee Involvement ProgramsVariable Pay Plans/RewardsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Organizational
Objectives
Divisional
Objectives
Departmental
Objectives
Individual
Objectives
What Is Management by Objectives?
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Linking MBO and
Goal-Setting TheoryUNIT IV: SUSTAINING EMPLOYEE INTEREST
Participation
in Goal Setting
Specificity
of Goals
Feedback
on Performance
Difficulty
of Goals
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Employee Recognition Programs
(linking with Herzberg two factor theory)
Recognition and
Reinforcement
Defining
Recognition
Recognition Plans
in Practice
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Employee Involvement
ProgramsParticipative
Management
Representative
Participation
Employee
Stock Ownership
Quality
Circles
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Piece
Rate
Variable Pay Plans/Rewards
Profit
Sharing
Gainsharing
Bonus
Plans
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CAREER MANAGEMENT
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What comes to your mind when you think of the word
careerUNIT IV: SUSTAINING EMPLOYEE INTEREST
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What is a Career?
A career
is a pattern of work-related experiences that span the course of a persons lifereflects any work, paid or unpaidis a broad definition helpful in todays work environment where employees and organizations have diverse needsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Traditional Career Stages
High
Low
Getting first job and being accepted
The elder statesperson
Preparing for retirement
Transition from school to work
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Will performance increase or decline?
5
15
10
35
25
20
40
30
50
45
60
55
70
65
75
Age
Exploration
Estblshment
Mid career
Late Career
Decline
Job Performance
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Traditional Career Stages
this stage is least relevant to HRM because it occurs prior to employment
exploration
includes school and early work experiences, such as internships. involves:trying out different fieldsdiscovering likes and dislikesforming attitudes toward work and social relationship patternsUNIT IV: SUSTAINING EMPLOYEE INTEREST
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establishment
Traditional Career Stages
includes:searching for workgetting first jobgetting evidence of success or failuretakes time and energy to find a niche and tomake your mark
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mid-career
Traditional Career Stages
challenged to remain productive at workemployee may:continue to growplateau (stay competent but not ambitious)deteriorateUNIT IV: SUSTAINING EMPLOYEE INTEREST
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late career
Traditional Career Stages
successful elder states persons can enjoy being respected for their judgment. Good resource for teaching othersthose who have declined may experience job insecurity plateauing is expected; life off the job increases in importanceUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Traditional Career Stages
may be most difficult for those who were most successful at earlier stages todays longer life spans and legal protections for older workers open the possibility for continued work contributions, either paid or volunteerdecline
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Enhancing Your Career
You are ultimately responsible for your own career.
manage your
reputation
know yourself
build and maintain
network contacts
keep current
keep your
options open
document your
achievements
balance your
specialist & generalist
competencies
Successful
Career
Tips
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Career management
The process for enabling employees to better understand and develop their career skills and interests, and to use these skills and interests more effectively.Career management = career planning + developmentUNIT IV: SUSTAINING EMPLOYEE INTEREST
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Career planning
The deliberate process through which someone becomes aware of personal skills, interests, knowledge, motivations, and other characteristics; and establishes action plans to attain specific goals.UNIT IV: SUSTAINING EMPLOYEE INTEREST
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Career planning process
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Career development
The lifelong series of activities that contribute to a persons career exploration, establishment, success, and fulfillment.
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Roles in Career Development
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Any questions?
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