BADM310 Session 2-3 HRM Ch 12 Slides

Human Resource

Management

chapter twelve

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

BADM 310

Management and Organizational

Behavior

Learning Objectives

1. Explain why strategic human resource management can help an organization gain a competitive advantage.

2. Describe the steps managers take to recruit and select organizational members.

3. Discuss the training and development options that ensure organization members can effectively perform their jobs.

4. Explain why performance appraisal and feedback is such a crucial activity, and list the choices managers must make in designing effective performance appraisal and feedback procedures.

5. Explain the issues managers face in determining levels of pay and benefits

6. Understand the role that labor relations play in the effective management of human resources

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Human Resource Management

• Human Resource Management (HRM)– Activities that managers engage in to attract and

retain employees and to ensure that they perform at a high level and contribute to the accomplishment of organizational goals.

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Components of a Human Resource Management System

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Figure 12.1

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Human resource management and competitive advantage

• Strategic Human Resource Management– Designing the components of a HRM system to be

consistent with the organization’s architecture, strategy and goals.

– Aims to use HR to build competitive advantage• Contrast with HRM as “personnel” where the focus is

on administering policies – Major but uneven trend in the past two decades

• But companies vary in degree to which they have embraced this idea

• It requires changes in power and management paradigms

How Does Strategic HRM Actually Work?

• Who: HRM managers work closely with the “line” managers to improve efficiency, quality, innovation, and responsiveness.– “Line” managers = managers who are directly involved in

production & sales of products / services: (for example, operations; production; sales; logistics).

– “Staff” managers = support the line: (e.g., marketing; finance; HRM; R&D).

• What: HRM managers support high performance work practices– For example, Cross-functional and self-managed work teams,

TQM, employee involvement, training, information sharing6

HRM Systems and Market Value

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$250,000

$270,000

$290,000

$310,000

$330,000

$350,000

$370,000

$390,000

$410,000

Market Value

in Dollars

per Employee

Quality of the HRM System

TopQuintile

LowestQuintile

MiddleQuintileFirms with excellent

HRM Systems have greater market value per employee

Source: Adapted from M. A. Huselid and B. E. Becker. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38, 1995, pp. 635-672

Components of a Human Resource Management System

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Figure 12.1 • Recruitment– Activities that managers

engage in to develop a pool of candidates for open positions.

• Selection– The process that managers

use to determine the relative qualifications of job applicants and their potential for performing well in a particular job.

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Human Resource Planning

• Recruitment is driven by human resources planning • Human resource planning involves forecasting of

current and future staffing needs– Driven by organization’s strategy and goals– Top-down forecasts of overall needs– Individual job analysis

Recruitment

Internal Recruiting└ Hiring existing employees to fill open positions.

External Recruiting└ Hiring people who have not worked at the firm

previously.└ Sources: Newspapers advertisements, open

houses, on-campus recruiting, employee referrals, and through the Internet.

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Internal RecruitmentAdvantages & Disadvantages

Advantages:└ Managers already know candidates and thus have a

better idea of their capabilities and fit└ Internal applicants are already familiar with the

organization and how it works└ Provides clear evidence of a career path – so can help

boost levels of employee motivation and morale. Disadvantages / concerns

└ Learning (skills & gaining experience) on the job can be (very) expensive

└ You may know how the candidate performs at their current job, but what about in the new job? 12-11

External RecruitmentAdvantages & Disadvantages

Advantages└ Accesses a large applicant pool└ Can access people who have skills, expertise, and

experience that the organization lacks└ Newcomers can bring fresh ideas & perspectives

Disadvantage: └ Search can be expensive└ Outsider’s actual technical capabilities and their

fit (e.g., with organizational culture) are unknown

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The Selection Process

Selection process└ Managers find out

whether each applicant is qualified for the position and likely to be a good performer

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Selection Tools

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Reliability and Validity

Reliability └ the degree to which

the tool measures the same thing each time it is used

Validity └ the degree to which

the test measures what it is supposed to measure

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Each selection tool has strengths and weaknesses

• Standard Tools:– Resumes and application forms – initial screening– Interviews – almost universal and reasonably valid– Written tests - measure intelligence, ability, personality,

interest, etc. – popular; validity varies– Reference checks – tough to get negative information

• Performance-simulation tests– Work sampling - perform key tasks (non-managerial jobs)– Assessment center - simulate challenges of managerial jobs– Most valid – Most expensive

The Legal Environment of HRM(We focus on this later)

Equal Employment Opportunity (EEO)└ The equal right of all citizens to the opportunity to

obtain employment regardless of their gender, age, race, country of origin, religion, or disabilities.

└ Equal Employment Opportunity Commission (EEOC) enforces employment laws.

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Retaining employees

Realistic Job Preview└ An honest assessment of the advantage and

disadvantages of a job and organization.• vs. temptation to present a rosy view

└ Perhaps counterintuitively, honesty is seen to be more effective, as tends to reduce the number of new hires who quit when jobs and organizations fail to meet their unrealistic expectations• Losing the new hire and rehiring is costly in multiple ways

Socialization (covered already in culture)12-18

Components of a Human Resource Management System

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Figure 12.1 • TrainingTeaching organizational members how to perform current jobs and helping them to acquire skills and knowledge they need to be effective performers.

• DevelopmentBuilding the knowledge and skills of organizational members to enable them to take on new responsibilities and challenges.

Training

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Development

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Action Learning: Training that “Sticks”

• Problem: How do you ensure training is brought back to the job?– The “now what do I do on my real job” problem is common

with non-technical training.– For instance, established routines and inertia can suppress

changes inspired by training or development.• Action learning: Training designed to link conceptual

learning with actual job tasks (not in text)– Action learning addresses this problem because employees

learn techniques and concurrently use them on an actual project in their job.

– Example: General Electric – presenting to your boss’s boss.

Components of a Human Resource Management System

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Figure 12.1 • Performance AppraisalThe evaluation of employees’ job performance and contributions to their organization.

• Performance FeedbackProcess by which managers share performance appraisal information and (with subordinates) develop plans for the future.

Illusory superiority bias

People tend to believe their performance is better than it actually is, relative to other people. └ “Lake Wobegon effect” – where everyone is

above average└ Among the reasons: you see all of your positive

actions, but only some of others’ positive actions. It turns out this is really important where

performance evaluation is concerned.12-24

Performance Appraisal & Feedback

• Performance Appraisal– Evaluation of employees’ job performance and

contributions to their organization.• What do you evaluate?

– Results (“The bottom line” / outputs)• Best if 1) measurable and 2) under employee’s control

– Behaviors (“What the person does” / inputs)• Useful when conditions 1) and/or 2) above are not true

– Traits (“Who the person is” / personality)• AVOID! We tend to attribute traits, but this introduces

bias (e.g., stereotyping), and hinders action planning 12-25

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Effective Performance Appraisal:Subjective vs. Objective Evaluations

• Subjective = (manager’s perceptions, esp. of behaviors)– + Rich information => can adjust for situations where

results are not a valid indicator of individuals’ job performance

– - Potential for bias because managers perceptions can be unfair (e.g., favoritism), inconsistent (e.g., across managers) and /or biased (e.g., stereotypes, halo)

• Objective = (measurable results)– + Less bias– - Information is less rich => more difficult to adjust

when results are not indicative of individuals’ job performance

• Recommendation: Incorporate both types

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Effective Performance Appraisal:Effective subjective / objective evaluation

• To use subjective evaluation effectively:– Evaluate behaviors rather than traits– Describe specific, important job-related behaviors– Avoid making overall judgments or citing outlying

incidents. • To use objective evaluation effectively:

– Work with employees to set goals (=> commitment)– Assess whether employee controls goal achievement

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Example of subjective evaluation:Graphic Rating Scale

Scores poorly on criteria for subjective evaluation

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Better subjective evaluation:Behaviorally Anchored Rating Scale

Better subjective evaluation: Behavioral Observation Scale

12-30Figure 12.5

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Two additional performance evaluation techniques:

• Forced ranking: Each manager is required to categorize employees in a standardized way.

• Multiple Evaluators: Expand evaluation beyond bosses, to include coworkers, subordinates, etc.

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Forced Rankings

• Each manager is required to categorize employees in a standardized way.– Example: Each manager must rate 10% of subordinates

as excellent, 20% as exceeds requirements, 50% meets requirements, and 20% below requirements

– Examples: General Electric, Microsoft• Typically adopted because managers typically rate

most of their people highly– E.g., mostly 4’s or 5’s on a 5 point scale, virtually no 1’s

or 2’s.• Advantages:

– Better discrimination between high and low performers.

– Deters retention of low performers

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Problems with Forced Rankings

• Inflexible: Assumes that each manager has an equal # of high / low performers– But this can vary (demo)

• Creates competition rather than collaboration among employees – (e.g., hurts information sharing)

• Employee Dissatisfaction with ratings– Clashes with illusory superiority bias – Consider reaction of a good employee who is told

they “meet requirements.”

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Forced Rankings Exercise

• Imagine you are a manager with 4 direct reports. Your firms’ forced-ranking system means you can only give out 2 high-performer ratings. But how many of your reports are actually high (above average) performers?

• We can assume that each of your direct reports has a 50% chance of being a high performer. To see how many are actually high performers, flip a coin 4 times. Heads indicate high performers!

• What did you get? Your team:A. 4 Heads D. 1 or 0 HeadsB. 3 Heads E. Could not get a coinC. 2 Heads

Who Appraises Performance?

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Figure 12.6

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Multiple Evaluators (360 degree feedback)

• Expand evaluation beyond bosses, to include coworkers, subordinates, etc.– Why valuable: Managers do not have the only, or even the

best, information to evaluate an employee’s performance.• Especially when work is done in teams, virtually, etc.

– Most common type: 360 degree feedback: You receive feedback from everyone you work with.

• With arrangements to provide anonymity.– Limitations:

• Not appropriate for evaluation (potential for “settling scores” & retaliation), is much better for good for development.

Dilbert on 360-Degree Review

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Screen clipping taken: 5/29/2014 3:20 PM

Components of a Human Resource Management System

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Figure 12.1 • Performance AppraisalThe evaluation of employees’ job performance and contributions to their organization.

• Performance FeedbackProcess by which managers share performance appraisal information and (with subordinates) develop plans for the future.

Effective Performance Feedback

Goal└ Improve employee performance

Formal appraisals└ An appraisal conducted at a set time (i.e., annual,

semi-annual) and based on performance dimensions that were specified in advance

Informal appraisals└ An unscheduled appraisal of ongoing progress

and areas for improvement

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How do you deliver feedback?

• When I give feedback I usually:

1 a. Describe the behavior

b. Evaluate the behavior

2. a. Focus on the feelings that the behavior evokes

b. Tell the person what they should be doing differently

3. a. Give specific instances of the behavior

b. Generalize

4. a. Deal only with behavior that the person can control

b. Sometimes focus on something the person can do

nothing aboutSource: DEVELOPING MANAGERIAL SKILLS IN ORGANIZATIONAL BEHAVIOR by Mainiero/Tromley, © 1994. Adapted by pernussion of Prentice-Hall, Inc., Upper Saddle River, NJ.

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How do you deliver feedback?

Source: DEVELOPING MANAGERIAL SKILLS IN ORGANIZATIONAL BEHAVIOR by Mainiero/Tromley, © 1994. Adapted by pernussion of Prentice-Hall, Inc., Upper Saddle River, NJ.

When I give feedback I usually:5. a. Tell the person as soon as possible after the behavior b. Sometimes wait too long6. a. Focus on the effect the behavior has on me b. Try to figure out why the individual did what he or she did7. a. Balance negative feedback with positive feedback b. Sometimes focus only on the negative

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Barriers to Effective Performance Feedback

• Barrier #1: The skills required to deliver effective performance appraisals are very different than those required for effective feedback:– Appraisal requires objectivity & difficult evaluation

decisions. Managers must play the role of judge.– Feedback calls for supportive behaviors, in order to

encourage growth and development. Managers must play role of coach.

– It is difficult to do both tasks well, especially when they must be done concurrently.

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Barriers to Effective Performance Feedback

• Barrier #2: Appraisals often generate conflict (differing perceptions, illusory superiority bias)– Managers may avoid conflict and so not address core

problem issues.• Barrier #3: Performance management is “indirectly

productive” (doesn’t directly generate outputs) – So can be delayed or taken lightly

• High-performing organizations devote enormous attention to these problems– Notably through performance management systems

and training managers to give feedback

Best Practice for Effective Feedback

• Approach feedback as an exercise in problem solving and solution finding, not criticizing.

• Be specific and focus on behaviors or outcomes that are correctable and within a worker’s ability to improve. – Also set a timetable for agreed changes.

• Express confidence in subordinate’s ability to improve.– Treat subordinates with respect & praise achievements.– Example: “Sandwich” method

• Provide performance feedback both formally and informally.

• Does chewing someone out have its uses?12-44

Components of a Human Resource Management System

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Figure 12.1 • PayIncludes employees’ base salaries, pay raises, and bonuses, based on job & performance

• Benefits Other compensation, usually based on membership in an organization.

Pay and Benefits(refer to textbook)

Pay└ Includes employees’ base salaries, pay raises, and bonuses└ Determined by characteristics of the organization and the

job and levels of performance Benefits

└ Benefits are based on membership in an organization└ Legally required: social security, workers’ compensation,

unemployment insurance└ Voluntary: health insurance, retirement, day care└ Cafeteria-style benefits plans allow employees to choose

the best mix of benefits for them, but can be hard to manage.

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Pay Level and Structure

Pay Level└ The relative position of an

organization’s incentives in comparison with those of other firms in the same industry employing similar kinds of workers

Pay Structure└ The arrangement of jobs into

categories based on their relative importance to the organization and its goals, level of skills, and other characteristics.

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CEO

Director Director

Dept Mgr

Dept Mgr

Director

VP VP

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Pay for performance

• Traditional pay:– Salary with (permanent) increases based on

individual performance• Pay-for-performance:

– Variable compensation based on individual, group and/or organization performance.

• For example, commissions; bonuses; stock options

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Benefits of Pay for performance

• Increased motivational leverage– Large changes in compensation (tied to current

performance) rather than small ones– Can emphasize team or organizational goals

• Flexible– Allows costs to naturally vary with firm success, so

reduces need for downsizing or salary “cuts”.

Components of a Human Resource Management System

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Figure 12.1 • Labor RelationsThe activities managers engage in to ensure they have effective working relationships with the labor unions that represent their employees’ interests.

Unions(refer to textbook)

Unions└ Represent worker’s interests to management in

organizations.└ The power that organizations have over individuals

can lead workers to join together in unions. Collective bargaining

└ Negotiation between labor and management to resolve conflicts and disputes about issues such as working hours, wages, benefits, working conditions, and job security.

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