Chapter Eight

Managing Human

Resources

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Human Resource Management

Human resources management (HRM) system of organizational activities to attract,

develop, and motivate an effective and qualified workforce. Also known as talent, human capital, or personnel management.

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Human Resources Management

People and management policies, like other resources, become a competitive advantage for a company when they:• create value• are rare• are difficult to imitate• are organized

Because employee skills, knowledge, and abilities are among the most distinctive and renewable resources upon which a company can draw, their strategic management is more important than ever.

Human capital is often used today to describe the strategic value of employee skills and knowledge.

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HR Planning InvolvesThree Stages

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HR Planning InvolvesThree Stages

Planning ensures that the right number and types of people are available, where the company is headed, in what businesses it plans to be, what future growth is expected, and so forth.

Programming of specific human resources activities such as recruitment, training, or layoffs. The company’s plans are implemented.

Evaluating determines whether they are producing the results needed to contribute to the organization’s business plans.

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HR Planning ProcessFigure 8.1

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The HR Planning Process

Demand forecasts determining how many

and what type of people are needed

Demand forecasts for people needs are derived from organizational plans.

The number of labor-hours required operating a plant, selling the product, distributing it, and service customers can be calculated.

Supply of labor Estimates of how many

and what types of employees the organization actually will have.

In performing a supply analysis, the organization estimates the number and quality of its current employees as well as the available external supply of workers.

Forecasts of a diverse workforce have become fact.

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Forecast Methods

DirectManagerial

Input

DirectManagerial

Input

BestGuess

BestGuess

Statistical/Historical Ratios

Statistical/Historical Ratios

Based on projections of cash flows,expenses, or financial measures

Based on projections of cash flows,expenses, or financial measures

Based on managers’ assessment of current head count, plus a guess onrelevant internal/external factors

Based on managers’ assessment of current head count, plus a guess onrelevant internal/external factors

Based on statistical methods, such asmultiple regression, in combinationwith historical data

Based on statistical methods, such asmultiple regression, in combinationwith historical data

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The Planning Process

Reconciling supply and demand Once managers have a good idea of both the

supply and demand for various types of employees, they can start developing approaches for reconciling the two.

Organizations may find that they need more people than they currently have.

Organizations may find that they have more people than they need.

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The Planning Process

Job analysis It tells the HR manager about the job itself: the

essential tasks, duties, and responsibilities involved in performing the job.

It describes the skills, knowledge, ability and other characteristics needed to perform the job.

It provides the information that virtually every human resources activity requires.

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Job Analysis

JobDescription

JobDescription

written description of the basic tasks, duties, and responsibilities requiredof an employee holding a particular job

written description of the basic tasks, duties, and responsibilities requiredof an employee holding a particular job

JobSpecification

JobSpecification

a written summary of the qualificationsneeded to successfully perform a job

a written summary of the qualificationsneeded to successfully perform a job

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Job Analysis and HR

Job DescriptionJob DescriptionJob DescriptionJob Description Job Job SpecificationSpecification

Job Job SpecificationSpecification

HR SubsystemsHR SubsystemsHR SubsystemsHR Subsystems

RecruitingRecruitingRecruitingRecruiting SelectionSelectionSelectionSelection TrainingTrainingTrainingTraining PerformancePerformanceAppraisalAppraisal

PerformancePerformanceAppraisalAppraisal SeparationSeparationSeparationSeparation

Job AnalysisJob AnalysisJob AnalysisJob Analysis

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Staffing the Organization

Recruitment The development of a

pool of applicants for jobs in an organization

Internal, external

Selection Choosing from among

qualified applicants to hire into an organization

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Methods for External Recruiting

• Advertising• Employee referrals• Walk-ins• Outside organizations• Employment services• Special events• Internet job sites

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Internal Recruiting

• A pool of applicants who already work for the company

• “Promotion from within”• Improves employee morale and

motivation• Reduces employer time and cost• Job posting is the procedure for

internal advertising• Career path is a planned sequence of

jobs

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Selection Methods

InterviewsInterviews

Background Background ChecksChecks

Personality Personality TestsTests

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Selection Methods Applications and resumes provide basic information to prospective

employers. Typically include information about the applicant’s name, educational background, citizenship, work experience, certifications, and the like.

Interviews are the most popular selection tool. Structured interviews conduct the same interview with each applicant.

– Situational interview focuses on hypothetical situations.– Behavioral description interview explores what candidates have actually done in the past.

Reference checks are another commonly used screening device. Background checks provide a higher level of scrutiny. Personality tests are less popular for employee selection, largely because

they are hard to defend in court. Drug testing is done by 80% of U.S. Firms Genetic testing is among the most controversial screening instruments. Cognitive ability tests measure a range of intellectual abilities, including

verbal comprehension and numerical aptitude. (See Figure 10.3) Performance tests are procedures in which the test taker performs a sample

of the job. Integrity tests are used to assess job candidate’s honesty. Two forms are

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Reliability and Validity

Reliability refers to the consistency of test scores over time and across alternative measurements.

Validity moves beyond reliability to assess the accuracy of the selection test. The criterion-related validity refers to the degree to which a test actually predicts or correlates with job performance. Content validity concerns the degree to which selection tests measure a representative sample of the knowledge, skills, and abilities required for the job.

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© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–22

Reliability as Stability over TimeHIGH RELIABILITY TEST RETEST APPLICANT SCORE SCORESmith 90 93Perez 65 62Riley 110 105Chan 80 78

VERY LOW RELIABILITY TEST RETESTAPPLICANT SCORE SCORESmith 90 72Perez 65 88Riley 110 67Chan 80 111

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© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–23

Reliability as Consistency(Interrater Reliability)

HIGH RELIABILITY

APPLICANT Rater #1 Rater #2 Rater #3Smith 9 8 8Perez 5 6 5Riley 4 5 5Chan 8 8 8

VERY LOW RELIABILITY

APPLICANT Rater #1 Rater #2 Rater #3Smith 9 5 6Perez 5 9 4Riley 4 2 7Chan 8 4 2

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© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–24

Valid and Invalid Tests

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© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–25

Approaches to ValidationCriterion-related Validity

The extent to which a selection tool predicts, or significantly correlates with, important elements of work behavior.

Performance on a test is compared with actual production records, supervisor ratings, training outcomes, and other measures of success that are appropriate to each type of job.

In a sales job, it is common to use sales figures as a basis for comparison.

In production jobs, quantity and quality of output may provide the best criteria for job success.• A high score indicates high job performance potential; a low

score is predictive of low job performance.

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Criterion-Related Validity

Types of Criterion-Related Validity Concurrent Validity

• The extent to which test scores (or other predictor information) match criterion data obtained at about the same time from current employees.

– High or low test scores for employees match their respective job performance.

Predictive Validity• The extent to which applicants’ test scores match criterion

data obtained from those applicants/ employees after they have been on the job for some indefinite period.

– A high or low test score at hiring predicts high or low job performance at a point in time after hiring.

© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–26

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Interviews

Structured interview Selection technique that

involves asking all applicants the same questions and comparing their responses to a standardized set of answers.

Unstructured interview Free-flow of questions

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Performance Tests

Assessment center A managerial performance test in which

candidates participate in a variety of exercises and situations.

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Sometimes EmployeesMust Be Let Go

Layoffs a result of the massive restructuring of American

industry brought about by mergers and acquisitions, divestiture, and increased competition.

Outplacement The process of helping people who have been

dismissed from the company regain employment elsewhere.

Termination interview the manager discusses the company’s position with

the employee, is a stressful situation for both parties.

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Termination

Employment-at-will The legal concept that

an employee may be terminated for any reason.

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Advice on Termination

Do give as much warning as possible for mass layoffs.

Do sit down one on one with the individual, in a private office.

Do complete a termination session within 15 minutes.

Don’t allow time for debate during a termination session.

Don’t make personal comments when firing someone.

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U.S. Equal Employment LawsExhibit 8.3

Fair Labor Standards Act

• Nonexempt EmployeesNonexempt Employees Employees covered by the overtime provisions of the

Fair Labor Standards Act.

They must be paid time and one-half their regular pay for all work performed after forty regular hours of work in a workweek.

• Exempt EmployeesExempt Employees Employees who not covered in the overtime provisions

of the Fair Labor Standards Act.

Managers, supervisors, and white-collar professional employees are exempted on the basis of their exercise of independent judgment and other criteria.

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Federal Employment Laws

Equal Pay Act of 1963Equal Pay Act of 1963

Civil Rights Act of 1964Civil Rights Act of 1964

Age Discrimination inEmployment Act of 1967

Age Discrimination inEmployment Act of 1967

Pregnancy DiscriminationAct of 1978

Pregnancy DiscriminationAct of 1978

prohibits unequal pay for males and females doing similar work

prohibits unequal pay for males and females doing similar work

prohibits discrimination on basis ofrace, color, religion, gender, origin

prohibits discrimination on basis ofrace, color, religion, gender, origin

prohibits discrimination against persons age 40 and over

prohibits discrimination against persons age 40 and over

prohibits discrimination in employmentagainst pregnant women

prohibits discrimination in employmentagainst pregnant women

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Federal Employment Laws (cont.)

Americans with Disabilities Act of 1990

Americans with Disabilities Act of 1990

Civil Rights Act of 1991Civil Rights Act of 1991

Family & Medical LeaveAct of 1993

Family & Medical LeaveAct of 1993

prohibits discrimination on the basis ofphysical or mental disabilities

prohibits discrimination on the basis ofphysical or mental disabilities

strengthened the Civil Rights Act of 1964strengthened the Civil Rights Act of 1964

permits workers to take up to 12 weeksof unpaid leave for pregnancy, etc.

permits workers to take up to 12 weeksof unpaid leave for pregnancy, etc.

Adapted from Exhibit 11.2Uniformed Services Employment & Reemployment Rights Act

Uniformed Services Employment & Reemployment Rights Act

prohibits discrimination against those serving in the Armed Forces

prohibits discrimination against those serving in the Armed Forces

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Equal Employment Opportunity Commission

The EEOC has investigatory, enforcement, and informational responsibilities.

It investigates charges of discrimination, enforces the provisions of these laws in federal court, and publishes guidelines (Uniform Guidelines on Employee Selection Procedures)that organizations can use to ensure they are in compliance with the law.

These guidelines define two important criteria that are used to determine whether companies have engaged in discriminatory practices: Disparate treatment Adverse Impact

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Adverse Impact and Employment Discrimination

Four-FifthsFour-FifthsRuleRule

Four-FifthsFour-FifthsRuleRule

AdverseAdverseImpactImpact

AdverseAdverseImpactImpact

DisparateDisparateTreatmentTreatment

DisparateDisparateTreatmentTreatment

Intentional discrimination that results in equally qualified people being treated differently

Unintentional discrimination that works to the disadvantage of member of protected groups

Comparison of selection rates of a protected to a nonprotected group, to determine if adverse impact has occurred

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Determining Adverse Impact:The Four-fifths Rule

Source: Adoption of Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform Guidelines on Employee Selection Procedures, Federal Register 44, no. 43 (March 2, 1979): 11998.

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Exemptions From Antidiscrimination Regulations

Bona Fide Occupational Qualification (BFOQ) Suitable defense against a discrimination

charge only where age, religion, sex, or national origin is an actual qualification for performing the job.

Business Necessity Work-related practice that is necessary to the

safe and efficient operation of an organization.

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Training and Development

Annual spending by employers on formal training is over $55 billion.

Adding informal educational and development experiences to that and the number balloons to $200 billion.

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Training and Development

Training usually refers to teaching lower-level employees how to perform their present jobs.

Development involves teaching managers and professional employees broader skills needed for their present and future jobs.

– Phase one of the training process should include needs assessment

– Phase two involves the design of training programs– Phase three involves decisions about the training methods to be

used.– Phase four should evaluate the program’s effectiveness in terms

of employee reactions, learning, behavior transferred to the job, and bottom-line results.

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Training and Development

Needs assessment An analysis identifying

the jobs, people, and departments for which training is necessary.

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Percentage of companies increasingspending on specific training areas in 2011

Exhibit 8.4

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Types of Training

Orientation training Training designed to introduce new employees to

the company and familiarize them with policies, procedures, culture, and the like

Team training Training that provides employees with the skills

and perspectives they need to collaborate with others.

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Types of Training

Diversity training Programs that focus on identifying and reducing

hidden biases against people with differences and developing the skills needed to manage a diversified workforce.

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Performance Appraisal

Performance appraisal (PA) Assessment of an

employee’s job performance.

Performance appraisal has two basic purposes: • a. Administrative

purposes • b. Developmental

purposes.

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Types of Appraisals

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What Do You Appraise?

Trait appraisals involve subjective judgments about employee performance. They contain dimensions such as initiative, leadership, and attitude, and ask raters to indicate how much of each trait the employee possesses.

Behavioral appraisals focus more on observable aspects of performance. They focus on specific, prescribed behaviors, which can help ensure that all parties understand what the ratings are really measuring.

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Performance Appraisal

Results appraisals focus on production data such as sales volume, units produced, or profits. Management by objectives (MBO) involves a subordinate and a supervisor agreeing on specific performance goals.

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Performance Appraisal

360-degree appraisal Process of using multiple sources of appraisal to

gain a comprehensive perspective on one’s performance

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Subjective Performance Appraisal Scales

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Performance Appraisal

In choosing an appraisal method, the following guidelines may prove helpful:

• Base performance standards on job analysis.• Communicate performance standards to employees.• Evaluate employees on specific performance-related

behaviors rather then on a single global or overall measure.

• Document the PA process carefully.• If possible, use more than one rater.• Develop a formal appeal process.• Always take legal considerations into account.

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Performance Appraisal

Who should do the appraisal? • Managers and supervisors are the traditional source

of appraisal information since they are often in the best position to observe an employee’s performance.

• Internal and external customers are also used as sources of performance appraisal information.

• Self-appraisals help increase the employee’s involvement in the review process, and are a starting point for establishing future goals.

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How do you give employees feedback?

Providing growth and development requires understanding and support; however, the manager must be impersonal and be able to make tough decisions.

• A useful interview format to use when an employee is performing below acceptable standards is as follows:

– Summarize the employee’s specific performance.– Describe the expectations and standards, and be specific.– Determine the causes for the low performance; get the

employee’s input.– Discuss solutions to the problem, and have the employee play a

major role in the process.– Agree to a solution.– Agree to a timetable for improvement.– Document the meeting. 8-57

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How do you give employees feedback?

Follow-up meetings may be needed. Guidelines for giving feedback to an average employee:

– Summarize the employee’s performance, and be specific– Explain why the employee’s work is important to the

organization.– Thank the employee for doing the job.– Raise any relevant issues, such as areas for improvement.– Express confidence in the employee’s future good

performance.

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Designing reward systems

Pay decisions consider the company, position and the individual Pay level refers to the choice of whether to be a

high-, average-, or low-paying company. Pay structure decision is the choice of how to price

different jobs within the organization. Individual pay decisions concern different pay rates

for jobs of similar worth within the same family.

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Incentive Pay

Individual incentive plans consist of an objective standard against which a worker’s performance is compared.

Gainsharing plans concentrate on saving money.Profit-sharing plans give employee incentives

based on unit, department, plant, or company productivity.

Merit pay systems are used when objective performance measures are not available but the company still wants to base pay on performance.

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The Wage Mix

Internal and external factors combine to influence what jobs will be paid.

The combination of these factors is called the “wage mix.”

© 2010 South-Western, a part of Cengage Learning. All rights reserved. 9–61

© 2010 South-Western, a part of Cengage Learning. All rights reserved.

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Factors Affecting the Wage Mix

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Pay StructureExhibit 8.6

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Pay and Benefits MustMeet Legal Requirements

Comparable worth principle of equal pay for different jobs of equal

worth

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Employee Benefits

Three basic required benefits are:• Workers’ compensation• Social security• Unemployment insurance

A large number of benefits are not required but employer provided:

• Pension plans• Medical and hospital insurance• Dental insurance• Life insurance• Vacation time 8-65

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Employee Benefits

Cafeteria benefit program An employee benefit

program in which employees choose from a menu of options to create a benefit package tailored to their needs.

Flexible benefit programs Benefit programs in

which employees are given credits to spend on benefits that fit their unique needs.

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© 2010 South-Western, a part of Cengage Learning. All rights reserved. 12–67

Safety and Health: It’s the Law

In 2006 there were 4.1 million injuries/illnesses among private-sector firms.

Back problems cost employers $50 billion yearly in workers’ compensation costs and $50 billion in indirect costs

Each year the cost of occupational injuries and illness totals more than $156 billion.

In any year, approximately 75 million working days are lost because of on-the-job injuries.

In 2006, 5,840 employees died from work accidents.

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Employee Health

The Occupational Safety and Health Act (OSHA) of 1970 requires employers to pursue workplace safety.

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Labor Relations

Labor relations The system of

relations between workers and management.

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Collective Bargaining

Union shop An organization with a

union and a union security clause specifying that workers must join the union after a set period of time.

Right-to-work Legislation that allows

employees to work without having to join a union.

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http://bevideos.mhhe.com/business/video_library/0077424611/swf/Clip_11.html

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Video: Google

Why does Google provide free food and free luxury bus transportation for employees?

Why don’t other firms offer a similar package of benefits?