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7/24/2019 stevenson operations management 3e - Chapter 1
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AN INVESTMENT PERSPECTIVE OF
HUMAN RESOURCE MANAGEMENT
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The Strategic View of HumanThe Strategic View of Human
ResourcesResources
The Strategic View of HumanThe Strategic View of Human
ResourcesResources
Employees areEmployees are human assetshuman assets
Increase in value to organization and marketplace whenIncrease in value to organization and marketplace when
investments of appropriate policies & programs are appliedinvestments of appropriate policies & programs are applied
Effective organizations recognize that employeesEffective organizations recognize that employeeshave valuehave value
Much as organizations physical & capital assets have valueMuch as organizations physical & capital assets have value
Employees are valuable source ofEmployees are valuable source ofsustainablesustainable
competitive advantagecompetitive advantage
Employees areEmployees are human assetshuman assets
Increase in value to organization and marketplace whenIncrease in value to organization and marketplace when
investments of appropriate policies & programs are appliedinvestments of appropriate policies & programs are applied
Effective organizations recognize that employeesEffective organizations recognize that employeeshave valuehave value
Much as organizations physical & capital assets have valueMuch as organizations physical & capital assets have value
Employees are valuable source ofEmployees are valuable source ofsustainablesustainable
competitive advantagecompetitive advantage
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Exhibit 1.1Exhibit 1.1
Sources of Employee ValueSources of Employee Value
Exhibit 1.1Exhibit 1.1
Sources of Employee ValueSources of Employee Value
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Sources of Employee ValueSources of Employee Value
Sources of Employee ValueSources of Employee Value
Technical KnowledgeTechnical Knowledge
Markets, processes, customers, environmentMarkets, processes, customers, environment
Ability to Learn and GrowAbility to Learn and Grow
Openness to new ideasOpenness to new ideas Acuisition of knowledge & skillsAcuisition of knowledge & skills
Decision a!ing "apabilitiesDecision a!ing "apabilities
otivationotivation "ommitment"ommitment
Teamwor!Teamwor!
Interpersonal skills, leadership a!ilityInterpersonal skills, leadership a!ility
Technical KnowledgeTechnical Knowledge
Markets, processes, customers, environmentMarkets, processes, customers, environment
Ability to Learn and GrowAbility to Learn and Grow
Openness to new ideasOpenness to new ideas Acuisition of knowledge & skillsAcuisition of knowledge & skills
Decision a!ing "apabilitiesDecision a!ing "apabilities
otivationotivation
"ommitment"ommitment
Teamwor!Teamwor!
Interpersonal skills, leadership a!ilityInterpersonal skills, leadership a!ility
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Adopting an n!estment "erspecti!eAdopting an n!estment "erspecti!e
Adopting an n!estment "erspecti!eAdopting an n!estment "erspecti!e
Determines how to best invest in peopleDetermines how to best invest in people
"osts"osts
Out"of"pocketOut"of"pocket
OpportunityOpportunity
#uman assets become competitive advantage#uman assets become competitive advantage
$e%uired s!ills become less manual& more$e%uired s!ills become less manual& more
!nowledge'based!nowledge'based Appropriate& integrated& strategy'consistentAppropriate& integrated& strategy'consistent
approach is neededapproach is needed
Determines how to best invest in peopleDetermines how to best invest in people
"osts"osts
Out"of"pocketOut"of"pocket
OpportunityOpportunity
#uman assets become competitive advantage#uman assets become competitive advantage
$e%uired s!ills become less manual& more$e%uired s!ills become less manual& more
!nowledge'based!nowledge'based Appropriate& integrated& strategy'consistentAppropriate& integrated& strategy'consistent
approach is neededapproach is needed
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A #ilemmaA #ilemma
A #ilemmaA #ilemma
(ailure to invest in employees causes(ailure to invest in employees causes
InefficiencyInefficiency
#eakening of organizations competitive#eakening of organizations competitivepositionposition
#uman assets are ris!y investment#uman assets are ris!y investment
$e%uire e)tra effort to ensure that they$e%uire e)tra effort to ensure that theyare not lostare not lost
(ailure to invest in employees causes(ailure to invest in employees causes
InefficiencyInefficiency
#eakening of organizations competitive#eakening of organizations competitivepositionposition
#uman assets are ris!y investment#uman assets are ris!y investment
$e%uire e)tra effort to ensure that they$e%uire e)tra effort to ensure that theyare not lostare not lost
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Exhibit 1.$Exhibit 1.$
Types of %rgani&ationalTypes of %rgani&ational
Assets'(apitalAssets'(apital
Exhibit 1.$Exhibit 1.$
Types of %rgani&ationalTypes of %rgani&ational
Assets'(apitalAssets'(apital
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Research )indingsResearch )indingsResearch )indingsResearch )indings
#$ practices directly related to profitability *#$ practices directly related to profitability *
mar!et valuemar!et value
+rimary reason for profitability,+rimary reason for profitability,
$ffective management of human capital$ffective management of human capital
-ntegrated management of human capital can-ntegrated management of human capital can
result in ./0 increase in mar!et valueresult in ./0 increase in mar!et value
Top 120 of organizations studied e)periencedTop 120 of organizations studied e)perienced3410 return on investment in management of3410 return on investment in management of
human capitalhuman capital
#$ practices directly related to profitability *#$ practices directly related to profitability *
mar!et valuemar!et value
+rimary reason for profitability,+rimary reason for profitability,
$ffective management of human capital$ffective management of human capital -ntegrated management of human capital can-ntegrated management of human capital can
result in ./0 increase in mar!et valueresult in ./0 increase in mar!et value
Top 120 of organizations studied e)periencedTop 120 of organizations studied e)perienced
3410 return on investment in management of3410 return on investment in management of
human capitalhuman capital
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Exhibit 1.*Exhibit 1.*
HR Value (hainHR Value (hain
Exhibit 1.*Exhibit 1.*
HR Value (hainHR Value (hain
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H+,A- RES%+R(E ,ETR(SH+,A- RES%+R(E ,ETR(SH+,A- RES%+R(E ,ETR(SH+,A- RES%+R(E ,ETR(S
5all 6treet analysts still generally fail to ac!nowledge5all 6treet analysts still generally fail to ac!nowledge
human capital in assessing the value of an organizationhuman capital in assessing the value of an organization
and the effect that human resources can have on stoc!and the effect that human resources can have on stoc!
priceprice
This is rooted in the fact that there are no 7standard8This is rooted in the fact that there are no 7standard8
metrics or measures of human capital& much as there aremetrics or measures of human capital& much as there are
for other organizational assetsfor other organizational assets
E)hibit 19. lists some "ommon #$ etrics while E)hibitE)hibit 19. lists some "ommon #$ etrics while E)hibit
19: displays the means of calculating five common19: displays the means of calculating five commonmetrics9 #owever& the appropriate metrics for any givenmetrics9 #owever& the appropriate metrics for any given
organization will be dependant on that organization;sorganization will be dependant on that organization;s
strategy9strategy9
5all 6treet analysts still generally fail to ac!nowledge5all 6treet analysts still generally fail to ac!nowledge
human capital in assessing the value of an organizationhuman capital in assessing the value of an organization
and the effect that human resources can have on stoc!and the effect that human resources can have on stoc!
priceprice
This is rooted in the fact that there are no 7standard8This is rooted in the fact that there are no 7standard8metrics or measures of human capital& much as there aremetrics or measures of human capital& much as there are
for other organizational assetsfor other organizational assets
E)hibit 19. lists some "ommon #$ etrics while E)hibitE)hibit 19. lists some "ommon #$ etrics while E)hibit
19: displays the means of calculating five common19: displays the means of calculating five commonmetrics9 #owever& the appropriate metrics for any givenmetrics9 #owever& the appropriate metrics for any given
organization will be dependant on that organization;sorganization will be dependant on that organization;s
strategy9strategy9
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Exhibit 1.Exhibit 1.
(ommon HR ,etrics(ommon HR ,etrics
Exhibit 1.Exhibit 1.
(ommon HR ,etrics(ommon HR ,etrics
Absence $ateAbsence $ate
"ost per #ire"ost per #ire
#ealth "are "osts per Employee#ealth "are "osts per Employee
#$ E)pense (actor#$ E)pense (actor
#uman "apital $eturn on#uman "apital $eturn on
-nvestment -nvestment
#uman "apital ?alue Added#uman "apital ?alue Added
Labor "osts as a +ercentage ofLabor "osts as a +ercentage of
6ales or $evenues6ales or $evenues
+rofit per Employee+rofit per Employee
$evenue per Employee$evenue per Employee
Time to fillTime to fill
Absence $ateAbsence $ate "ost per #ire"ost per #ire
#ealth "are "osts per Employee#ealth "are "osts per Employee
#$ E)pense (actor#$ E)pense (actor
#uman "apital $eturn on#uman "apital $eturn on
-nvestment -nvestment #uman "apital ?alue Added#uman "apital ?alue Added
Labor "osts as a +ercentage ofLabor "osts as a +ercentage of
6ales or $evenues6ales or $evenues
+rofit per Employee+rofit per Employee
$evenue per Employee$evenue per Employee
Time to fillTime to fill
Training -nvestment (actorTraining -nvestment (actor
Training $eturn on -nvestmentTraining $eturn on -nvestment
Turnover "ostsTurnover "osts
Turnover $ate Turnover $ate
?acancy "osts?acancy "osts
?acancy $ate?acancy $ate
5or!ers; "ompensation "ost per5or!ers; "ompensation "ost per
EmployeeEmployee
5or!ers; "ompensation -ncident5or!ers; "ompensation -ncident
raterate
5or!ers; "ompensation 6everity5or!ers; "ompensation 6everity
raterate
ield $atioield $atio
Training -nvestment (actorTraining -nvestment (actor Training $eturn on -nvestmentTraining $eturn on -nvestment
Turnover "ostsTurnover "osts
Turnover $ate Turnover $ate
?acancy "osts?acancy "osts ?acancy $ate?acancy $ate
5or!ers; "ompensation "ost per5or!ers; "ompensation "ost per
EmployeeEmployee
5or!ers; "ompensation -ncident5or!ers; "ompensation -ncident
raterate 5or!ers; "ompensation 6everity5or!ers; "ompensation 6everity
raterate
ield $atioield $atio
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Exhibit 1./Exhibit 1./
(alculation of Human (apital ,etrics(alculation of Human (apital ,etrics
Exhibit 1./Exhibit 1./
(alculation of Human (apital ,etrics(alculation of Human (apital ,etrics
easureeasure (ormula(ormula ?alue@Bse?alue@Bse
#uman "apital $=-#uman "apital $=- $evenue ' > @'"ompensation enefits "osts>> @ on human investments relativeon human investments relative
"ompensation enefits "osts"ompensation enefits "osts to productivity and profitabilityFto productivity and profitabilityF
represents pre'ta) profit forrepresents pre'ta) profit for
amounts invested in employeeamounts invested in employee
pay and benefits after removal ofpay and benefits after removal of
capital e)pensescapital e)penses
+rofit per employee+rofit per employee $evenue ' =perating E)penses@$evenue ' =perating E)penses@ -llustrates the value created by-llustrates the value created by
umber of (ull'time e%uivalent umber of (ull'time e%uivalent employeesF provides a means ofemployeesF provides a means of
employeesemployees productivity and e)penseproductivity and e)pense
analysisanalysis
#$ e)pense factor#$ e)pense factor Total #$ e)pense@total operatingTotal #$ e)pense@total operating -llustrates the degree of-llustrates the degree of
e)pensese)penses leverage of human capitalFleverage of human capitalF
provides a benchmar! forprovides a benchmar! for
overall e)pense analysisoverall e)pense analysis
relative to targets or budgetsrelative to targets or budgets
easureeasure (ormula(ormula ?alue@Bse?alue@Bse
#uman "apital $=-#uman "apital $=- $evenue ' > @'"ompensation enefits "osts>> @ on human investments relativeon human investments relative
"ompensation enefits "osts"ompensation enefits "osts to productivity and profitabilityFto productivity and profitabilityF
represents pre'ta) profit forrepresents pre'ta) profit for
amounts invested in employeeamounts invested in employee
pay and benefits after removal ofpay and benefits after removal of
capital e)pensescapital e)penses
+rofit per employee+rofit per employee $evenue ' =perating E)penses@$evenue ' =perating E)penses@ -llustrates the value created by-llustrates the value created by
umber of (ull'time e%uivalent umber of (ull'time e%uivalent employeesF provides a means ofemployeesF provides a means of
employeesemployees productivity and e)penseproductivity and e)pense
analysisanalysis
#$ e)pense factor#$ e)pense factor Total #$ e)pense@total operatingTotal #$ e)pense@total operating -llustrates the degree of-llustrates the degree of
e)pensese)penses leverage of human capitalFleverage of human capitalF
provides a benchmar! forprovides a benchmar! for
overall e)pense analysisoverall e)pense analysis
relative to targets or budgetsrelative to targets or budgets
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Exhibit 1./ 0cont.Exhibit 1./ 0cont.
(alculation of Human (apital ,etrics(alculation of Human (apital ,etrics
Exhibit 1./ 0cont.Exhibit 1./ 0cont.
(alculation of Human (apital ,etrics(alculation of Human (apital ,etrics
easureeasure (ormula(ormula ?alue@Bse?alue@Bse
#uman "apital ?alue Added#uman "apital ?alue Added $evenue ' > @'"ompensation enefits "osts>> @ !nowledge& s!ills and!nowledge& s!ills and
Total number of (TE employeesTotal number of (TE employees performance and how humanperformance and how human
capital adds value to ancapital adds value to an
organizationorganization
Turnover $ateTurnover $ate number of employee separationsnumber of employee separations +rovides a measure of+rovides a measure of
@@ wor!place retention effortswor!place retention efforts
number of employeesnumber of employees which can impact direct costs&which can impact direct costs&
stability& profitability morale&stability& profitability morale&
and productivityF can be usedand productivityF can be used
as a measure of success foras a measure of success for
retention and reward programsretention and reward programs
easureeasure (ormula(ormula ?alue@Bse?alue@Bse
#uman "apital ?alue Added#uman "apital ?alue Added $evenue ' > @'"ompensation enefits "osts>> @ !nowledge& s!ills and!nowledge& s!ills and
Total number of (TE employeesTotal number of (TE employees performance and how humanperformance and how human
capital adds value to ancapital adds value to an
organizationorganization
Turnover $ateTurnover $ate number of employee separationsnumber of employee separations +rovides a measure of+rovides a measure of
@@ wor!place retention effortswor!place retention efforts
number of employeesnumber of employees which can impact direct costs&which can impact direct costs&
stability& profitability morale&stability& profitability morale&
and productivityF can be usedand productivityF can be used
as a measure of success foras a measure of success for
retention and reward programsretention and reward programs
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HR ,etrics Are (omplexHR ,etrics Are (omplexHR ,etrics Are (omplexHR ,etrics Are (omplex
420 of (ortune :22 organizations evaluate420 of (ortune :22 organizations evaluate
#$ operations on basis of three metrics,#$ operations on basis of three metrics,
$mployee retention and turnover$mployee retention and turnover
%orporate morale%orporate morale
$mployee satisfaction$mployee satisfaction
These metrics do not necessarily illustrateThese metrics do not necessarily illustrate
how #$ impactshow #$ impacts
rofitsrofits
'hareholder value'hareholder value
420 of (ortune :22 organizations evaluate420 of (ortune :22 organizations evaluate
#$ operations on basis of three metrics,#$ operations on basis of three metrics,
$mployee retention and turnover$mployee retention and turnover
%orporate morale%orporate morale
$mployee satisfaction$mployee satisfaction
These metrics do not necessarily illustrateThese metrics do not necessarily illustrate
how #$ impactshow #$ impacts rofitsrofits
'hareholder value'hareholder value
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,ercer ,odel of ,easuring HR,ercer ,odel of ,easuring HR
mpactmpact
,ercer ,odel of ,easuring HR,ercer ,odel of ,easuring HR
mpactmpact
-dentify problem #$ can impact-dentify problem #$ can impact
"alculate actual cost of problem"alculate actual cost of problem
"hoose #$ solution that addresses problem"hoose #$ solution that addresses problem
"alculate cost of solution"alculate cost of solution
"alculate value of improvement H to I. months"alculate value of improvement H to I. months
after implementationafter implementation
"alculate specific return on investment"alculate specific return on investment $=- in human assets often not realized until some$=- in human assets often not realized until some
time in futuretime in future
-dentify problem #$ can impact-dentify problem #$ can impact
"alculate actual cost of problem"alculate actual cost of problem
"hoose #$ solution that addresses problem"hoose #$ solution that addresses problem
"alculate cost of solution"alculate cost of solution
"alculate value of improvement H to I. months"alculate value of improvement H to I. months
after implementationafter implementation
"alculate specific return on investment"alculate specific return on investment $=- in human assets often not realized until some$=- in human assets often not realized until some
time in futuretime in future
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Exhibit 1.2Exhibit 1.2
)actors n3uencing n!estment)actors n3uencing n!estment
%rientation%rientation
Exhibit 1.2Exhibit 1.2
)actors n3uencing n!estment)actors n3uencing n!estment
%rientation%rientation
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n!estment4%riented %rgani&ationn!estment4%riented %rgani&ationn!estment4%riented %rgani&ationn!estment4%riented %rgani&ation
6ees people as central to mission * strategy6ees people as central to mission * strategy
ission statement * strategic obJectivesission statement * strategic obJectives
espouse value of human assets in achievingespouse value of human assets in achieving
goalsgoals
anagement philosophy encouraginganagement philosophy encouraging
development * retention of human assetsdevelopment * retention of human assets
Does not treat human assets in same waysDoes not treat human assets in same ways
as physical assetsas physical assets
6ees people as central to mission * strategy6ees people as central to mission * strategy
ission statement * strategic obJectivesission statement * strategic obJectives
espouse value of human assets in achievingespouse value of human assets in achieving
goalsgoals
anagement philosophy encouraginganagement philosophy encouraging
development * retention of human assetsdevelopment * retention of human assets
Does not treat human assets in same waysDoes not treat human assets in same ways
as physical assetsas physical assets
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n!estment %rientation )actorsn!estment %rientation )actorsn!estment %rientation )actorsn!estment %rientation )actors
6enior anagement ?alues * Actions6enior anagement ?alues * Actions
Managers need (investment orientation) towardManagers need (investment orientation) toward
peoplepeople
Attitude Toward $is!Attitude Toward $is!
Investment in human resources inherently riskierInvestment in human resources inherently riskier
*uman assets never a!solutely (owned)*uman assets never a!solutely (owned)
ature of 6!ills eeded by Employeesature of 6!ills eeded by Employees
+he more marketa!le employee skills, the riskier the+he more marketa!le employee skills, the riskier the
firms investment in skill developmentfirms investment in skill development
6enior anagement ?alues * Actions6enior anagement ?alues * Actions
Managers need (investment orientation) towardManagers need (investment orientation) toward
peoplepeople
Attitude Toward $is!Attitude Toward $is! Investment in human resources inherently riskierInvestment in human resources inherently riskier
*uman assets never a!solutely (owned)*uman assets never a!solutely (owned)
ature of 6!ills eeded by Employeesature of 6!ills eeded by Employees +he more marketa!le employee skills, the riskier the+he more marketa!le employee skills, the riskier the
firms investment in skill developmentfirms investment in skill development
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n!estment %rientation )actorsn!estment %rientation )actorsn!estment %rientation )actorsn!estment %rientation )actors
Btilitarian entalityBtilitarian entality
Attempt made to uantify employee worth throughAttempt made to uantify employee worth through
cost"!enefit analysiscost"!enefit analysis
(('oft) !enefits of * programs difficult to o!-ectively'oft) !enefits of * programs difficult to o!-ectivelyuantifyuantify
Availability of =utsourcingAvailability of =utsourcing
.iven availa!ility of cost"effective outsourcing,.iven availa!ility of cost"effective outsourcing,investments in * should produceinvestments in * should produce highest returnshighest returns&&
sustainable competitive advantagessustainable competitive advantages//
Btilitarian entalityBtilitarian entality
Attempt made to uantify employee worth throughAttempt made to uantify employee worth through
cost"!enefit analysiscost"!enefit analysis
(('oft) !enefits of * programs difficult to o!-ectively'oft) !enefits of * programs difficult to o!-ectivelyuantifyuantify
Availability of =utsourcingAvailability of =utsourcing
.iven availa!ility of cost"effective outsourcing,.iven availa!ility of cost"effective outsourcing,investments in * should produceinvestments in * should produce highest returnshighest returns&&
sustainable competitive advantagessustainable competitive advantages//
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Reading 1.15 The Hidden 6e!erage of Human (apitalReading 1.15 The Hidden 6e!erage of Human (apital
,odel for ,anagement Success,odel for ,anagement Success
Reading 1.15 The Hidden 6e!erage of Human (apitalReading 1.15 The Hidden 6e!erage of Human (apital
,odel for ,anagement Success,odel for ,anagement Success
6trengthen !ey6trengthen !ey
relationshipsrelationships
%ustomers%ustomers $mployees$mployees
'hareholders'hareholders
6trengthen !ey6trengthen !ey
relationshipsrelationships
%ustomers%ustomers
$mployees$mployees
'hareholders'hareholders
LeverageLeverage
downtimedowntime
0se varia!le"pay0se varia!le"pay
Address neglectedAddress neglected
areas1areas1
-nfrastructure-nfrastructure
ar!etingar!eting =perations=perations
LeverageLeverage
downtimedowntime 0se varia!le"pay0se varia!le"pay
Address neglectedAddress neglected
areas1areas1
-nfrastructure-nfrastructure
ar!etingar!eting =perations=perations
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Reading 1.1Reading 1.1
,odel for ,anagement Success,odel for ,anagement Success
Reading 1.1Reading 1.1
,odel for ,anagement Success,odel for ,anagement Success
$efocusing staff on$efocusing staff on
what;s importantwhat;s important erformanceerformance
management asmanagement asdisciplined, strategic,disciplined, strategic,
value"added processvalue"added process
%learly define,%learly define,
differentiate & !alancedifferentiate & !alance!etween core!etween core
competencies & resultscompetencies & results
$efocusing staff on$efocusing staff on
what;s importantwhat;s important erformanceerformance
management asmanagement asdisciplined, strategic,disciplined, strategic,
value"added processvalue"added process
%learly define,%learly define,
differentiate & !alancedifferentiate & !alance
!etween core!etween core
competencies & resultscompetencies & results
uilding return onuilding return on
compensationcompensation 2ink !ase"pay2ink !ase"pay
progression toprogression tocompetencycompetency
achievementachievement
2ink incentive pay to2ink incentive pay to
annual, semiannual, orannual, semiannual, oruarterly resultsuarterly results
uilding return onuilding return on
compensationcompensation 2ink !ase"pay2ink !ase"pay
progression toprogression tocompetencycompetency
achievementachievement
2ink incentive pay to2ink incentive pay to
annual, semiannual, orannual, semiannual, or
uarterly resultsuarterly results
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Reading 1.$Reading 1.$
Se!en (ommon ,isconceptionsSe!en (ommon ,isconceptions
Reading 1.$Reading 1.$
Se!en (ommon ,isconceptionsSe!en (ommon ,isconceptions
1919 "onscientiousness is a better predictor of"onscientiousness is a better predictor of
performance than intelligence9performance than intelligence9
I9I9 "ompanies that screen Job applicants for values"ompanies that screen Job applicants for values
have higher performance than those that screenhave higher performance than those that screenfor intelligence9for intelligence9
3939 -ntegrity tests don;t wor! well in practice-ntegrity tests don;t wor! well in practice
because so many people lie on them9because so many people lie on them9
.9.9 -ntegrity tests have adverse impact on racial-ntegrity tests have adverse impact on racial
minorities9minorities9
1919 "onscientiousness is a better predictor of"onscientiousness is a better predictor ofperformance than intelligence9performance than intelligence9
I9I9 "ompanies that screen Job applicants for values"ompanies that screen Job applicants for values
have higher performance than those that screenhave higher performance than those that screenfor intelligence9for intelligence9
3939 -ntegrity tests don;t wor! well in practice-ntegrity tests don;t wor! well in practice
because so many people lie on them9because so many people lie on them9
.9.9 -ntegrity tests have adverse impact on racial-ntegrity tests have adverse impact on racial
minorities9minorities9
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Reading 1.$Reading 1.$
Se!en (ommon ,isconceptionsSe!en (ommon ,isconceptions
Reading 1.$Reading 1.$
Se!en (ommon ,isconceptionsSe!en (ommon ,isconceptions
:9:9 Encouraging employee participation is moreEncouraging employee participation is more
effective for improving organizationaleffective for improving organizational
performance than setting performance goals9performance than setting performance goals9
H9H9 ost errors in performance appraisal can beost errors in performance appraisal can beeliminated by providing training to managers oneliminated by providing training to managers on
how to avoid them9how to avoid them9
/9/9 -f employees are as!ed how important pay is to-f employees are as!ed how important pay is to
them& they are li!ely to overestimate its truethem& they are li!ely to overestimate its true
importance9importance9
:9:9 Encouraging employee participation is moreEncouraging employee participation is moreeffective for improving organizationaleffective for improving organizational
performance than setting performance goals9performance than setting performance goals9
H9H9 ost errors in performance appraisal can beost errors in performance appraisal can beeliminated by providing training to managers oneliminated by providing training to managers on
how to avoid them9how to avoid them9
/9/9 -f employees are as!ed how important pay is to-f employees are as!ed how important pay is to
them& they are li!ely to overestimate its truethem& they are li!ely to overestimate its trueimportance9importance9
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Reading 1.$Reading 1.$
Se!en (ommon ,isconceptions5Se!en (ommon ,isconceptions5
mplicationsmplications
Reading 1.$Reading 1.$
Se!en (ommon ,isconceptions5Se!en (ommon ,isconceptions5
mplicationsmplications
1919 6elect new employees on both intelligence and6elect new employees on both intelligence and
conscientiousness9conscientiousness9
I9I9 Assess intelligence and conscientiousness beforeAssess intelligence and conscientiousness before
values9values93939 Define the values that are important and assessDefine the values that are important and assess
them through carefully developed& validthem through carefully developed& valid
procedures9procedures9
.9.9 Bse integrity tests with ability tests for highBse integrity tests with ability tests for high
predictability9predictability9
1919 6elect new employees on both intelligence and6elect new employees on both intelligence andconscientiousness9conscientiousness9
I9I9 Assess intelligence and conscientiousness beforeAssess intelligence and conscientiousness before
values9values93939 Define the values that are important and assessDefine the values that are important and assess
them through carefully developed& validthem through carefully developed& valid
procedures9procedures9
.9.9 Bse integrity tests with ability tests for highBse integrity tests with ability tests for high
predictability9predictability9
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Reading 1.$Reading 1.$
Se!en (ommon ,isconceptions5Se!en (ommon ,isconceptions5
mplicationsmplications
Reading 1.$Reading 1.$
Se!en (ommon ,isconceptions5Se!en (ommon ,isconceptions5
mplicationsmplications
:9:9 Develop compelling goalsF enlist participationDevelop compelling goalsF enlist participation
and support it through rewards9and support it through rewards9
H9H9 Training and feedbac! are important& but errorsTraining and feedbac! are important& but errors
are difficult to eliminate9 Top managers shouldare difficult to eliminate9 Top managers shouldserve as role models in %uality of performanceserve as role models in %uality of performance
reviews9reviews9
/9/9 Attitude surveys are subJect to biasesF studyAttitude surveys are subJect to biasesF study
behaviors as well as attitudes9behaviors as well as attitudes9
:9:9 Develop compelling goalsF enlist participationDevelop compelling goalsF enlist participationand support it through rewards9and support it through rewards9
H9H9 Training and feedbac! are important& but errorsTraining and feedbac! are important& but errors
are difficult to eliminate9 Top managers shouldare difficult to eliminate9 Top managers shouldserve as role models in %uality of performanceserve as role models in %uality of performance
reviews9reviews9
/9/9 Attitude surveys are subJect to biasesF studyAttitude surveys are subJect to biasesF study
behaviors as well as attitudes9behaviors as well as attitudes9
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Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
#uman capital is defined as the collective !nowledgeuman capital is defined as the collective !nowledge&
s!ills and abilities of people that contribute tos!ills and abilities of people that contribute to
organizational successorganizational success
#uman capital is influenced by corporate cultureuman capital is influenced by corporate culture&
organizational values and strategic business goals andorganizational values and strategic business goals andobJectives and indicates the health of an organizationobJectives and indicates the health of an organization
#uman capital can be assessed via !ey performance#uman capital can be assessed via !ey performance
indicators which are %uantifiable& specific measuresindicators which are %uantifiable& specific measures
of an organization;s performance in critical areas of itsof an organization;s performance in critical areas of itsbusinessbusiness
#uman capital is defined as the collective !nowledgeuman capital is defined as the collective !nowledge&s!ills and abilities of people that contribute tos!ills and abilities of people that contribute to
organizational successorganizational success
#uman capital is influenced by corporate cultureuman capital is influenced by corporate culture&
organizational values and strategic business goals andorganizational values and strategic business goals andobJectives and indicates the health of an organizationobJectives and indicates the health of an organization
#uman capital can be assessed via !ey performance#uman capital can be assessed via !ey performance
indicators which are %uantifiable& specific measuresindicators which are %uantifiable& specific measures
of an organization;s performance in critical areas of itsof an organization;s performance in critical areas of itsbusinessbusiness
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Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
The #$ scorecard is a !ey management tool which can strengthen #$;s strategicThe #$ scorecard is a !ey management tool which can strengthen #$;s strategic
influence in an organization9 The scorecard has four perspectives, strategic&influence in an organization9 The scorecard has four perspectives, strategic&
operational& financial and customer9 These four perspectives organize andoperational& financial and customer9 These four perspectives organize and
trac! areas in which #$ adds value9trac! areas in which #$ adds value9
The strategic perspective focuses on measurements of effectiveness or maJorThe strategic perspective focuses on measurements of effectiveness or maJor
strategy'lined people goals9strategy'lined people goals9 The operational perspective e reflects the effectiveness of #$ processes9The operational perspective e reflects the effectiveness of #$ processes9
The financial perspective e relates to financial measures of #$ value to theThe financial perspective e relates to financial measures of #$ value to the
organization9organization9
The customer perspective focuses on the effectiveness of #$ from the internalThe customer perspective focuses on the effectiveness of #$ from the internal
customer viewpoint9 6pecific measures for each of these perspectives arecustomer viewpoint9 6pecific measures for each of these perspectives are
provided in (igure 39 K+-s can also be effectively utilized in the global #$provided in (igure 39 K+-s can also be effectively utilized in the global #$
function as indicated in (igure .9function as indicated in (igure .9
The #$ scorecard is a !ey management tool which can strengthen #$;s strategicThe #$ scorecard is a !ey management tool which can strengthen #$;s strategicinfluence in an organization9 The scorecard has four perspectives, strategic&influence in an organization9 The scorecard has four perspectives, strategic&
operational& financial and customer9 These four perspectives organize andoperational& financial and customer9 These four perspectives organize and
trac! areas in which #$ adds value9trac! areas in which #$ adds value9
The strategic perspective focuses on measurements of effectiveness or maJorThe strategic perspective focuses on measurements of effectiveness or maJor
strategy'lined people goals9strategy'lined people goals9
The operational perspective e reflects the effectiveness of #$ processes9The operational perspective e reflects the effectiveness of #$ processes9
The financial perspective e relates to financial measures of #$ value to theThe financial perspective e relates to financial measures of #$ value to the
organization9organization9
The customer perspective focuses on the effectiveness of #$ from the internalThe customer perspective focuses on the effectiveness of #$ from the internal
customer viewpoint9 6pecific measures for each of these perspectives arecustomer viewpoint9 6pecific measures for each of these perspectives are
provided in (igure 39 K+-s can also be effectively utilized in the global #$provided in (igure 39 K+-s can also be effectively utilized in the global #$function as indicated in (igure .9function as indicated in (igure .9
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Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
Reading 1.*Reading 1.*
,aximi&ing Human (apital,aximi&ing Human (apital
(our recommendations are provided for developing specific(our recommendations are provided for developing specific
K+-s tailored to a given organization;s strategyK+-s tailored to a given organization;s strategy
1>1> %ualitative measurement is one path to assess %ualitative%ualitative measurement is one path to assess %ualitative
characteristics of the wor!force& such as engagementcharacteristics of the wor!force& such as engagement
I>I> employee feedbac! provides useful perspectives on #$employee feedbac! provides useful perspectives on #$
efficiencyefficiency
3>3> whenever possible& the impact of recruiting is bestwhenever possible& the impact of recruiting is best
described in terms of financial gainsdescribed in terms of financial gains
.>.> retaining older wor!ers for future leadership roles dependsretaining older wor!ers for future leadership roles depends
on what tan employer most valueson what tan employer most values
(our recommendations are provided for developing specific(our recommendations are provided for developing specificK+-s tailored to a given organization;s strategyK+-s tailored to a given organization;s strategy
1>1> %ualitative measurement is one path to assess %ualitative%ualitative measurement is one path to assess %ualitative
characteristics of the wor!force& such as engagementcharacteristics of the wor!force& such as engagement
I>I> employee feedbac! provides useful perspectives on #$employee feedbac! provides useful perspectives on #$efficiencyefficiency
3>3> whenever possible& the impact of recruiting is bestwhenever possible& the impact of recruiting is best
described in terms of financial gainsdescribed in terms of financial gains
.>.> retaining older wor!ers for future leadership roles dependsretaining older wor!ers for future leadership roles dependson what tan employer most valueson what tan employer most values