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University of Management and Technology 1901 N. Fort Myer Drive Arlington, VA USA Phone: (703) Fax: (703) Website:

2 Chapter 8: Managing Human Resources and Labor Relations
Griffin, R. W. & Ebert, R. J. Business (7th ed.) © 2004 Prentice Hall.

3 Learning Objectives Upon successful completion, the student will be able to: Describe The Foundations of Human Resource Management Define The Staffing the Organization Understand Developing the Workforce Explain The Compensation and Benefits Describe The Legal Context of HR Management Understand New Challenges in the Changing Workplace Explain The Dealing With Organized Labor Define Collective Bargaining

4 The Foundations of Human Resource Management (HRM)
The ability to attract and retain talented and motivated employees often marks the difference between success and failure in today’s competitive business environment. Human Resource Management—set of organizational activities directed at attracting, developing, and maintaining an effective workforce.

5 The Strategic Importance of HRM
Human resources are critical for effective organizational functioning. HRM (or personnel, as it is sometimes called) was once relegated to second-class status in many organizations, but its importance has grown dramatically in the last several years. This new importance stems from increased legal complexities, the recognition that human resources are a valuable means for improving productivity, and the awareness today of the costs associated with poor human resource management. Poor human resource planning can result in spurts of hiring followed by layoffs—costly in terms of unemployment compensation payments, training expenses, and morale.

6 The Strategic Importance of HRM
Consequently, the chief human resource executive of most large businesses is a vice president directly accountable to the CEO, and many firms are developing strategic HR plans that are integrated with other strategic planning activities.

7 Human Resource Planning
Job analysis is a systematic analysis of jobs within an organization. The results: Job description is an outline of the duties of a job, working conditions and the tools, materials, and equipment used to perform it Job specification is a description of the skills, abilities and other credentials required by a job Job analysis information is used in many HR activities. For instance, knowing about job content and job requirements is necessary to develop appropriate selection methods and job-relevant performance systems and to set equitable compensation rates.

8 Human Resource Planning
As you can see in the figure, the starting point in attracting qualified human resources is planning. In turn, HR planning involves job analysis and forecasting the demand for and supply of labor. The Human Resource Planning Process

9 Human Resource Planning
Forecasting HR Demand and Supply After managers fully understand the jobs to be performed within an organization, they can start planning for the organization’s future HR needs. The manager starts by assessing trends in past HR usage, future organizational plans, and general economic trends. A good sales forecast is often the foundation, especially for smaller organizations. Historical ratios can then be used to predict demand for types of employees, such as operating employees and sales representatives. Large organizations use much more complicated models to predict HR needs.

10 Human Resource Planning
Forecasting the supply of labor is two tasks: Forecasting internal supply—the number and type of employees who will be in the firm at some future date Forecasting external supply—the number and type of people who will be available for hiring from the labor market at large

11 Human Resource Planning
Replacement Chart—listing of each managerial position, who occupies it, how long that person will likely stay in the job, and who is qualified as a replacement. Replacement charts are used at higher levels of the organization to plan developmental experiences for people identified as potential successors to critical managerial jobs. Skills Inventories (or Employee Information System)—computerized system containing information on each employee’s education, skills, work experiences, and career aspirations.

12 Human Resource Planning
Matching HR Supply and Demand—After comparing future demand and internal supply, managers can make plans to manage predicted shortfalls or overstaffing. If the organization needs to hire, the external labor-supply forecast helps managers plan how to recruit.

13 Staffing the Organization
When managers have determined that new employees are needed, they must then turn their attention to recruiting and hiring the right mix of people. Staffing the organization is one of the most complex and important tasks of good HR management.

14 Staffing the Organization
Recruiting Human Resources—process of attracting qualified persons to apply for open jobs. Internal Recruiting—practice of considering present employees as candidates for job openings. External Recruiting—practice of attracting people outside an organization to apply for jobs. By early 1998, unemployment had dropped to a 23-year low of 4.6 percent, making recruiting a more difficult task. By 2001, the situation reversed.

15 Staffing the Organization
How would you attract people to fill jobs in your organization in a tight labor market? Employers can make an effort to accommodate employees with disabilities, work hours limited by Social Security, and people who are homebound. What could you offer a skilled older employee to stay or come to work for your organization? An ergonomically designed workplace with accommodation for the disabled, flexible work schedules, participation in management decisions, and on-site fitness facilities.

16 Selecting Human Resources
Once the recruiting process has attracted a pool of applicants, the next step is to select someone to hire. The intend of the selection process is to gather from applicants information that will predict their job success and then to hire the candidates likely to be most successful. Of course, the organization can only gather information about factors that can be used to predict future performance. The process of determining the predictive value of information is called validation.

17 Selecting Human Resources
Application Forms The first step in selection is usually asking the candidate to fill out an application. An application form is an efficient method of gathering information about the applicant’s previous work history, educational background, and other job-related demographic data. It should not contain questions about areas unrelated to the job such as gender, religion, or national origin. Tests Tests of ability, skill, aptitude, or knowledge that is relevant to a particular job are usually the best predictors of job success, although tests of general intelligence or personality are occasionally useful as well.

18 Selecting Human Resources
Employers should test for substance abuse? YES They are an important tool for screening employees for sensitive jobs in such industries as banking, nuclear power, and drug manufacturing. Outlawing tests would lead to an increase in crime and make it harder for innocent employees to exonerate themselves.3. If employees have nothing to hide, they have nothing to lose by taking them. NO Many workers are denied employment based on test errors or refusals to be tested. Studies show that testing is not totally reliable. There are many untrained test interpreters.

19 Selecting Human Resources
Interviews Interviews are sometimes a poor predictor of job success although they remain a popular means of screening candidates. Validity can be improved by training employees to be aware of potential biases created in the interview situation and by using structured interviews, in which questions are written in advance and all interviews follow the same list of questions for each candidate.

20 Selecting Human Resources
What do you think makes a recruiter eliminate a potential employee? An elimination list (known as the “Tacky Ten”), developed by the Quaker Oats Company of Chicago, looks like this: Candidate does not make eye contact. All questions relate to benefits/salary. Candidate berates current boss/employer. Candidate smokes without asking. Candidate not knowledgeable about company’s products. Candidate is late for appointment. Candidate dresses inappropriately. Dead-mackerel-handshake syndrome. Candidate rambles on with needless details. Candidate does not respond maturely to strengths/weaknesses self-assessment.

21 Selecting Human Resources
Other Techniques Polygraph tests are declining in popularity, although some organizations require physical exams. More organizations are using drug tests, particularly in which drug-related performance problems could create serious safety hazards for customers or employees.

22 Developing the Workforce
After a company has hired new employees, if must acquaint them with the firm and their new jobs. Managers also take steps to train employees and to further develop necessary job skills. In addition, every firm has some system for performance appraisal and feedback. Unfortunately, the results of these assessments sometimes require procedures for demoting or terminating employees.

23 Training If you have participated in some kind of orientation program when you started a new job. Is this training? Yes. Orientation makes it possible for all new employees to have a clear idea of the company’s goals and values, policies, and procedures. Although organizations differ, they tend to include such topics as Company background and structure Employment policies, including overtime requirements, paydays, and termination procedures. Standards of employee conduct, such as dress codes and smoking policies Benefit programs, including insurance benefits and vacation policies Job duties and responsibilities

24 Training On-the-Job Training—work-based training, sometimes informal, conducted while an employee is in the actual work situation. As much as 60 percent of training in the United States occurs on the job. Off-the-Job Training—Training conducted in a controlled environment away from the work site. Vestibule Training—work-based training conducted in a simulated environment away from the work site. Airline pilots and machine operators frequently learn via vestibule training.

25 Performance Appraisal
Formal evaluation of an employee’s job performance in order to determine the degree to which the employee is performing effectively. The individual supervisor is usually responsible for the performance of his or her subordinates. Appraisals help managers assess the extent to which they are recruiting and selecting the best employees and contribute to effective training and appropriate compensation.

26 Performance Appraisal
For some jobs, a rating scale like the abbreviated on in the figure is useful in providing a basis for companies. Performance Rating Schedule

27 Compensation and Benefits
Set of rewards that organizations provide to individuals in return for their willingness to perform various jobs and tasks within the organization. Compensation includes base salary, incentives, bonuses, benefits, and other rewards.

28 Wages and Salaries Wages—compensation in the form of money paid for time worked. For example, workers who are paid by the hour receive wages. Salary—compensation in the form of money paid for discharging the responsibilities of a job. A salaried executive earning $100,000 per year is paid to achieve results even if that means working 5 hours one day and 15 the next, Salaries are usually expressed as an amount paid per year or per month.

29 Incentive Programs Naturally, employees feel better about their companies when they believe that they are being fairly compensated; however, studies and experience have shown that beyond a certain point, more money will not produce better performance. Indeed, neither across-the-board nor cost-of-living wage increases cause people to work harder. Money motivates employees only if it is tied directly to performance. The most common method of establishing this link is the use of incentive programs—special pay programs designed to motivate high performance. Some programs are available to individuals, whereas others are distributed on a companywide basis.

30 Incentive Programs Individual Incentives—incentive-based pay plan that rewards individual performance. Bonus—Individual performance incentive in the form of a special payment made over and above the employee’s salary Employees who fails to reach this goal earn no bonuses Merit Salary Systems—Individual incentive linking compensation to performance in nonsales jobs For example, many baseball players have contract clauses that pay them bonuses for hitting over .300, making the All-Star team, or being named Most Valuable Player.

31 Incentive Programs Pay-for-performance (or variable pay)—Individual incentive that rewards a manager for especially productive output Such incentives have long been common among top-level executives and factory workers, but variable pay goes to middle managers on the basis of companywide performance, business unit performance, personal record, or all three factors. Company-wide Incentives Profit-sharing plan—Incentive plan for distributing bonuses to employees when company profits rise above a certain level Gain-sharing plan—Incentive plan that rewards groups for productivity improvements Pay-for-knowledge plan—Incentive plan to encourage employees to learn new skills or become proficient at different jobs

32 Incentive Programs How do incentive programs encourage employees to be more productive, innovative, and committed to their work? Incentive programs link the work and productivity of an employee with his or her earnings. By making this link direct, employees can feel in control of their income and are motivated to improve not only their own performance but the performance of the company overall. Moreover, because employers show employees that their efforts will be rewarded, employees feel good about their jobs and valued as employees, creating a bond between company and employee.

33 Benefits Programs A growing part of nearly every firm’s compensation system is its benefits program. Benefits—are compensation other than wages and salaries offered by a firm to its workers. Benefits comprise a large percentage of most compensation budgets. Most companies are required by law to provide social security retirement benefits and workers’ compensation insurance (insurance for workers injured on the job). Most businesses also voluntarily provide health, life, and disability insurance. Many also allow employees to use payroll deductions to buy stock at discounted prices. Another common benefit is paid time-off for vacations and holidays.

34 Benefits Programs Retirement Plans—are prearranged company pensions provided to retired employees. Cafeteria Benefit Plan—benefit plan that sets limits on benefits per employee, each of whom may choose from a variety of alternative benefits. It allows employees to choose those benefits they really want. It may help contain benefits costs overall.

35 Equal Employment Opportunity
The basic goal of all equal employment opportunity regulation is to protect people from unfair or inappropriate discrimination in the workplace. Legally mandated nondiscrimination in employment on the basis of race, creed, sex, or national origin Protected Classes in the Workplace Protected Class—set of individuals who by nature of one or more common characteristics are protected by law from discrimination on the basis of any of those characteristics.

36 Equal Employment Opportunity
Equal Employment Opportunity Commission (EEOC)—Dept. of Justice agency created by Title VII to enforce discrimination-related laws. Affirmative Action Plan–practice of recruiting qualified employees belonging to racial, gender, or ethnic groups who are underrepresented in an organization.

37 Equal Employment Opportunity
The Glass Ceiling The glass ceiling is an invisible barrier that keeps women and minorities from reaching the highest-level positions. One theory about the glass ceiling suggests that top management has long been dominated by white males who tend to hire and promote employees who look, act, and think as they do. Another theory states that stereotyping by male middle managers leads them to believe that family life will interfere with a woman’s work. As a result, women are relegated to less-visible assignments in the company, so their work goes unnoticed by top executives and their careers stagnate.

38 Contemporary Legal Issues in HR Management
In additional to these established areas of HR legal regulation, there are several emerging legal issues that will likely become more and more important with the passage of time. These include employees safety and health, various emerging areas of discrimination law, employee rights, and employment-at-will.

39 Contemporary Legal Issues in HR Management
Employment Safety and Health Occupational Safety and Health Act of 1970 (or OSHA) sets and enforces guidelines for protecting workers from unsafe conditions and potential health hazards in the workplace. If an OSHA compliance officer believes that a violation has occurred, a citation is issued. Nonserious violations may result in fines of up to $1,000 for each incident. Serious or willful and repeated violations may incur fines of up to $10,000 per incident.

40 Emerging Areas of Discrimination Law
AIDS in the Workplace—Organizations must follow a certain set of guidelines and employ common sense when dealing with AIDS-related issues. AIDS is considered a disability under ADA. Sexual Harassment—practice or instance of making unwelcome sexual advances in the workplace. It is a violation of Title VII of the Civil Rights Act of 1964. quid pro quo harassment—form of sexual harassment in which sexual favors are requested in return for job-related benefits hostile work environment—form of sexual harassment, deriving from off-color jokes, lewd comments, and so forth, that makes the work environment uncomfortable for some employees

41 Emerging Areas of Discrimination Law
Employment-at-Will This principle, increasingly modified by legislation and judicial decision, holds that organizations should be able to retain or dismiss employees at their sole discretion, with or without reasons. Employees, however, cannot be fired for exercising rights protected by law such as filing worker compensation claims or taking time off to serve jury duty.

42 New Challenges in the Changing Workplace
Human resource managers face several ongoing challenges in their efforts to keep their organizations staffed with effective workforces. To complicate matters, new challenges arise as the economic and social environments of business change.

43 Managing Workforce Diversity
Range of workers’ attitudes, values, and behaviors that differ by gender, race, and ethnicity. Workforce diversity has been increasing in recent years and by 2006 it is expected that almost half all workers in the labor force will be women and almost one-third will be Blacks, Hispanics, Asian Americans, and others.

44 Managing Workforce Diversity
Should companies require workers to speak only English on the job? Many businesses have instituted such rules because employees complain that they feel excluded or gossiped about by those speaking to others in a foreign language. Those who may be speaking Chinese or Spanish argue that it is easier to explain work to another in a more familiar language. Experts say that most people don’t intend to be rude and are unaware of the effect speaking in a foreign tongue has on others. They suggest training in cultural-diversity issues as a solution to the problem.

45 Managing Workforce Diversity
The figure helps put the changing U.S. workforce into perspective by illustrating changes in the percentage of different groups of workers—males and females, whites, African Americans, Hispanics, Asians, and others—in the total workforce in the years 1986, 1996, and (as projected) 2006. Changing Composition of the U.S. Workforce

46 Managing Knowledge Worker
The Nature of Knowledge Work Knowledge Workers—are employees who are of value because of the knowledge that they possesses. Knowledge workers include computer scientists, engineers, and physical scientists who tend to work in high-technology firms and are usually experts in some abstract knowledge base. Knowledge Worker Management and Labor Markets The demand for knowledge workers has been growing at a dramatic rate. The growing demand for knowledge workers has inspired some fairly extreme measure for attracting them, such a high starting salaries and sign-on bonuses.

47 Contingent and Temporary Worker
Trends in Contingent and Temporary Employment—About 10 percent of the U.S. workforce currently uses an alternative form of employment relationship such as contingent or temporary employment. Contingent Worker—employee hired on something other than a full-time basis to supplement an organization’s permanent workforce. Managing Contingent and Temporary Workers—HR managers must understand how to use contingent workers by using careful planning, acknowledging both their advantages and disadvantages, and assessing the real cost of using them.

48 Contingent and Temporary Worker
Is it fair to individuals, as a regular practice, to be hired as “temps” instead of permanent employees? YES. It provides opportunity to work that employers might not offer otherwise. Some people don’t want to be tied to one company. The “temp” can assess the employer. The “temp” has flexibility to work or not. NO. There are no benefits. There is no job security. A feeling of rootlessness may occur. We are developing a transient workforce that is unprotected by mandatory benefits.

49 Dealing With Organized Labor
Labor Union—Group of individuals working together to achieve shared job-related goals, such as higher pay, shorter working hours, more job security, greater benefits, or better working conditions Labor Relations—Process of dealing with employees who are represented by a union Collective Bargaining—Process by which labor and management negotiate conditions of employment for union-represented workers.

50 Dealing With Organized Labor
Why do employees choose to join labor unions? Why do they not join labor unions? Employees form and join labor unions to protect their interests when those interests conflict with employers’ policies and practices. Employees are particularly likely to join unions if they’re dissatisfied with job and employment conditions, if they believe the union can improve job conditions, and if they can overlook the negative stereotypes of unions. Employees don’t join unions when they believe that doing so will stifle individual initiative and won’t help to ensure fair treatment by employers.

51 Unionism Today Trends in Union Membership
U.S. labor unions have experienced increasing difficulties in attracting new members. Union membership has declined, together with the percentage of successful union-organizing campaigns. There are some recent exceptions. Trends in Union-Management Relations The gradual decline in unionization in the United States has been accompanied by some significant trends in union-management relations. Unions remain quite strong in some sectors, notably the automobile and steel industries. Unions generally are in a weakened position, and many have taken a more conciliatory stance in their relations with management. Most experts agree that improved union-management relations have benefited both sides.

52 Unionism Today The figure (a) traces the decades-long decline in union membership. If public employees are excluded, then only around 11% of all private industry wage and salary employees currently belong to unions. The figure (b) illustrates the different trends in membership for public employees versus private nonfarm employees. Trends in Union Membership

53 Unionism Today Trends in Bargaining Perspectives
In the past, most union-management bargaining situations were characterized by union demands for dramatic increase in wages and salaries. A secondary issue was usually increased benefits for members. Now, however, unions often bargain for different benefits, such as job security. Of particular interest in this area is the trend toward relocating jobs to take advantage of lower labor costs in other countries. Unions, of course, want to restrict job movement, whereas companies want to save money by moving facilities—and jobs—to other countries.

54 Unionism Today The future of Unions
Despite declining membership and some loss of power, labor unions remain a major factor in the U.S. business world. Some unions still wield considerable power, especially in the traditional strongholds of goods-producing industries. Labor and management in some industries, notably airlines and steel, are beginning to favor contracts that establish formal mechanisms for greater worker input into management decisions.

55 Collective Bargaining
Collective bargaining is an ongoing process involving both the drafting and the administering of the terms of the labor contract. It begins as soon as the union is recognized as the exclusive negotiator for its members.

56 Collective Bargaining
Reaching Agreement on Contract Terms Law requires that union leaders and management representatives must sit down at the bargaining table and negotiate in good faith. Sessions focus on identifying the bargaining zone.

57 Collective Bargaining
When each side has presented its demands, sessions focus on identifying the bargaining zone. The process is shown in the figure. For example, Although an employer may initially offer no pay raise, it may expect to grant a raise of up to 6 percent. Likewise, the union may initially demand a 10-percent pay raise while expecting to accept the raise as low as 4 percent.

58 Collective Bargaining
Contract Issues Compensation—Unions generally want their members to earn higher wages; compensation is the most common contract issue. cost-of-living adjustment (COLA)–labor contract clause tying future raises to changes in consumer purchasing power wage reopener clause–clause allowing wage rates to be renegotiated during the life of the labor contract Benefits (e.g., health insurance, retirement benefits, paid holidays, working conditions)—Unions typically want employers to pay all or most of the costs of benefits.

59 Collective Bargaining
Job Security—In some cases, demands for job security entail the company’s promise not to move to another location, or a stipulation that if workforce reductions must occur, seniority will be used to determine which employees lose their jobs. Other Union Issues (e.g., working hours, overtime policies, rest period arrangements, differential pay plans for shift employees, the use of temporary workers, grievance procedures, and allowable union activities) Management Rights—Management wants as much control as possible over hiring policies and work assignments. Unions try to limit management rights by specifying hiring, assignment, and other policies.

60 When Bargaining Fails Although it is generally agreed that both parties suffer when, after bargaining, an impasse is reached and action is taken, both sides can use several tactics to support their cause. Union Tactics Strike—labor action in which employees temporarily walk off the job and refuse to work. Most strikes in the United States are economic strikes, triggered by stalemates over mandatory bargaining items including such noneconomic issues as working hours. Sympathy Strike (or Secondary Strike)—strike in which one union strikes to support action initiated by another.

61 When Bargaining Fails Other Labor Actions
Wildcat Strike—strike that is unauthorized by strikers’ union. Other Labor Actions Picketing—labor action in which workers publicize their grievances at the entrance to an employer’s facility. Boycott—labor action in which workers refuse to buy the products of a targeted employer. Slowdown—labor action in which workers perform jobs at a slower than normal pace.

62 When Bargaining Fails Management Tactics—Like workers, management can respond forcefully to an impasse. Lockout—management tactic whereby workers are denied access to the employer’s workplace. Strikebreaker—worker hired as permanent or temporary replacement for a striking employee.

63 When Bargaining Fails Mediation and Arbitration—Mediation and arbitration make use of a third party to help resolve the dispute. Mediation–method of resolving a labor dispute in which a third party suggests, but does not impose, a settlement. Voluntary Arbitration–method of resolving a labor dispute in which both parties agree to submit to the judgment of a neutral party. Compulsory Arbitration–method of resolving a labor dispute in which both parties are legally required to accept the judgment of a neutral party.

64 Summary The goal of human resource management (HRM) is to attract, develop, and maintain an effective workforce. Planning for human resources involves analyzing jobs, forecasting supply and demand for the number and types of workers necessary in the organization, and matching supply with demand for workers. Recruiting is the process of attracting qualified people to apply for open jobs. Human resource managers can recruit either internally (from within the organization) or externally (from outside the organization). Organizations use a variety of methods—including applications, tests, and interviews—to select employees from the pool of applicants.

65 Summary Once workers have been hired, performance appraisals, which typically incorporate either ranking or rating techniques, help managers decide who needs training and who should be promoted. Wages and salaries, incentives, and benefit packages may all be part of a company’s compensation program, playing a critical role in attracting and retaining qualified personnel. In recruiting, hiring, compensating, and managing workers, managers must comply with a variety of federal laws.

66 Summary Equal employment opportunity legislation forbids discrimination based on factors that do not relate to legitimate job requirements. The concept of comparable worth holds that different jobs requiring equal levels of training and skill must pay the same. And the Occupational Health and Safety Administration establishes guidelines for ensuring a safe working environment. Human resource managers must also deal with other contemporary legal issues including employment-at-will, AIDS and sexual harassment.

67 Summary Key changes that affect the workplace today include workforce diversity, the management of knowledge workers, and the growing use of contingent employees. Many firms are striving to create workforces that reflect the increasing diversity of the population, but not all firms have been equally successful in, or eager to implement, diversity programs. Recruiting, retaining, and managing knowledge workers—employees whose value is based on what they know rather than on their experience—is a particular challenge for technology-related firms who depend on them.

68 Summary Hiring contingent workers—temporary or part-time employees—is a growing trend that offers managers more flexibility, but also creates a new set of management issues. A labor union is a group of employees working together to achieve shared job-related goals, such as higher pay, shorter working hours, more job security, or improved benefits. For unionized employees, the foundation of labor-management relations is collective bargaining, the process by which union leaders and managers negotiate terms of employment for those workers represented by unions. Both labor and management have a range of tactics that they can use against each other if negotiations fail.


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