Managing Human Resources

Managing Human Resources
After studying this chapter, students should be able to: Explain the strategic role of human resource management. Describe federal legislation and societal trends that influence human resource management. Explain what the changing social contract between organizations and employees means for workers and human resource managers. Show how organizations determine their future staffing needs through human resource planning. Describe the tools managers use to recruit and select employees. Describe how organizations develop an effective workforce through training and performance appraisal. Explain how organizations maintain a workforce through the administration of wages and salaries, benefits, and terminations. Chapter 12 Managing Human Resources

The Strategic Role of HRM: The Strategic Approach to HRM
HR must drive organizational performance; it’s the competitive edge Matching process Integrate strategy HR builds (organizational) culture The right people: To become more competitive on a global basis For improving quality, innovation, and customer service To retain during mergers and acquisitions To apply new information technology for e-business THE STRATEGIC ROLE OF HRM IS TO DRIVE ORGANIZATIONAL PERFORMANCE The Strategic Approach Exhibit 12.1 The strategic approach to human resource management recognizes three key elements. First, all managers are involved in human resource management. Second, employees are viewed as assets. In today’s brutally competitive business environment, how a company manages its workforce may be the single most important factor in sustained competitive success. Third, HRM is a matching process, integrating the organization’s strategy and goals with the correct approach to managing human capital. Current strategic issues of particular concern to managers include: right people to become more competitive on a global basis; right people for improving quality, innovation, and customer service; right people to retain during mergers and acquisitions; and right people to apply new information technology for e-business. The three broad activities of HRM are to attract an effective workforce, develop the workforce to its potential, and maintain the workforce over the long term. Achieving these goals requires skills in planning, training, performance appraisal, wage and salary administration, benefit programs, and termination techniques DQ: Explain the strategic role of human resource management. The term human resource management (HRM) refers to activities undertaken to attract an effective workforce, develop the workforce to its potential, and maintain the workforce over the long term. These goals take place within the larger organizational environment including competitive strategy, federal legislation, and societal trends. The organization’s competitive strategy may include mergers and acquisitions, downsizing to increase efficiency, international operations, or the acquisition of automated production technology. These strategic decisions determine the demand for skills and employees. The human resource strategy, in turn, must include the correct employee makeup to implement the organization’s strategy. Discussion Question #1: Assume it is the year In your company, central planning has given way to frontline decision making, and bureaucracy has given way to teamwork. Shop floor workers use handheld devices and robots. A labor shortage currently affects many job openings, and the few applicants you do attract lack skills to work in teams, make their own production decisions, or use sophisticated technology. As vice president of human resource management since 2008, what should you have done to prepare for this situation?

12.1 Strategic HRM

Building Human Capital to Drive Performance
Strategic decisions are related to human decisions More companies rely on information, creativity, and knowledge To build Human capital, HRM develops strategies for Recruiting: Finding the best talent, T & D: Enhancing their skills and knowledge with training programs and opportunities for personal and professional development, and Providing compensation and benefits that support the sharing of knowledge and appropriately reward people for their contributions to the organization. Human Capital is the economic value of the combined knowledge, experience, skills, and capabilities of employees Building Human Capital to Drive Performance Exhibit 12.2 Human capital refers to the economic value of the combined knowledge, experience, skills, and capabilities of employees. To build human capital, HRM develops strategies for finding the best talent, enhancing their skills and knowledge with training programs and opportunities for personal and professional development, and providing compensation and benefits that support the sharing of knowledge and appropriately reward people for their contributions to the organization.

Valuing a Human Capital per employee – A Firm Value Approach
$ Human Capital per employee = Firm Value ÷ # of Employees Firm Value = [Stock Price per share] x [# of Common Stocks] Example: Suppose Laker Corporation is a public company traded on NYSE. Its stock price today is $100. The number of outstanding stocks is 1,000,000. Laker Corp. employs 1,000 people. Using a firm value approach, value the company’s human capital per employee. Solution: Firm Value = $100 x 1,000,000 shares = 100 M $ Human Capital per employee = 100 M ÷ = 100 K

Cantrell, et al. (2006): The Role and Value of Human Capital Investments [Exhibit 12.2 ]
Susan Cantrell, James M. Benton, Terry Laudal, and Robert J. Thomas, “Measuring the Value of Human Capital Investments: The SAP Case,” Strategy & Leadership, 34:2 (2006): 43-52

The Impact of Federal Legislation on HRM [Exhibit 12.3]
HR managers must stay on top of legal and regulatory environment; Many laws exist to ensure equal opportunity and stop discrimination Discrimination – the hiring or promotion of applicants based on criteria that are not job related Affirmative action – requires employers to take positive steps to guarantee equal employment opportunities for people of protected groups Sexual harassment is a growing concern that is a violation of the Civil Rights Act THE IMPACT OF FEDERAL LEGISLATION ON HRM Exhibit 12.3 Several federal laws have been passed to insure equal employment opportunity (EEO). The purpose of these laws is to stop discriminatory practices that are unfair to specific groups and define enforcement agencies for these laws. EEO legislation attempts to balance the pay given to men and women and provide employment opportunities without regard to race, religion, national origin, sex, age, or disability. The Civil Rights Act of 1964 created the Equal Employment Opportunity Commission (EEOC), the major agency involved with employment discrimination. Discrimination occurs when some applicants are hired or promoted based on criteria that are not job relevant. When discrimination is found, remedies include back pay and affirmative action. Affirmative action requires an employer to take positive steps to guarantee equal employment opportunities for people within protected groups. Failure to comply with equal employment opportunity legislation can result in substantial fines and penalties for employers. One issue of concern is sexual harassment, which is a violation of Title VII of the Civil Rights Act. The EEOC guidelines specify that behavior such as unwelcome advances, requests for sexual favors, and other verbal and physical conduct of a sexual nature becomes sexual harassment when submission to the conduct is tied to continued employment or advancement, or when the behavior creates an intimidating, hostile, or offensive work environment. Discussion Question #2: If you were asked to advise a private company about its equal employment opportunity responsibilities, what two points would you emphasize as most important?

12.3 Major Federal Laws Related to HRM

The Changing Nature of Careers: OLD Social Contract
In the old social contract, the employee contributed ability, education, loyalty, and commitment in return for the company providing wages and benefits, work, advancement, and training. THE CHANGING NATURE OF CAREERS Exhibit 12.4 The Changing Social Contract In the old social contract, the employee contributed ability, education, loyalty, and commitment in return for the company providing wages and benefits, work, advancement, and training.

The Changing Nature of Careers: New Social Contract
Employees: Downsizing, outsourcing, rightsizing, and restructuring have left little stability Subsidized benefits are decreasing Employees are expected to be self-motivated Employers: Organizations must be creative with training and development New performance appraisal processes are required THE CHANGING NATURE OF CAREERS Exhibit 12.4 The Changing Social Contract – New Social Contract Volatile changes in the environment have disrupted this contract. Organizations have downsized and careers no longer necessarily progress up a vertical hierarchy. The new social contract is based on the concept of employability rather than lifetime employment. Individuals are responsible for developing their own skills and abilities, understanding their employer’s business needs, and demonstrating their value to the organization. The employer, in turn, invests in creative training and development opportunities so that people will be more employable when the company no longer needs them.

12.4 The Changing Social Contract
a cog in the machine/wheel = one part of a large system or organization eg. He was just a small cog in the large wheel of organized crime. This warehouse is an important cog in our distribution machine.

Innovations in HRM: (1) Becoming an Employer of Choice
Organizations that are highly attractive to potential employees because of HR practices that focus on: Tangible benefits such as pay and profit sharing: Starbucks – Benefits to P/T employees Intangibles (e.g., work/life balance, a trust- based work climate, a healthy corporate culture) and that embraces a long-term view to solving immediate problems Innovations in HRM Becoming an Employer of Choice An employer of choice is a company that is highly attractive to potential employees because of human resources practices that focus not just on tangible benefits such as pay and profit sharing, but also on intangibles (e.g., work/life balance, a trust-based work climate, a healthy corporate culture) and that embraces a long-term view to solving immediate problems.

Innovations in HRM (continued): (2) Using Contingent Workers
Contingent workers (temporary/part-time employees) are not permanent, maintain flexibility, and keep costs low The temporary staffing industry doubled between 2002 and 2007 and is projected to grow into a $200 billion industry by 2010. People in these temporary jobs do everything from data entry to becoming the interim CEO. Innovations in HRM Using Temporary and Part-Time Employees The temporary staffing industry doubled between 2002 and 2007 and is projected to grow into a $200 billion industry by People in these temporary jobs do everything from data entry to becoming the interim CEO. Contingent workers are people who work for an organization, but not on a permanent or full-time basis. This may include temporary placements, contracted professionals, leased employees, or part-time workers.

Innovations in HRM (continued): (3) Promoting Work-Life Balance
Critical retention strategy Helping workers lead a balanced life Part-time work and telecommuting Flexible scheduling Gen Y/Millennials demand more work-life balance On-site gym, Childcare, Eldercare, etc. Promoting Work/Life Balance Critical retention strategies Telecommuting, or using computers and telecommunications equipment to do work without going to an office, is one way organizations are helping employees lead more balanced lives. Flexible scheduling for regular employees is also important in today’s workplace, with approximately 27 percent of the U.S. workforce having flexible hours. Broad work-life initiatives have become a critical retention strategy. Managers realize that people have personal needs that may require special attention. Some HR responses include benefits such as on-site gym facilities and childcare, assistance with arranging child- and eldercare, and paid leaves. Discussion Question #5: How do you think the growing use of telecommuters, temporary and part-time workers, and virtual teams affects human resource management? How can managers improve recruiting and retention of these employees?

Finding the Right People: Attracting an Effective Workforce – 4 Steps
Planning, predicting the need for new employees based on the types of vacancies that exist Communicate with potential applicants Select those with the best potential Welcome the new employee to the organization FINDING THE RIGHT PEOPLE Exhibit 12.5 The first step in attracting a workforce is planning, predicting the need for new employees based on the types of vacancies that exist. The second step is to communicate with potential applicants; the third step is to select those with the best potential; finally, the new employee is welcomed to the organization.

Finding Right People (continued): Matching Model [Exhibit 12.5]
Underlying the organization’s effort to attract employees is a matching model, in which the organization and the individual attempt to match the needs, interests, and values they offer each other. Job sculpting is a new approach that attempts to match people to jobs that enable them to fulfill deeply embedded life interests. The idea is that people can fulfill deep-seated needs and interests on the job, which will induce them to stay with the organization.

Human Resource Planning
What new technologies are emerging? What is the volume of the business likely to be in the next 5 to 10 years? What is the turnover rate? What types of engineers will we need? How many administrative personnel will we need to support additional engineers? Can we use temporary, part-time, or virtual workers? Human Resource Planning Human resource planning is the forecasting of human resource needs and the projected matching of individuals with expected job vacancies. Human resource planning begins with several questions. What new technologies are emerging and how will they affect the work system? What is the volume of business likely to be in the next five to ten years? What is the turnover rate, and how much, if any, is avoidable? The responses to these questions are used to formulate specific HR questions pertaining to HR activities. What types of engineers will we need, and how many? How many administrative personnel will we need to support the additional engineers? Can we use temporary, part-time, or virtual workers to handle some tasks? Answers to these questions help define the direction for the organization’s HRM strategy.

Recruiting (talent acquisition)
Internal Recruiting: less costly, generates higher employee commitment, and offers career advancement Assessing Organizational Needs: Job Analysis: a systematic process of gathering and interpreting information about the essential duties, tasks, responsibilities, and context of a job Job Description: clear & concise summary of tasks, duties, responsibilities Job Specification: knowledge, skills, education, physical abilities, etc. Realistic Job Previews (RJP) – provide pertinent information; positive and negative about the job & organization Legal Considerations – recruiting practices must be legal Innovations in Recruiting: eRecruiting; Twitter, LinkedIn, and other social media Getting referrals from current employees (cash rewards, etc.) Recruiting Exhibit 12.6, Exhibit 12.7 Recruiting, sometimes referred to as talent acquisition, is defined as activities or practices that define the characteristics of applicants to whom selection procedures are applied. Many organizations use internal recruiting (promote‑from‑within) policies. Internal recruiting is less costly, generates higher employee commitment, and offers career advancement. External recruiting gains newcomers from advertising, state employment services, online recruiting services, private employment agencies, job fairs, and employee referrals. Assessing Jobs. Basic building blocks of human resource management include job analysis, job descriptions, and job specifications. Job analysis is a systematic process of gathering and interpreting information about the essential duties, tasks, responsibilities, and context of a job. A written job description is a clear and concise summary of the specific tasks, duties, and responsibilities of a job. A job specification outlines the knowledge, skills, education, physical abilities, and other characteristics needed to adequately perform the job. Realistic job previews. A realistic job preview (RJP) gives applicants all pertinent and realistic information, positive and negative, about the job and the organization. RJPs enhance employee satisfaction and reduce turnover, because they facilitate matching individuals, jobs, and organizations. Legal considerations. Organizations must ensure that their recruiting practices conform to the law. EEO laws require that recruiting and hiring decisions cannot discriminate on the basis of race, national origin, religion, and gender. The Americans with Disabilities Act underscored the need for job descriptions and specifications that reflect the job’s mental and physical specifications to prevent discrimination against people with disabilities. Affirmative action refers to the use of goals, timetables, or other methods in recruiting to promote the hiring, development, and retention of protected groups. E-cruiting. E-cruiting, or recruiting job applicants online, offers access to a wider pool of applicants. In addition to posting job openings on the company Web site, many organizations use recruiting sites such as Monster.com, Jobster and JobThread. Innovations in Recruiting. Managers have to find innovative ways approaches to recruit the right people. One highly effective approach is getting referrals from current employees who know of qualified people who would fit in with the company’s culture. Many organizations offer cash awards to employees who submit names of people who subsequently accept employment. Some companies turn to nontraditional sources to find employees when there is a tight labor market (e.g., hiring former welfare recipients, former prison inmates, refugees, or the homeless).

12.6 Sara Lee’s Required Skills for Finance Executives

12.7 PAIRE’s Recruitment and Hiring Policy
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Selecting HR professionals us a combination of devices:
Employers assess applicants for a “fit” HR professionals us a combination of devices: Application Form Avoid irrelevant questions Avoid questions w/ adverse impact Interview; cannot violate EEO guidelines Structured interviews Biographical interviews Behavioral interviews Situational interviews Panel interviews Employment Tests Cognitive ability tests Physical ability tests Personality tests Brainteasers Assessment Center Work sample tests Online Checks Selecting Exhibit 12.8 In the selection process, employers assess applicants’ characteristics in an attempt to determine the “fit” between the job and applicant characteristics. The most frequently used selection devices are the application form, interview, employment test, and assessment center. Human resource professionals may use a combination of these devices to obtain a valid prediction of employee job performance. Validity refers to the relationship between one’s score on a selection device and one’s future job performance. Application Form. The application form is used to collect information about the applicant’s education, previous job experience, and other background characteristics. Employers should avoid questions that are irrelevant to job success. Additionally, the application form should not ask questions that create an adverse impact on protected groups. Interview. The interview serves as a two-way communication channel that allows both the organization and the applicant to collect information that would otherwise be difficult to obtain. This selection technique is used in the hiring process in almost every job category in nearly every organization, but it is not generally a valid predictor of job performance, though it does have face validity (i.e. it seems valid). This is another area in which employers can get into legal trouble if they ask questions that violate EEO guidelines. Some organizations are using panel interviews, in which the candidate meets with several interviewers who take turns asking questions, to increase interview validity. Organizations are also using computer-based interviews to complement traditional interviewing information. Structured interviews use a set of standardized questions that are asked of every applicant so comparisons can easily be made. Non-directive interviews allow the applicant a great deal of freedom in determining the course of the conversation, with the interviewer taking care not to influence the person’s remarks. Discussion Question #4: Which selection criteria (personal interview, employment test, assessment center) do you think would be most valuable for predicting effective job performance for a college professor? For an assembly‑line worker in a manufacturing plant? Discuss. Notes____________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Exhibit 12.9 Employment Test. An employment test is a written or computer-based test designed to measure particular attributes such as intelligence, aptitude, ability, or personality. Many companies are particularly interested in personality inventories that measure such characteristics as openness to learning, initiative, responsibility, creativity, and emotional stability. Assessment Center. Assessment centers present a series of simulated managerial situations to groups of applicants over a two- or three-day period. One technique is the in‑basket simulation, which requires the applicant to play the role of a manager and respond to a number of memos in his or her in‑basket within a specific time period. Then, a panel assesses the applicant’s interpersonal, communication, and problem‑solving skills. Assessment centers have proven to be valid predictors of managerial success, and some organizations now use them for hiring front-line workers as well. Online Checks. One of the newest ways of gauging whether a candidate is right for the company is by seeing what the person has to say about him or herself on blogs and social networking sites. HR managers may also search online for criminal records, credit history, and other indications of the candidate’s honesty, integrity, and stability.

Linkedln (p. 336) DQ: Discuss what makes LinkedIn so special that US Cellular pays $60,000 annual fee to LinkedIn. DQ: Discuss what benefits you can get when you join LinkedIn. DQ: Explain how you can build your own professional networks even if you were not born with a silver spoon.

5 Etiquette at Job Interview
P. 339 “Manager’s Shoptalk” Communication Skills Performance Attitude Appearance Honesty

12.8 Employment Applications and Interviews: What Can You Ask?

12.9 Interview Brain Teasers
Michael Kaplan, “Job Interview Brainteasers,” Business 20 (September 2007): 35-37 William Poundstone, “Impossible Questions,” Across the Board (September-October 2003): 44-48

12.9 Interview Brain Teasers (continued)
Michael Kaplan, “Job Interview Brainteasers,” Business 20 (September 2007): 35-37 William Poundstone, “Impossible Questions,” Across the Board (September-October 2003): 44-48

Managing Talent Training and Development
On-the-Job Training Corporate Universities Promotion from Within Mentoring and Coaching Development involves teaching broader skills MANAGING TALENT Exhibit 12.10 Training and Development Training and development is a planned effort by an organization for employees to learn job‑related behaviors. The most common method of training is on‑the‑job training (OJT), in which an experienced employee “adopts” a new employee to teach him or her how to perform job duties. Cross-training places an employee in a new position for as short as a few hours or for as long as a year to develop new skills and give the organization flexibility. Corporate Universities. A corporate university is an in-house training and education facility that offers broad-based learning opportunities for employees—and frequently for customers, suppliers, and strategic partners as well—throughout their careers. Promotion from Within. Promoting from within helps companies retain valuable employees. This provides challenging assignments, prescribes new responsibilities, and helps employees grown by expanding and developing their abilities. Mentoring and Coaching. Mentoring involves experienced employees guiding and supporting newcomers or less experienced employees. Coaching is a method of directing, instructing, and training a person with the goal to develop specific management skills.

12.10 Methods and Goals of Training

Managing Talent (continued): Performance Appraisal
Observing and assessing employee performance, Recording the assessment, and Providing feedback to the employee. Give feedback and praise Reward high performers with merit pay, recognition, and other rewards – must be on-ongoing process HRM professionals concentrate on: Accurate assessment of performance Training managers to the use the performance appraisal interview effectively Performance Appraisal Performance appraisal is observing and assessing employee performance, recording the assessment, and providing feedback to the employee. During performance appraisal, skilled managers give feedback and praise concerning the acceptable elements of the employee’s performance. Performance appraisal can also reward high performers with merit pay, recognition, and other rewards. Recent thinking is that linking performance appraisal to rewards has unintended consequences, and that it should be ongoing rather than something that is done once a year as part of a consideration of raises. HRM professionals concentrate on the accurate assessment of performance and on training managers to the use the performance appraisal interview effectively.

Performance Appraisal (continued)
Assessing Performance Accurately – system should evaluate relevant performance 360-degree Feedback – uses multiple raters, including self-rating to appraise employees Jack Welch’s negative opinion of this approach Performance review ranking - managers evaluate direct reports relative to one another and categorizes each on a scale; This system pit employees against each other Assessing Performance Accurately To obtain an accurate performance rating, managers must acknowledge that jobs are multidimensional and performance may be multidimensional as well. The 360- degree feedback is a process that uses multiple raters, including self-rating, as a way to increase self-awareness of strengths and weaknesses and guide employee development. Members of the appraisal group may include supervisors, co-workers, and customers to provide appraisal of the employee from a variety of perspectives. Performance review ranking is a method in which managers evaluate direct reports relative to one another and categorizes each on a scale. Proponents say the technique provides an effective way to assess performance and offer guidance for employee development. Critics call it rank and yank, arguing that subjective judgments produce skewed results and discriminate against employees who are “different” from the mainstream, and that ranking systems significantly hinder collaboration and risk taking.

Managing Talent (continued): Performance Evaluation Errors [Ex. 12.11]
Stereotyping – placing an employee into a class or category based on a few characteristics Halo Effect - giving an employee the same rating on all dimensions of the job even if performance is good on some dimensions and not good on others. Behaviorally Anchored Rating Scales (BARS) – rating technique that relates an employee’s performance to specific job-related incidents P. 346 Performance Evaluation Errors Exhibit 12.11 Stereotyping occurs when a rater places an employee into a class or category based on one or a few traits or characteristics. Halo effect refers to giving an employee the same rating on all dimensions of the job even if performance is good on some dimensions and not good on others. The behaviorally anchored rating scale (BARS) is developed from critical incidents pertaining to job performance and is designed to help raters avoid performance evaluation errors. Each job performance scale is anchored with specific behavioral statements that describe varying degrees of performance.

12.11 Example of a Behaviorally Anchored Rating Scale (BARS)
J. P. Campbell, M.D. Dunnette, R. D. Arvey, and L. V. Hellevik, “The Development and Evaluation of Behaviorally Based Rating Scales,” Journal of Applied Psychology, 47 (1973): 15-22 Francine Alexander, “Performance Appraisals,” Small Business Reports (March 1989): The behaviorally anchored rating scale (BARS) is developed from critical incidents pertaining to job performance and is designed to help raters avoid performance evaluation errors. Each job performance scale is anchored with specific behavioral statements that describe varying degrees of performance.

IBM – Volunteer project
Learn to accomplish things collaboratively TEAMWORK, Teamplayer

Compensation Compensation – all monetary payments and all goods or commodities used to reward employees Wage and Salary Systems Merit pay system vs. Seniority Job-based pay: Fails to reward the learning behavior (development) Emphasis on hierarchy, centralized decision making & control Skill-based pay (= Competency-based pay) Encourages employees to develop their skills and competencies, thus more valuable to the firm & more employable themselves MAINTAINING AN EFFECTIVE WORKFORCE Compensation Compensation refers to all monetary payments and all goods or commodities used in lieu of money to reward employees. Developing an effective compensation system is an important part of human resource management because it helps to attract and retain talented workers. A company’s compensation system has an impact on strategic performance. Human resource managers design the pay and benefit systems to fit the company strategy and to provide compensation equity. Wage and Salary Systems Management’s strategy for the organization should be a critical determinant of the features and operations of the pay system. Job-based pay links compensation to the specific tasks that an employee performs. Skill-based pay systems encourage employees to develop skills and competencies, making them more valuable to the organization and more employable if they leave. Compensation Equity Good managers strive to maintain a sense of fairness and equity within the pay structure to maintain employee morale. Job evaluation is the process of determining the worth of jobs within the organization through an examination of job content. The intent is to pay employees fairly. Wage and salary surveys show what other organizations pay incumbents in jobs that match a sample of “key” jobs selected by the organization. Pay-for-performance Pay-for-performance, also called incentive pay, ties at least part of the compensation to employee effort and performance through merit-based pay, bonuses, team incentives, gainsharing or profit sharing. With pay-for-performance, incentives are aligned with the behaviors needed to help the organization achieve its strategic goals. Discussion Question #9: How would you go about deciding whether to use a job-based, skills-based, or pay-for-performance compensation plan for employees in a textile manufacturing plant? For waitstaff in a restaurant? For salespeople in an insurance company? Notes____________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Compensation (continued)
Compensation Equity – fairness and equity Pay for Performance (Incentive Pay) – raise productivity, cut labor costs in competitive environment DQ: Discuss weakness of job-based pay. DQ: A top research institution like Bell Lab, often pays higher salary to a new employee, a fresh Ph.D. at low rank than a senior employee. What kind of salary system does Bell Lab implement? MAINTAINING AN EFFECTIVE WORKFORCE Compensation Compensation refers to all monetary payments and all goods or commodities used in lieu of money to reward employees. Developing an effective compensation system is an important part of human resource management because it helps to attract and retain talented workers. A company’s compensation system has an impact on strategic performance. Human resource managers design the pay and benefit systems to fit the company strategy and to provide compensation equity. Wage and Salary Systems Management’s strategy for the organization should be a critical determinant of the features and operations of the pay system. Job-based pay links compensation to the specific tasks that an employee performs. Skill-based pay systems encourage employees to develop skills and competencies, making them more valuable to the organization and more employable if they leave. Compensation Equity Good managers strive to maintain a sense of fairness and equity within the pay structure to maintain employee morale. Job evaluation is the process of determining the worth of jobs within the organization through an examination of job content. The intent is to pay employees fairly. Wage and salary surveys show what other organizations pay incumbents in jobs that match a sample of “key” jobs selected by the organization. Pay-for-performance Pay-for-performance, also called incentive pay, ties at least part of the compensation to employee effort and performance through merit-based pay, bonuses, team incentives, gainsharing or profit sharing. With pay-for-performance, incentives are aligned with the behaviors needed to help the organization achieve its strategic goals. Discussion Question #9: How would you go about deciding whether to use a job-based, skills-based, or pay-for-performance compensation plan for employees in a textile manufacturing plant? For waitstaff in a restaurant? For salespeople in an insurance company? Notes____________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Benefits Social security, unemployment compensation, and workers’ compensation are required by law Benefits = 40% of labor costs in the U.S. Cafeteria-plan benefits packages allow employees to select benefits for themselves Healthcare Costs: HRM Innovation is needed to reduce the skyrocketing healthcare costs: Capitated Payment [McDonnel- Douglas to Barnes Hospital] DQ: Explain why Starbucks Company became an employer of choice, in particular, for contingent workers. Benefits The best human resource managers know a compensation package requires more than money. Benefits make up 40 percent of labor costs in the U.S. Some benefits are required by law such as Social Security, unemployment compensation, and worker’s compensation. One reason that benefits make up such a large portion of the compensation package is that health care costs have been increasing so quickly. Some firms offer cafeteria‑plan benefit packages that allow employees to select the benefits of greatest value to them. The benefits packages provided by large companies attempt to meet the needs of all employees.

Rightsizing the Organization
Reducing the company’s workforce to the “right” size; also called downsizing Make company stronger and more competitive HR Department must effectively and humanely manage the process Many organizations use communication and provide assistance to address emotional needs Rightsizing the Organization Rightsizing refers to intentionally reducing the company’s workforce to the point where the number of employees is deemed to be right for the company’s current situation. The goal is to make the company stronger and more competitive by aligning the size of the workforce with the company’s current needs. Unless HRM departments carefully manage the rightsizing process, layoffs can lead to decreased morale and performance. Managers can smooth the rightsizing process by regularly communicating with employees and providing them with as much information as possible. Managers can also use training and development to help address the emotional needs of remaining employees.

Termination Employees leave voluntarily, retire, are rightsized, and are fired for poor performance Poor performing employees can be disruptive and cause problems for morale Exit interviews can be used to learn about dissatisfaction E-Bay Case - p. 350 Termination Despite the best efforts of line managers and HRM professionals, the organization will lose employees. Terminations are valuable in maintaining an effective workforce in two ways. Employees who are poor performers can be dismissed. Productive employees often resent disruptive, low-performing employees who are allowed to stay with the company and receive pay comparable to theirs. Employers can use exit interviews as an inexpensive way to learn about pockets of dissatisfaction within the organization and use that information to reduce future turnover. An exit interview is an interview conducted with departing employees to determine why they are leaving. Enlightened companies try to find a smooth transition for departing employees. By showing concern, the company communicates the value of human resources and helps maintain a positive corporate culture.

The Changing Workplace
Demographic changes have transformed society Good organizations take steps to attract and maintain workers Diversity is no longer just the right thing to do

Globalization Organizations must compete on a global basis
Success is determined by global HR strategies International human-resource management addresses the added complexity of managing diverse people globally

Discussion Questions What is SHRM? What services/resources does SHRM provide to its members? Suppose Laker Corporation is a public company traded on NYSE. Its stock price today is $100. The number of outstanding stocks is 1,000,000. Laker Corp. employs 1,000 people. Using a firm value approach, value the company’s human capital per employee. Republicans has attempted to repeal Obama Care. What law is Obama Care related to? Discuss why the business community, in particular, owners of small business, hates Patient Protection and Affordable Care Act (2010). Explain what benefits “social contract” should provide for America, from the political economics perspectives. From the macro-economic perspectives, what does social contract offer to poor people?

Discussion Questions (continued)
Explain why Starbucks Company became an employer of choice, in particular, for contingent workers. Discuss what makes LinkedIn so special that US Cellular pays $60,000 annual fee to LinkedIn. Discuss what benefits you can get when you join LinkedIn. Explain how you can build your own professional networks even if you are not a child from the old money. Provide examples of inappropriate/illegal interview questions on (1) national origin (2) race (3) disabilities (4) age (5) religion (6) criminal record (7) marital/family status (8) education & experience (9) citizenship (10) sexual orientation. Elaborate five proper etiquette at a job interview.

Articulate your answer to the following questions: How would you weigh a jet plane without using scales? Why are manhole covers round? How many golf balls can fit inside a standard school bus? How much should you charge to wash all the windows in Seattle? You’re shrunk and trapped in a blender that will turn on in 60 seconds. What do you do? Discuss what outcomes IBM gained from a training and development project such as voluntary service in a foreign country. Explain the halo effect in performance evaluation. Explain how the BARS overcomes performance evaluation errors.

Discuss weakness of job-based pay. A top research institution like Bell Lab, often pays higher salary to a new employee, a fresh Ph.D. at low rank than a senior employee. What kind of salary system does Bell Lab implement? Discuss how the HR management department manage effectively and humanely manage the rightsizing process for remaining employees. Explain why people who left Microsoft voluntarily or involuntarily are not bitter about their former employer, from the HR management perspectives. How did e-Bay learn about high turn-over of mid-level executives? What caused the high turn-over. Explain why Jack Welch does not support the 360-degree evaluation approach. Explain how capitation (capitated payment) system works.

Discussion Questions Explain the strategic role of human resource management. Describe federal legislation and societal trends that influence human resource management. Explain what the changing social contract between organizations and employees means for workers and human resource managers. Show how organizations determine their future staffing needs through human resource planning. Describe the tools managers use to recruit and select employees. Describe how organizations develop an effective workforce through training and performance appraisal. Explain how organizations maintain a workforce through the administration of wages and salaries, benefits, and terminations.

Managing Human Resources

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