Fall 2005 Management 412 / Intro to HRM / Page 1 Introduction to Human Resource Management

Management 412 / Intro to HRM / Page 2 Fall 2005 Reading List Caudron, S. (January 2003). HR is dead - Long live HR. Workforce, pp Challenger, J. A. (July 2003). Solving the looming labor crisis. USA Today Magazine, pp Cole, C. L., Gale, S. F., Greengard, S., Kiger, P. J., Lachnit, C., Raphael, T., Shuit, D. P., & Wiscombe, J. (June 2003). 25 trends that will change the way you do business. Workforce, pp Pfeffer, J. (Winter 1998). Seven practices of successful organizations. California Management Review, Raphael, T. (2003, March). At Google, the proof is in the people. Workforce, pp Sheley, E. (June, 1996). Share your worth. HRMagazine, pp Stewart, T. A. (April 13, 1998). A new way to think about employees. Fortune, pp Stewart, T. A., & Woods, W. (January 15, 1996). Taking on the last bureaucracy. Fortune, pp Stewart, T. A. (October 2, 1995). Trying to grasp the intangible. Fortune, pp Ulrich, D. (January/February 1998). A new mandate for human resources. Harvard Business Review, pp Zimmerman, E. (February 2001). What are employees worth? Workforce, pp

Management 412 / Intro to HRM / Page 3 Fall 2005 Introduction to HRM Two questions: Does it matter? Why does it matter? What is HRM? Organization’s methods and procedures for managing people to enhance skills and motivation Activities to enhance the organization’s ability to attract, select, retain and motivate people

Management 412 / Intro to HRM / Page 4 Fall 2005 The Death of HR ? Traditional “personnel” function Recordkeeping Perceived as a dumping ground The death of HR? HR’s rebirth Sources: Caudron (2003); Schuler (1990); Schuler & Walker (1990); Stewart (1996); Sunoo & Laabs (1999); Ulrich (2000); Wells (2003)

Management 412 / Intro to HRM / Page 5 Fall 2005 Outsourcing HR Would it just make more sense to outsource HR functions? Many organizations are doing just this Recordkeeping and administrative, perhaps Basic functions….. Sources: Caudron (2003); Stewart & Woods (1996); Zimmerman (April 2001)

Management 412 / Intro to HRM / Page 6 Fall 2005 Approaches to Revitalizing HR Accounting for human resources Managing people for competitive advantage

Management 412 / Intro to HRM / Page 7 Fall 2005 Accounting for Human Resources Cascio’s costing approach: Cost accounting for employee outcomes Calculate cost of interventions and outcomes on individual basis Tracking costs and contributions to firm net profitability Human capital approach Employees are intangible assets, but can still be valued Based on assumed contribution of employees to corporate earnings Sources: Cascio (1982); Sheley (1996) Solomon (2000); Stewart (1995); Zimmerman (February 2001)

Management 412 / Intro to HRM / Page 8 Fall 2005 Costing HR: Example The costs of turnover per individual: Exit interviews Unemployment tax Recruitment advertising Staff time to interview applicants Reference checking, medical exams Training new employees Costs of reducing turnover Additional training Realistic job previews Net savings Calculated per person, then totaled Source: Cascio (1982)

Management 412 / Intro to HRM / Page 9 Fall 2005 Human Capital: The Steps Determine three years’ total pretax earnings Determine average assets over same three years Calculate firm’s return on assets (ROA) Determine industry average ROA Calculate “excess returns” Subtract taxes Calculate net present value of excess return Result: “intangible value” of firm’s human capital Sources: Stewart (October 1995); Zimmerman (February 2001)

Management 412 / Intro to HRM / Page 10 Fall 2005 Human Resources and Competitive Advantage The basic idea: establishing and maintaining competitive advantage through people. Competitive advantage: Valuable, rare, inimitable, nonsubstitutable Achieved not through strategy, but strategy implementation Source: Pfeffer (1994, 1998)

Management 412 / Intro to HRM / Page 11 Fall 2005 Traditional Sources of Competitive Advantage…and Where They’ve Gone Product and process technology Technological innovations make innovation easier and faster Development and manufacturing technology freely available Protected and regulated markets Move to global economy Deregulation Access to financial resources Global capital market Venture capital Economies of scale Fragmented markets Less important with advances in technology So, what’s left… people Source: Pfeffer (1994, 1998)

Management 412 / Intro to HRM / Page 12 Fall 2005 Competitive Advantage Through People Viewing the work force as an asset, not an expense The result: Harder work, from increased involvement and commitment Smarter work, through enhanced skills and competence Lower overhead, by pushing responsibility downward High performance work systems Source: Pfeffer (1994, 1998)

Management 412 / Intro to HRM / Page 13 Fall 2005 Employment security Selective hiring Self managed teams and decentralized decision making High compensation, based on organizational performance Extensive training Reduced status distinctions Extensive information sharing (both financial and performance) High-Performance Work Systems: The Seven Practices Critical to remember that all of these are part of a system Source: Pfeffer (1994, 1998)

Management 412 / Intro to HRM / Page 14 Fall 2005 The Research Evidence Garment manufacturing Steel minimills Initial public offerings

Management 412 / Intro to HRM / Page 15 Fall 2005 Garment Manufacturing Bundle system = traditional assembly line (the employee receives a bundle of garments, does one thing, then passes the bundle on to the next worker) Modular system = small cross-trained and self- managed work teams, team pay Source: Pfeffer (1998)

Management 412 / Intro to HRM / Page 16 Fall 2005 The Minimills * 1 = very little to 6 = very much Source: Pfeffer (1998)

Management 412 / Intro to HRM / Page 17 Fall 2005 The Case of the IPOs Source: Pfeffer (1998)

Management 412 / Intro to HRM / Page 18 Fall 2005 Why Not? The Downward Performance Spiral Individual Behaviors Decreased motivation More accidents Higher turnover Reduced effort Performance Problems Low profits High costs Poor customer service Low stock price Organizational Response Reduce training Layoffs Salary freeze Contingent staffing Source: Pfeffer (1998)

Management 412 / Intro to HRM / Page 19 Fall 2005 Aligning Strategy and HR Determine the firm’s strategy Determine the competencies needed to carry out the strategy Examine current management practices Determine congruence Do the current practices work to enhance needed competencies? Are the current practices internally consistent? Source: Pfeffer (1998)

Management 412 / Intro to HRM / Page 20 Fall 2005 External Influences on HRM Economic conditions Legal requirements and constraints Demographics Technology 7

Management 412 / Intro to HRM / Page 21 Fall 2005 General Economic Conditions Global economy Lower wage levels vs. quality and productivity Ethical issues and political considerations Domestic factors Move from manufacturing economy to service / information economy Mergers  duplication of functions  layoffs Supply and demand of labor, which, in turn, influences price. Supply and demand of company’s product, which determines available resources Sources: Challenger (2003); Cole, et al. (2003)

Management 412 / Intro to HRM / Page 22 Fall 2005 Changes in the U.S. Economy, 1939 to Present Source: U.S. Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM / Page 23 Fall 2005 Fastest Growing Occupations, (by percentage growth) Source: Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM / Page 24 Fall 2005 Fastest Growing Occupations, (by number of jobs) Source: Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM / Page 25 Fall 2005 Legal Requirements and Constraints Government now an intermediary in the relationship between employers and employees Legal requirements and constraints are usually a reflection of social attitudes and opinions

Management 412 / Intro to HRM / Page 26 Fall 2005 Demographics Supply of labor (number of people, skills, etc.) New skills needed, but are they present in workforce? Basic skills availability? Different needs of different groups in the population Increasing number of women in paid workforce Dual-earner families Family friendly benefits Aging population Sources: Challenger (2003); Cole, et al. (2003)

Management 412 / Intro to HRM / Page 27 Fall 2005 Participation in the Paid Labor Force by Gender: 1948 to 2004 Source: Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM / Page 28 Fall 2005 Technology New jobs; old jobs vanish Need for new skills Need for continuous skills development Managing the HR function Data management Employee communications

Management 412 / Intro to HRM / Page 29 Fall 2005 HR Functions: What We’ll Be Looking At Reward Systems Legal Compliance Staffing Planning Training and Development Employee and Labor Relations