Introduction to Human Resource Management

Fall 2008Management 412 / Intro to HRMPage 2 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

Fall 2008Management 412 / Intro to HRMPage 3 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)

Fall 2008Management 412 / Intro to HRMPage 4 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)

Fall 2008Management 412 / Intro to HRMPage 5 Approaches to Revitalizing HR Accounting for human resources Managing people for competitive advantage

Fall 2008Management 412 / Intro to HRMPage 6 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)

Fall 2008Management 412 / Intro to HRMPage 7 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)

Fall 2008Management 412 / Intro to HRMPage 8 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)

Fall 2008Management 412 / Intro to HRMPage 9 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)

Fall 2008Management 412 / Intro to HRMPage 10 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)

Fall 2008Management 412 / Intro to HRMPage 11 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)

Fall 2008Management 412 / Intro to HRMPage 12 High-Performance Work Systems: The Seven Practices 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) Critical to remember that all of these are part of a system Source: Pfeffer (1994, 1998)

Fall 2008Management 412 / Intro to HRMPage 13 The Research Evidence Garment manufacturing Steel minimills Initial public offerings

Fall 2008Management 412 / Intro to HRMPage 14 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)

Fall 2008Management 412 / Intro to HRMPage 15 The Minimills * 1 = very little to 6 = very much Source: Pfeffer (1998)

Fall 2008Management 412 / Intro to HRMPage 16 The Case of the IPOs Source: Pfeffer (1998)

Fall 2008Management 412 / Intro to HRMPage 17 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)

Fall 2008Management 412 / Intro to HRMPage 18 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)

Fall 2008Management 412 / Intro to HRMPage 19 External Influences on HRM Economic conditions Legal requirements and constraints Demographics Technology

Fall 2008Management 412 / Intro to HRMPage 20 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 influences price Supply and demand of company’s product, which determines available resources Sources: Challenger (2003); Cole, et al. (2003)

Fall 2008Management 412 / Intro to HRMPage 21 Changes in the U.S. Economy, 1939 to Present Source: U.S. Department of Labor, Bureau of Labor Statistics

Fall 2008Management 412 / Intro to HRMPage 22 Fastest Growing Occupations, (by percentage growth) Source: Department of Labor, Bureau of Labor Statistics

Fall 2008Management 412 / Intro to HRMPage 23 Fastest Growing Occupations, (by number of jobs) Source: Department of Labor, Bureau of Labor Statistics

Fall 2008Management 412 / Intro to HRMPage 24 Largest Job Losses,

Fall 2008Management 412 / Intro to HRMPage 25 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

Fall 2008Management 412 / Intro to HRMPage 26 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)

Fall 2008Management 412 / Intro to HRMPage 27 Participation in the Paid Labor Force by Gender: 1948 to 2007 Source: Department of Labor, Bureau of Labor Statistics

Fall 2008Management 412 / Intro to HRMPage 28 Labor Force By Age,

Fall 2008Management 412 / Intro to HRMPage 29 Technology New jobs; old jobs vanish Need for new skills Need for continuous skills development Managing the HR function Data management Employee communications

Fall 2008Management 412 / Intro to HRMPage 30 HR Functions: What We’ll Be Looking At Reward Systems Legal Compliance Staffing Planning Training and Development Employee and Labor Relations