The Challenge of Human Resource Management

The Challenge of Human Resource Management

Why Study Human Resource Management
Staffing the organization, designing jobs and teams, developing skillful employees, identifying approaches for improving their performance, and rewarding employee successes are as relevant to line managers as they are to managers in the HR department.

To work with people effectively, we have to understand human behavior, and we have to be knowledgeable about the various systems and practices available to help us build a skilled and motivated workforce.

We have to be aware of economic, technological, social, legal, and global issues that either facilitate or constrain our efforts to achieve organizational goals.

Competitive Advantage through People
Core Competencies Integrated knowledge sets within an organization that distinguish it from its competitors and deliver value to customers. Sustained competitive advantage through people is achieved if these human resources: Have value. Are rare and unavailable to competitors. Are difficult to imitate. Are organized for synergy.

Overall Framework for Human Resource Management
COMPETITIVE CHALLENGES Globalization Technology Managing change Human capital Responsiveness Cost containment HUMAN RESOURCES Planning Recruitment Staffing Job design Training/development Appraisal Communications Compensation Benefits Labor relations EMPLOYEE CONCERNS Background diversity Age distribution Gender issues Educational levels Employee rights Privacy issues Work attitudes Family concerns

Competitive Challenges and Human Resources Management
The most pressing competitive issues facing firms: Going global Embracing technology Managing change Developing human capital Responding to the market Containing costs

CHALLENGE 1: Going Global
Globalization The trend toward opening up foreign markets to international trade and investment. Impact of Globalization Partnerships with foreign firms “Anything, anywhere, anytime” markets Lower trade and tariff barriers NAFTA, EU, APEC trade agreements WTO and GATT

Going Global (cont’d) Impact on HRM
Different geographies, cultures, laws, and business practices Issues: Identifying capable expatriate managers. Developing foreign culture and work practice training programs. Adjusting compensation plans for overseas work.

CHALLENGE 2: Embracing New Technology
Knowledge Workers Workers whose responsibilities extend beyond the physical execution of work to include planning, decision making, and problem solving. The Spread of E-commerce The Rise of Virtual Workers

Influence of Technology in HRM
Human Resources Information System (HRIS) Computerized system that provides current and accurate data for purposes of control and decision making. Benefits: Store and retrieve of large quantities of data. Combine and reconfigure data to create new information. Institutionalization of organizational knowledge. Easier communications. Lower administrative costs, increase productivity and response times.

Major Uses For HR Information Systems

Transformational Impact
Impact of IT on HRM Operational Impact Relational Impact HRM Transformational Impact

A specific example of HR transformation at Merck can be seen in the evolution of education and training. Rather than relying solely on traditional approaches to learning, Merck is developing a “blended” approach to learning.

In combination with traditional classroom experiences, Merck created web-based e-learning opportunities as well. For example, in association with Forum Corporation, Merck piloted the use of an online 560-degree diagnostic tool called Performance Compass for its Leadership Development Program. The tool helps managers assess their developmental needs and then connects them to a wide array of external training and educational resources. Similarly, Merck worked with Developmental Dimensions International (DDI) to implement an On-line Performance and Learning (OPAL) system that provides coaching tips and learning tools and resources for employees and managers.

As organizations think about making investments in IT, HR and line managers should jointly plan for its implementation. In small companies, in particular, managers should consider the following factors in their needs assessment for IT investments:

Initial costs and annual maintenance costs
Fit of software packages to the employee base Ability to upgrade Increased efficiency and time savings Compatibility with current systems User-friendliness Availability of technical support Needs for customizing Time required to implement Training time required for HR and payroll

CHALLENGE 3: Managing Change
Technology and globalization are only two of the forces driving change in organizations and HRM. As John Kotter, leadership guru, noted, "Efforts to transform organizations have increased dramatically. These changes are both driven by forces associated with technology, the globalization of competition and market and workforce demographics.”

Most employees--regardless of occupation--understand that the way things were done five or ten years ago is very different from how they are done today (or will be done in the future). Responsibilities change, job assignments change, work processes change. And this change is continuous--apart of the job--rather than temporary. Nevertheless, people often resist change because it requires them to modify or abandon ways of working that have been successful or at least familiar to them．

Managing Change Types of Change Reactive change Proactive change
Change that occurs after external forces have already affected performance Proactive change Change initiated to take advantage of targeted opportunities Formal change management programs help to keep employees focused on the success of the business.

Managing Change Why Change Efforts Fail:
Not establishing a sense of urgency. Not creating a powerful coalition to guide the effort. Lacking leaders who have a vision. Lacking leaders who communicate the vision. Not removing obstacles to the new vision. Not systematically planning for and creating short-term “wins.” Declaring victory too soon. Not anchoring changes in the corporate culture.

CHALLENGE 4: Developing Human Capital
The knowledge, skills, and capabilities of individuals that have economic value to an organization. Valuable because capital: Is based on company-specific skills. Is gained through long-term experience. Can be expanded through development.

Managers are evaluated on their progress toward meeting developmental goals. These goals focus on skill development and gaining new competencies and capabilities. In a growing number of instances, pay is attached to this knowledge and skill acquisition. Skill-based pay, for example, rewards employees for each new class of jobs they are capable of performing.

CHALLENGE 5: Responding to the Market
Total Quality Management (TQM) A set of principles and practices whose core ideas include understanding customer needs, doing things right the first time, and striving for continuous improvement. Six Sigma A process used to translate customer needs into a set of optimal tasks that are performed in concert with one another.

Responding to the Market
Reengineering Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed. Requires that managers create an environment for change. Depends on effective leadership and communication processes. Requires that administrative systems be reviewed and modified.

Today at Ford Motor Company, their most popular slogan is “Ford Has a Better Idea.” Back in the 1980s when Ford Motor Company total quality management practices were vast, the slogan of “Quality Is Job 1” made more sense. Ford wanted to produce better quality products, a stable work environment for the workforce, effective management, and profitability; all by the 1990s, “Quality is Job 1” became “Quality People, Quality Products.”

CHALLENGE 6: Containing Costs
Downsizing The planned elimination of jobs. Outsourcing Contracting outside the organization to have work done that formerly was done by internal employees. Employee Leasing The process of dismissing employees who are then hired by a leasing company (which handles all HR-related activities) and contracting with that company to lease back the employees.

Companies with No Lay-off Policy
Companies with Creative Layoff Strategies

Productivity Enhancements
ENVIRONMENT Empowerment Teams Leader support Culture Perf = f (A,M,E) MOTIVATION Job enrichment Promotions Coaching Feedback Rewards ABILITY Recruitment Selection Training Development

Demographic and Employee Concerns
In addition to the competitive challenges racing organizations, managers in general-and HR managers in particular-need to be concerned about changes in the makeup and the expectations of their employees.

Gender Distribution Women Men

Education

Changing Demographics
Social Issues and HRM Changing Demographics Shrinking pool of entry-level workers Productivity Individual differences Retirement benefits Social Security contributions Skills development Use of temporary employees

Social Issues and HRM (cont’d)
Employer/Employee Concerns Job as an entitlement Right to work Whistle-blowing Employment at will AIDS Comparable worth Concern for privacy Mandated benefits

Social Issues and HRM (cont’d)
Attitudes Toward Work and Family Day care Flextime Job sharing Alternative work schedules Elder care Job rotation Parental leave Telecommuting

Cultural Changes and HRM
The attitudes, beliefs, values, and customs of people in a society are an integral part of their culture. Naturally, their culture affects their behavior on the job and the environment within the organization, influencing their reactions to work assignments, leadership styles, and reward systems. Like the external and internal environments of which it is a part, culture is undergoing continual change. HR policies and procedures therefore must be adjusted to cope with this change.

Employee Rights Book 5 and Book 6 of The Labor Code of the Philippines

Concern for Privacy HR managers and their Staffs as well as line managers in positions of responsibility generally recognize importance of discretion in handling all types of information about employees．

Changing Attitude Towards Work
Employees today are less likely to define their personal success only in terms of financial gains. This trend has been evolving for some time, but observers have noted that it has peaked since the terrorist attacks of September

Personal fulfillment and self-expression-as well as a balance between work and family are key factors in a complex array of job attitudes. Many people view life satisfaction as more likely to result from balancing the challenges and rewards of work with those in their personal lives.

Though most people still enjoy work, and want to excel at it, they tend to be focused on finding interesting work and may pursue multiple careers rather than being satisfied with just “having a job.” People also appear to be seeking ways of living that are less complicated but more meaningful. These new lifestyles cannot help having an impact on the way employees must be motivated and managed. Consequently; HRM has become more complex than it was when employees were concerned primarily with economic survival.

Balancing Work and Family
Work and the family are connected in many subtle and not-so-subtle social, economic, and psychological ways. Because of the new forms that the family has taken-such as the two-wage-earner and the single-parent fatal/y--work organizations find it necessary to provide employees with more family-friendly options.

“Family friendly” is a broad term that may include unconventional hours, day care, part-time work, job. shying, pregnancy leave, parental leave, executive transfers, spousal involvement in career planning, assistance with family problems, and telecommuting.

Aetna Life and Casualty has cut turnover by 50 percent since it began to offer six-month parental leaves, coupled with an option for part-time work when employees return to the job. Bank of America provides tip to six weeks of paid leave for fathers. Further, Bank of America encourages all its employees to visit their children's schools or volunteer at any school - on company time.

Responsibilities of the Human Resources Manager
Advice and Counsel Service Policy formulation and implementation Employee Advocacy

Human Resource Competency Model
Business Mastery Business acumen Customer orientation External Relations HR Mastery Staffing Performance appraisal Rewards system Communication Organization design Change Mastery Interpersonal skills and influence Problem-solving skills Innovation and creativity Personal Credibility Trust Personal relationships Lived values Courage

Model of Diversity Management Strategy

Strategic HR Management and Planning

Developing Talent at Consumer goods conglomerate Procter and Gamble has had a long, successful history based on hiring at the entry level and developing and promoting its managers and executives from within. The key to this success is the organization’s Build from Within program, which tracks the performance of every manager within the organization’s top 50 jobs consistently has three internal replacement candidates lined up and ready to assume responsibility. Loyalty of employees is paramount to ensuring the success of such a program, and P&G’s history of grooming and training its employees promotes such loyalty.

Developing Talent at Fewer than 5% of the organization’s non-entry-level hires come from outside the organization, and its rigorous and competitive screening process, in which fewer than 5% of applicants are hire, ensures that P&G hires those best suited for the organization and its culture. P&G’s 138,000 employees are tracked via monthly and annual performance reviews in which managers discuss business goals, personal goals, and how they’ve trained others to assume responsibility. The latter is a key factor in the upward mobility of any manager. P&G prides itself in being able to fill any opening internally “in an hour.” All executives are required to teach in the organization’s training programs, and the CEO assumes direct responsibility for the development of the organization’s top 150 employees.

Strategic Planning and HR Planning
Strategic Human Resources Management (SHRM) The pattern of human resources deployments and activities that enable an organization to achieve its strategic goals Strategy formulation—providing input as to what is possible given the types and numbers of people available. Strategy implementation—making primary resource allocation decisions about structure, processes, and human resources.

Linking Strategic Planning and HRP
Strategic Analysis What human resources are needed and what are available? Strategic Formulation What is required and necessary in support of human resources? Strategic Implementation How will the human resources be allocated? Human Resources Planning Strategic Planning

Linking Strategic Planning and Human Resources

Step One: Mission, Vision, and Values
The basic purpose of the organization as well as its scope of operations Strategic Vision A statement about where the company is going and what it can become in the future; clarifies the long-term direction of the company and its strategic intent Core Values The strong and enduring beliefs and principles that the company uses as a foundation for its decisions

Since Mission, Vision, and Values influence HRP…
Small Group Discussion In groups of 4, discuss the Mission and Vision, of… University of Baguio Discuss whether or not the university is fulfilling its obligations according to the stated Mission and Vision. To what extent do the employees contribute to this? To what extent is the organization committed to motivate their people to be dedicated in helping the organization achieve company goals and objectives?

Step Two: Environmental Scanning
The systematic monitoring of the major external forces influencing the organization. Economic factors: general, regional, and global conditions Industry and competitive trends: new processes, services, and innovations Technological changes: robotics and office automation Government and legislative issues: laws and administrative rulings Social concerns: child care and educational priorities Demographic and labor market trends: age, composition, literacy, and immigration

The Competitive Environment
Assignment (Short bond paper; due: December 7, 2011) List and discuss the competitive environment of… ABS-CBN Who are its competitors? What distinct advantages does ABS-CBN have over its competitors? What can the company do to make sure they have the best pool of manpower considering the nature of competition in their industry?

Step Three: Internal Analysis
Culture Composition Capabilities Internal Analysis

Culture: Auditing Values, Beliefs, and Attitudes
Cultural Audits Audits of the culture and quality of work life in an organization. How do employees spend their time? How do they interact with each other? Are employees empowered? What is the predominant leadership style of managers? How do employees advance within the organization?

Capabilities: People as a Strategic Resource
Core Capabilities Integrated knowledge sets within an organization that distinguish it from its competitors and deliver value to customers. Sustained competitive advantage through people is achieved if these human resources: Are valuable. Are rare and unavailable to competitors. Your best competitive assets walk out the door every night. Are difficult to imitate. Are organized for teamwork and cooperation.

Composition: The Human Capital Architecture
Strategic Knowledge Workers Employees who have unique skills that are directly linked to the company’s strategy. Example: R&D scientists Core Employees Employees with skills to perform a predefined job that are quite valuable to a company, but not particularly unique or difficult to replace. Example: salespeople

Composition: The Human Capital Architecture (cont’d)
Supporting Labor Employees whose skills are of less strategic value and generally available in the labor market. Example: clerical workers Alliance Partners Individuals and groups with unique skills, but those skills are not directly related to a company’s core strategy. Example: consultants

Forecasting: A Critical Element of Planning
Forecasting involves: forecasting the demand for labor forecasting the supply of labor balancing supply and demand considerations.

Model of HR Forecasting

Forecasting Demand for Employees
Quantitative Methods Qualitative Methods Forecasting Demand

Quantitative Approach: Trend Analysis
Forecasting labor demand based on an organizational index such as sales: Select a business factor that best predicts human resources needs. Plot the business factor in relation to the number of employees to determine the labor productivity ratio. Compute the productivity ratio for the past five years. Calculate human resources demand by multiplying the business factor by the productivity ratio. Project human resources demand out to the target year(s).

Qualitative Approaches
Management Forecasts The opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization’s future employment needs. Delphi Technique An attempt to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals. The final forecast represents a composite group judgment.

HR Planning and Strategy Questions to Ask Business Managers
Workforce planning requires that HR leaders periodically interview their managers to gauge future workforce needs. Here are some sample questions to ask. What are your mission, vision, and values? What are your current pressing business issues? What are our organizational strengths? Who are our competitors’ organizational strengths? How do we compare? What core capabilities do we need to win in our markets?• What are the required knowledge, skills, and abilities we need to execute the winning strategy? What are the barriers to optimally achieving the strategy? What types of skills and positions will be required or no longer required? Which skills should we have internally versus contract with outside providers? What actions need to be taken to align our resources with strategy priorities? What recognition and rewards are needed to attract, motivate, and retain the employees we need? How will we know if we are effectively executing our workforce plan and staying on track?

Forecasting the Supply of Employees: Internal Labor Supply
Staffing Tables Markov Analysis Skill Inventories Replacement Charts Succession Planning

Forecasting Internal Labor Supply
Staffing Tables Graphic representations of all organizational jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements. Markov Analysis A method for tracking the pattern of employee movements through various jobs.

Hypothetical Markov Analysis for a Retail Company

Internal Demand Forecasting Tools
Skill Inventories Files of personnel education, experience, interests, skills, etc., that allow managers to quickly match job openings with employee backgrounds. Replacement Charts Listings of current jobholders and persons who are potential replacements if an opening occurs. Succession Planning The process of identifying, developing, and tracking key individuals for executive positions.

An Executive Replacement Chart

RATE THE SUCCESS OF YOUR SUCCESSION PLANNING
Succession-Planning Checklist RATE THE SUCCESS OF YOUR SUCCESSION PLANNING For each characteristic of a best-practice succession-planning and management program appearing in the left column below, enter a number to the right to indicate how well you believe your organization manages that characteristic. Ask other decision makers in your organization to complete this form individually, compile the scores, and compare notes.

Assessing a Firm’s Human Capital

Step Four: Formulating Strategy
Strategy Formulation Moving from simple analysis to devising a coherent course of action. SWOT analysis A comparison of strengths, weaknesses, opportunities, and threats for strategy formulation purposes. Use the strengths of the organization to capitalize on opportunities, counteract threats, and alleviate internal weaknesses.

Corporate Strategy Corporate Strategy
Strategic Alliances and Joint Ventures Growth and Diversification Mergers and Acquisitions Corporate Strategy

Business Strategy Value Creation
What the firm adds to a product or service by virtue of making it; the amount of benefits provided by the product or service once the costs of making it are subtracted (value = benefits — costs). Low-cost strategy: competing on productivity and efficiency Keeping costs low to offer an attractive price to customers (relative to competitors). Differentiation strategy: compete on added value Involves providing something unique and distinctive to customers that they value.

Key HR Activities Associated with Merger or Acquisition Phases

Key HR Activities Associated with Merger or Acquisition Phases (cont’d)

Business Strategy (cont’d)
Functional Strategy: Ensuring Alignment External Fit/Alignment Focuses on the connection between the business objectives and the major initiatives in HR. Internal Fit/Alignment Aligning HR practices with one another to establish a configuration that is mutually reinforcing.

Step Five: Strategy Implementation
Taking Action: Reconciling Supply and Demand Balancing demand and supply considerations Forecasting business activities (trends) Locating applicants Organizational downsizing, outsourcing, offshoring Reducing “headcount” Making layoff decisions Seniority or performance? Labor agreements

Step Six: Evaluation and Assessment
Evaluation and Assessment Issues Benchmarking: The process of comparing the organization’s processes and practices with those of other companies Human capital metrics Assess aspects of the workforce HR metrics Assess the performance of the HR function itself

Ten Measures of Human Capital
Your most important issues Human capital value added Human capital ROI Separation cost Voluntary separation rate Total labor-cost/revenue percentage Total compensation/revenue percentage Training investment factor Time to start Revenue factor

Organization/Individual Relations and Retention

Individual/Organizational Relationships
The Psychological Contract The unwritten expectations employees and employers have about the nature of their work relationships. Affected by age of employee and changes in economic conditions. Focuses on expectations about “fairness” that may not be defined clearly by employees. Psychological Ownership When individuals feel that they have some control and perceived rights in the organization, they are more likely to be committed to the organization.

Components of the Psychological Contract
Employers provide: Competitive compensation and benefits Flexibility to balance work and home life Career development opportunities Employees contribute: Continuous skill improvement and increase productivity Reasonable time with the organization Extra effort when needed

Job Satisfaction, Loyalty, and Commitment
A positive emotional state resulting from evaluating one’s job experience. Organization Commitment (Loyalty) The degree to which employees believe in and accept organizational goals and desire to remain with the organization. Continuance commitment: the likelihood that an individual will stay with rather than withdraw from the organization.

Individual Employee Performance
Individual Performance Factors Individual ability to do the work Effort level expended Organizational support Performance (P) = Ability (A) x Effort (E) x Support (S)

FIGURE 3-2 Components of Individual Performance

Individual Motivation
The desire within a person causing that person to act to reach a goal. Management Implications for Motivating Individual Performance Broad-based strategies and tactics to address individual employee concerns about: Consistency in organizational rewards Organizational support for employee efforts Accurate measurement of employee performance Desirability of rewards by employees

Retention of Human Resources
Myths About Retention Money is the main reason people leave. Hiring has nothing to do with retention. If you train people, you are only training them for another employer. Do not be concerned about retention during a merger. If solid performers want to leave, the company cannot hold them. I’m Gone

Retention of Human Resources
Why People Stay or Leave—Links, Fit, and Sacrifice Culture and values Positive, distinctive company that is well-managed, and offers exciting challenges. Attractive job Freedom and autonomy, exciting challenges, and career advancement and growth Compensation and lifestyle Differentiated pay package, high total compensation, geographic location, and respect for lifestyle

FIGURE 3-3 Drivers of Retention

FIGURE 3-4 Some Characteristics of People and Jobs

Employee Absenteeism Absenteeism
Any failure to report for work as scheduled or to stay at work when scheduled. Involuntary absenteeism Unavoidable with understandable cause (e.g., actual illness) Voluntary absenteeism Avoidable without justifiable cause (e.g., feigning illness)

Controlling Absenteeism
Disciplinary approach Positive reinforcement Combination approach Paid time-off (PTO) “No fault” policy Controlling Absenteeism

FIGURE 3-6 Employee Absenteeism Control Actions

Employee Turnover Turnover Impact of Turnover
The process in which employees leave an organization and have to be replaced. Impact of Turnover Inability to achieve business goals Loss of “image” to attract other individuals High costs of turnover and replacement Churn—hiring new workers while laying off others

Types of Turnover Turnover Involuntary Controllable Voluntary
Functional Dysfunctional Uncontrollable Controllable

HR Metrics: Measuring Absenteeism
U.S. Department of Labor formula: Other Measures of Absenteeism: Incidence rate—absences per 100 employees each day Inactivity rate—percentage of time lost to absenteeism Severity rate—average time lost per absent employee during a specified period of time

HR Metrics: Measuring Absenteeism (cont’d)
Calculations of the costs of absenteeism should usually include: Lost wages Benefits Overtime for replacements Fees for temporary employees, if incurred Supervisor’s time Substandard production Overstaffing necessary to cover absences

HR Metrics: Measuring Turnover
Computing the Turnover Rate: Costs of Turnover Separation costs Replacement costs Training costs Hidden costs

HR Metrics: Measuring Turnover (cont’d)
Ways to Measure Turnover: Job and job levels Department, units, and location Reason for leaving Length of service Demographic characteristics Education and training Knowledge, skills and abilities Performance ratings/levels

FIGURE 3-7 Simplified Turnover Costing Model
20,000 8,000 (40%) 28,000 20 3 3,500 70,000 Teller

FIGURE 3-8 Managing Retention

FIGURE 3-9 Possible Retention Interventions
Spot cash awards for good work Develop profiles of successful employees and hire to the profile Learning bonuses Focus groups on employee issues Voluntary job sharing Realist job avenues Excellent employee development Payback agreement for moving expenses Clear goals Accurate performance appraisals Competitive benefits Career counseling Mentoring Diverse workplace Sabbatical leaves Facilitate promotion/transfer Reward managers with low turnover “Fair” pay Fulfilling work Avoid hiring those with a history of turnover Tuition reimbursement and promotion for education Retention bonuses Subsidized child/elder care Retrain for promotion/transfer Pay tied to performance Telecommuting Recognize good work Good working conditions Friendly work culture/co-workers Considerate supervisors Improved Retention © 2008 Thomson/South-Western. All rights reserved.

The Challenge of Human Resource Management

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