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Human Resource Management9 Human Resource Management Better Business 3rd Edition Solomon (Contributing Editor) · Poatsy · Martin chapter © 2014 Pearson Education, Inc.
© 2011 Pearson Education, Inc.What is HRM? Human Resource Management (HRM) All the activities involved in acquiring, developing and maintaining an organization’s human resources HRM Activities Acquiring Human Resources Planning labor needs Job Analysis Recruiting Selection Orientation Developing Human Resources Training and Development Performance Evals (Appraisals) Maintaining Human Resources Financial Compensation Benefits Legal Issues Impacting HRM © 2011 Pearson Education, Inc.
Human Resource ManagementLearning Objective 1: What processes are involved in human resource management? Human resource management is the organizational function that deals with the people in the business: the executives and the managers, as well as the frontline production, sales and administrative staff. Human resource management encompasses every aspect of the “human” in a business, including hiring, training, motivating, evaluating, and compensating personnel. Human resource management also works through the many challenges in today’s society, such as diversity issues, work/lifestyle preferences, and global business considerations. © 2014 Pearson Education, Inc.
Planning Staffing NeedsDetermining the optimal number of employees Clearly identifying job positions and their requirements Workforce Profile: Personnel inventory Forecasting: Based on - Age - Education - Training - Experience - Specialized skills - Current position - Previous positions - Predicted sales - Current workforce skills - Technology changes - Use of temporary workers - Turnover - Retirement - Planned reassignments Although keeping track of human resource needs at small businesses can be fairly simple, companies that add employees and continue to grow require more specific human resource planning. Poor staff planning can be costly. Being overstaffed burdens a company with the unnecessary expense of maintaining salaries, benefits, and training for surplus employees. An understaffed organization can lead to loss of sales and competitiveness if customer needs are not met on a timely basis. Staffing is comprised of two components: Determining the optimal number of employees. Clearly identifying job positions and their requirements. The current supply of employees is determined by developing a workforce profile. A workforce profile is a personnel “inventory” that includes information about each employee, such as age, education, training, experience, specialized skills, and current and previous positions held in the company. Future demand for employees is determined in a process called forecasting. Forecasting is based on several factors, such as predicted sales of the company’s goods or services, current workforce skill level, the effect of technology changes on staff needs, and changes in employment practices (such as using more or less temporary staff). In addition, staffing changes that are expected to occur through normal turnover, retirement, and any planned reassignments are also taken into consideration when forecasting. If forecasting indicates an imbalance between the supply of and demand for employees, action must be taken, such as recruitment, training, retraining, labor reductions, or changes in workforce utilization. © 2014 Pearson Education, Inc.
Planning Labor Needs Demand > Supply Supply > DemandHire – Bring in new employees Promote – Put existing employees in new, “better” positions Transfer – Moving an existing employee to a different position Supply > Demand Laid Off – termination for economic or business reason Fire – terminating the employee for performance reasons Attrition – normal reduction of the work force that occurs when employees leave the firm on their own accord (retire, find another job) Early Retirement – letting employees within a few years of retirement retire early and allowing them to receive their full benefits © 2011 Pearson Education, Inc.
© 2011 Pearson Education, Inc.Job Analysis A systematic procedure for studying jobs to determine their various elements and requirements Job description A list of the elements that make up a particular job Duties to be performed, working conditions, the jobholder’s responsibilities, the tools and equipment used on the job Job specification A list of the qualifications required to perform a particular job Skills, abilities, education, and experience Used for recruiting, selecting, evaluation, and compensation decisions © 2011 Pearson Education, Inc.
Job Descriptions & Job SpecificationsBefore making shifts in staffing levels, the human resources department completes an analytical study of the tasks to be performed within the organization. A job analysis defines in detail the particular duties and requirements of the tasks and responsibilities an employee is required to perform. In a job analysis, each task is defined by a job description, a formal statement that summarizes what the employee will do in that role. It includes the job responsibilities, the conditions under which the job will be performed, and its relationship to other functions in the organization. Job descriptions are important because they define job objectives that are used later in performance appraisals. They also can become a part of the legal contract between the employee and the employer. To assist in recruiting the right person to fulfill the job’s requirements, job specifications are also defined in the job analysis. Job specifications are the skills, education, experience, and personal attributes that candidates need to possess to fulfill the role successfully. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.Internal Recruiting Internal Recruiting – Filling job vacancies from within the organization Methods - Company intranet - Staff notice boards - In-house newsletters - Staff meetings Advantages Morale booster Less risk Faster and less costly Disadvantages Limited pool of candidates Creates cascading internal vacancies May increase resistance to change Recruitment is the process of finding, screening, and selecting people for a specific job. The recruitment process uses a variety of methods and resources. Internal recruiting, or filling job vacancies with existing employees within the business, is the first choice of many companies. Often, companies post job openings on the company intranet, staff notice boards, in-house newsletters, and in staff meetings. Internal recruitment has several advantages. It tends to be a morale booster for employees because they know that the company has an interest in promoting their own. In addition, because employer and employee have established a working relationship, there is a reduced risk of selecting an inappropriate candidate. Additionally, choosing from within is potentially quicker and less costly as it reduces costs associated with outside recruiting and shortens the length of training time. However, there are disadvantages to solely looking internally. This includes the possibility of not getting the best candidate due to a limited search process. In addition, another internal vacancy is created that must be subsequently filled. Moreover, relying on internal employees may discourage new perspectives and ideas and eventually make the business resistant to change. As a result, businesses also rely on external recruiting to meet staffing needs. © 2014 Pearson Education, Inc.
External Recruiting: Finding Candidates from Outside the OrganizationDepending on the type of position, employment agencies or consultant firms are often used. Employment agencies often specialize in specific sectors such as accounting, sales, or clerical services. Employment agencies provide a screened pool of candidates, which reduces the hiring company’s administrative burden of recruitment. However, they can be costly. Recruitment consultants, often referred to as “headhunters,” conduct more specialized searches, usually for senior management or key employees. Typically, headhunters approach individuals with good reputations rather than waiting for people looking for jobs to contact them, as is done with employment agencies. Recruitment consultants are often expensive, but the costs of finding the wrong candidate can be even higher. LinkedIn is a social networking site that connects people with others that they know through college, graduate school, or professional affiliations. It can be used by employers to find candidates for a job. It can also be used by applicants to find out more about an interviewer. Posting ads in local newspapers, on Internet job sites, or in specialized trade magazines can be advantageous methods because they are not expensive and reach a wide audience. Pursuing a recruiting process that combines external recruiting with internal recruiting can help companies find the best candidate. © 2014 Pearson Education, Inc.
Hiring: Making The Right Choice The Hiring ProcessHiring is a multistep process. The first step is to narrow down the group of applicants to form a select pool of candidates. To do this, HR managers compare the candidates’ qualifications to the job specifications. In addition, many companies use special applicant-tracking system software to sort through résumés and job applications quickly. After identifying a small pool of appropriate candidates, the managers interview them. In an interview, managers ask candidates specific questions in an effort to gauge a candidate’s personality, to clarify information in the candidate’s résumé, and to determine whether he or she is the best match for the position. The candidate might also need to complete one or more skills-related tests. If necessary, a candidate will be brought back for follow-up interviews. Before offering a candidate a position, it’s important that the company completes thorough background and reference checks. © 2014 Pearson Education, Inc.
© 2011 Pearson Education, Inc.Orientation Effective orientations are the first step in the development process Introduce employees to the company culture Strong orientation programs reduce employee turnover Formal or Informal, Long or Short © 2011 Pearson Education, Inc.
Training and DevelopmentThe process of teaching employees new skills Training Programs On-the-job training Job simulation Off-the-job training Role Playing Classroom teaching and lectures Developing Labor The process of enhancing or augmenting employees’ current skills Development Programs Conferences / Seminars Companies should train new hires to ensure that they have the proper skills to do their job. Training should teach employees different skills or ways to improve on their existing skills. Initially, when an employee is hired, the organization uses an orientation program to integrate the new employee. Other employees in the department or the recent hire’s mentor can conduct on-the-job training. In on-the-job training, employees learn different skills through the process of performing them. An apprentice training program trains individuals through a combination of classroom or formal instruction and on-the-job training. Some jobs are more readily learned through a programmed learning approach in which the employee is asked to perform step-by-step instructions or to respond to questions with immediate feedback about the accuracy of the answers. These often come in the form of computerized multiple-choice tests, which provide immediate feedback. Simulation training provides realistic job-task training in an environment away from the work environment. It is most suitable to airline pilots, astronauts, and surgeons, for whom making mistakes during training is not an option or is too costly. Online training, or distance learning, allows employees to take college classes on the Internet at their convenience, enabling employees to obtain specific job-related education or to pursue a degree program. Teletraining, video conferencing and Electronic Performance Support Systems (EPSSs) are related training methods. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.Employee Training Benefits include: Increased job satisfaction, motivation, and morale among employees Greater efficiency in work, resulting in financial gain More effective use of new technologies and methods Development of new strategies and products Lower employee turnover Fewer interpersonal conflicts and better communication Learning Objective 2: How are employees trained and evaluated? Employee training is important for many reasons, as it often contributes to: Increased job satisfaction, motivation, and morale among employees. Greater efficiency in work, resulting in financial gain. More effective use of new technologies and methods. Development of new strategies and products. Lower employee turnover. Fewer interpersonal conflicts and better communication. Companies that emphasize training and development experience greater employee productivity, loyalty, and retention, all of which are good for the bottom line. © 2014 Pearson Education, Inc.
Performance Evaluation (Appraisal) ProcessThe evaluation of an employee’s performance that gives feedback about how well the employee is doing, as well as where changes and improvements are needed. Uses of performance appraisal Let workers know how they are doing and how they can do better Provide the basis for distributing rewards Help the organization monitor employee selection, training, and development activities Three main aspects: Determines standards Evaluates performance Provides feedback A performance appraisal is an evaluation of an employee’s performance that gives feedback about how well the employee is doing, as well as where changes and improvements are needed. Managers use the results of performance appraisals in decisions about promotion, raises, additional training, or reassignments. The performance appraisal process is important for both employees and the organization as a whole. Appraisals act as a confirmation of established standards and help employees create quantifiable and measurable goals for improvement in the upcoming year. See Figure 9.5 for a sample performance appraisal document. © 2014 Pearson Education, Inc.
Problems with Performance AppraisalsDiscomfort with negative feedback Difficulty quantifying performance Lack of follow-up Although performance appraisals, when conducted properly, are very helpful to the employee and ultimately the organization, they are often not effective. Since appraisals often lead to criticism, many managers shy away from them because they are uncomfortable handing out bad or harsh comments. Additionally, some managers have a difficult time quantifying performance and fear not being able to defend their ratings if questioned. Although performance appraisals often suggest means to improve weak performance or to enhance solid performance, the process does not always offer the opportunity to follow up and ensure that such means have been acted on. Often, it’s not until the next performance appraisal that it is recognized that such training and development have not happened. And when the next appraisal can be a year away, a typical span of time for many employees, the benefits of appraisals become diluted. © 2014 Pearson Education, Inc.
Performance ManagementPerformance management is an approach that combines goal setting, performance appraisal, and training and development into a unified and ongoing process. As such, it is more of a cyclical and fluid process than the single occurrence of a performance appraisal. Employees are constantly receiving feedback and given opportunities for training and development to ensure that they have the right tools with which to perform their jobs. Performance management, appraisals, and training can play a significant role in keeping a business productive and efficient. Although they often require an investment of time and money, the investment often pays off. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.Compensation 2 Basic Ways to Compensate Employees 1) Financial Compensation The payment employees receive in return for their labor 2) Benefits Rewards in addition to regular compensation that are provided indirectly to the employee Effective employee reward systems must: Enable employees to satisfy their basic needs Provide rewards comparable to those offered by other firms Be distributed fairly in the organization Recognize that different people have different needs Learning Objective 3: What are the main components of compensating and scheduling employees? There are many ways to pay workers for their time and effort. Compensation, payment for work performed, is generally offered through direct financial payments in the form of fixed salaries (annual pay for a specific job) or wages (payments for hourly work). Salary ranges and hourly rates must be competitive to attract and keep the best employees. Usually on an annual basis, the employee’s compensation level has the potential to increase based on the results of employee evaluations. Some positions, such as those in sales, are better compensated with an incentive-based payment structure that has a lower base salary enhanced with commissions, compensation based directly on the employee’s performance. Bonuses, compensation based on total corporate profits, help tie employees’ efforts to the company’s bottom line. Higher corporate profits mean higher bonuses. © 2014 Pearson Education, Inc.
Compensation: Show Me The MoneyCompensation – Payment for Work Performed, including applicable benefits Hourly Wages – pay in exchange for the number of hours or days that an employee works Salary – the pay that employees receive over a fixed period, regardless of hours worked Benefits – noncash compensation like health care and vacation © 2011 Pearson Education, Inc.
Financial Compensation MethodsCommission Bonuses Profit Sharing Stock Options Pay for Knowledge A 401(k) plan is a defined contribution plan in which pre-tax dollars are invested and generally managed by an outside investment company. The amount of the annual contribution is determined by the employee as a percentage of salary up to a specified legal limit. In some cases, the company matches a portion of the employee’s contribution to the account. Pension plans are financial programs that provide income to individuals in their retirement. With defined benefit plans, the employee knows ahead of time how much pension they will receive when they retire. Employers take on financial risk if the fund’s investments do not perform as expected. Defined contribution plans specify the annual amount the employee will contribute to their pension plan through payroll deductions. With defined contribution plans, the actual amount received at retirement is dependent on the amount contributed and the fund’s investment earnings. A profit sharing plan is a retirement plan for businesses in which the employer alone makes contributions. The business owner can contribute and deduct between 0 and 25 percent of the eligible employee’s combined compensation. In spite of its name, profit sharing plans aren’t dependent on a company making a profit. Two groups that often have profit-sharing are top executives and employees of small businesses. Stock option plans offer shares of company stock to employees for purchase on a set date at an agreed-upon price. if the stock value increases over time, the employee reaps financial rewards. Employee stock purchase plans allow employees to purchase company stock at a discount (usually 85 percent of market value). Employee stock ownership plans are a form of defined contribution plan that allow employees to own part of the company without purchasing stock. Instead of employees purchasing stock, the company contributes its stock to the plan. © 2014 Pearson Education, Inc.
Employee Benefits: From Birthday Cakes to Death BenefitsLegally Mandated Benefits Optional Benefits Social Security Medicare Contributions Unemployment Payments Workers’ Compensation Federal Family and Medical Leave Paid Vacation & Holidays Paid Sick Days Health Insurance Retirement Programs (401k) Product Discounts Tuition Reimbursement Employee benefits are indirect financial and nonfinancial payments an employer offers that supplement cash compensation. Employees regard benefits as an important part of their total compensation package, so, as a result, benefit compensation often enables a company to attract, motivate, and retain the best employees. Benefits come in many forms, including health and disability insurance, vacation and sick pay, and retirement plans. Some companies offer flexible benefit plans that permit employees to pick from a “menu” of several choices of taxable and nontaxable forms of compensation. Flexible benefit plans allow an employee to choose those benefits that are most important to them, while reducing the cost of offering all benefits to all employees. Vacation, holidays, and pensions, once referred to as “fringe benefits,” constitute a significant percentage of total compensation, and they are expected in today’s working world. Work/life benefits are benefits that help an employee achieve a balance between the demands of life both inside and outside the workplace. Work/life benefits include flexible schedules, relaxed atmospheres, and child care and fitness/gym programs. © 2014 Pearson Education, Inc.
Flexible Work ArrangementsAlternative scheduling plans (flextime) Permanent part-time Job sharing Compressed workweek Telecommuting The U.S. Bureau of Labor and Statistics indicates over one-quarter of U.S. employees take advantage of some form of flexible work arrangement. The most popular flexible work arrangements include the following: Alternative Scheduling Plans (Flextime). Management defines a total number of required hours as a core workday and is flexible with starting and ending times. Permanent Part-Time. Workers are hired on a permanent basis to work a part-time week. Permanent part-time employees enjoy the same benefits that full-time employees receive. Job Sharing. In this arrangement two employees work part-time sharing one full-time job. Compressed Workweek. In this arrangement a traditional five-day work week is condensed into four days by allowing employees to work four 10-hour days instead of five 8-hour days or nine days (not ten) in a two-week schedule for 80 hours. Telecommuting. This allows employees to work in the office part-time and work from home part-time, or to work completely from home, making only occasional visits to the office. Increases in employee satisfaction, decreases in absenteeism, and increases in worker productivity, reductions in employee turnover, and less employee recruiting and replacement training all contribute to the benefits for companies adopting alternate schedule arrangements. © 2014 Pearson Education, Inc.
Legal Issues Impacting HRMCivil Rights Act (1964, 1991), Title VII Prohibits discrimination based on sex, race, color, religion, or national origin Enforced by EEOC (Equal Employment Opportunity Commission), 1972 Disparate Treatment – intentional discrimination Disparate Impact – unintentional discrimination Affirmative Action – plan that increases minorities and women in workforce Reverse Discrimination Sexual Harassment Quid Pro Quo Hostile Work Environment Age Discrimination Act (1967) Prevents discrimination against individuals aged 40 or above Americans with Disabilities Act (1990) Prevents discrimination against qualified individuals with disabilities, and requires employers to make reasonable accommodations AIDS Fair Labor Standards Act (1938) Establishes a minimum wage and overtime for employees working over 40 hours per week Most managers and other professionals are exempt Unemployment Compensation (1930’s) Requires employers to maintain insurance to protect workers when laid off 20 weeks in SC (most other states: 26 weeks) Several federal laws must be carefully observed during the hiring process: Federal Equal Employment Opportunity. Established in 1965, the Federal Equal Employment Opportunity Commission works to “ensure equality of opportunity by vigorously enforcing federal legislation prohibiting discrimination in employment.” This legislation is comprised of a number of different acts and laws, known as Equal Employment Opportunity laws. The Civil Rights Act of The Civil Rights Act of 1964 prohibits discrimination based on race, color, gender, religion, and national origin. Americans with Disabilities Act. The Americans with Disabilities Act of 1990 prohibits discrimination based on disabilities (or perceived disabilities). It also requires employers to make reasonable accommodations to the known disability of a qualified applicant or employee as long as it does not impose an “undue hardship” on the operation of the employer's business. Age Discrimination in Employment Act. The Age Discrimination in Employment Act of 1967 makes it unlawful to discriminate against a person because of his or her age with respect to employment. It also prohibits the inclusion of age preferences in job notices or advertisements, except in specific circumstances where age is considered necessary to the job’s function. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.Affirmative Action Affirmative Action (a series of executive orders) Applies to all employers with 50 or more employees holding federal contracts in excess of $50,000 Such employers must actively encourage job applications from members of minority groups and hire qualified employees from minority groups not fully represented in the organization Valid Affirmative Action Program Identify racial/gender imbalance Plan doesn’t unnecessarily trammel rights of majority No bar is created (no quotas) Must be temporary Many companies have employed affirmative action to increase the number of women and minorities in the workplace. While originally designed to make up for discrimination in the past, many companies see affirmative action as a strategy to improve competitiveness and the bottom line. With a more diverse workforce, the company benefits from a broad range of viewpoints. Additionally, with more diversity, the company has the ability to serve a broader range of markets. © 2014 Pearson Education, Inc.
Managing Workforce DiversityWhy is the workforce becoming more diverse? Advancements in technology Outsourcing and offshoring Hiring patterns More women Increased number of older workers Learning Objective 5: How does incorporating diversity affect the workforce? A number of factors have led to a more diverse workforce. Advancements in technology have made it much easier for businesses to operate on a global basis. Outsourcing and offshoring have created a new workforce that may be significantly different than employees in the home country. US companies are increasingly hiring workers who have emigrated from other countries. This trend is also increasingly common in Europe and the Middle East. More women are entering the workforce. As people delay retirements, there is an increased number of older workers in the workplace. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.Impact of Diversity Cultural diversity Religion Gender Age While there are many benefits to diversity, there are also challenges. With greater cultural diversity, employers will face issues such as disparate religious beliefs and practices. As employers work to accommodate workers’ religious needs, they must also try to avoid the potential friction that open demonstrations of religious practices might provoke. Many employers strike a balance by accommodating employees to practice their religion. More women are entering the workforce than ever before. Women are still battling the glass ceiling, sexism, salary inequities, and sexual harassment. The aging Baby Boomer demographics group creates several workforce challenges. Older, more experienced workers often expect higher salaries and better benefits. Health care costs are higher with an older workforce. However, many employers find that hiring and retaining older employees has several benefits including less turnover and absenteeism, lower training costs, and a willingness to learn new skills and to help and train younger coworkers. These benefits offer enough savings to a company to negate the higher costs in retaining more senior workers. © 2014 Pearson Education, Inc.
© 2014 Pearson Education, Inc.
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