Building and Managing Human Resources

Building and Managing Human Resources
Chapter 12 Building and Managing Human Resources

Learning Objectives Explain why strategic human resource management can help an organization gain a competitive advantage Describe the steps managers take to recruit and select organizational members Discuss the training and development options that ensure organization members can effectively perform their jobs

Learning Objectives Explain why performance appraisal and feedback is such a crucial activity, and list the choices managers must make in designing effective performance appraisal and feedback procedures Explain the issues managers face in determining in determining levels of pay and benefits Understand the role that labor relations play in the effective management of human resources

Human Resources Management (HRM)
The management function that is concerned with getting, training, motivating, and keeping competent employees. Balancing the supply of employees with the demand for employees. Matching the talents and skills of employees with those required by the organization. Creating a working environment that fosters high employee performance. Meeting the pay and benefits needs of employees. Human resource management (HRM) is the management function that is concerned with getting, training, motivating, and keeping competent employees. While some large organizations have Human Resources Departments, not only small-business managers but also many managers who work for large companies must make human resource decisions: recruiting candidates, reviewing application forms, interviewing applicants, inducting new employees, appraising employee performance, and providing training.

Strategic Human Resource Management
Strategic human resource management: The process by which managers design the components of a HRM system to be consistent with each other, with other elements of organizational architecture, and with the organization’s strategy and goals The objective of strategic HRM is the development of an HRM system that enhances the four building blocks of competitive advantage. - HRM activities: Recruitment and selection Training and development Performance appraisal and feedback Pay and benefits Labor relations - The objective of strategic HRM is the development of an HRM system that enhances the organization’s efficiency, quality, innovation, and responsiveness to customers - “Six Sigma” quality improvement plans ensure that an organization’s products and services are as free of errors or defects as possible through a variety of human resource-related initiatives

Overview of the components of HRM: Recruitment and selection Training and development Performance appraisal and feedback Pay and benefits Labor relations Recruitment and Selection - Used to attract and hire new employees who have the abilities, skills, and experiences that will help an organization achieve its goals Training and Development - Ensures that organizational members develop the skills and abilities that will enable them to perform their jobs effectively in the present and the future - Changes in technology and the environment require that organizational members learn new techniques and ways of working Performance Appraisal and Feedback - Provides managers with the information they need to make good human resources decisions about how to train, motivate, and reward organizational members - Feedback from performance appraisal serves a developmental purpose for members of an organization Pay and Benefits - Rewarding high performing organizational members with raises, bonuses and recognition - Increased pay provides additional incentive - Benefits, such as health insurance, reward membership in firm Labor relations - Steps that managers take to develop and maintain good working relationships with the labor unions that may represent their employees’ interests

Managers use recruitment and selection to attract and hire new employees who have the abilities, skills, and experiences that will help an organization to achieve its goals. Careful attention to the selection process can contribute to a company’s competitive advantage. After recruiting and selecting employees, managers use training and development to ensure that organizational members develop needed skills and abilities. a. Training and development is an ongoing process because of changes in technology, the environment, and organizational goals and strategies.

Performance appraisal and feedback serve two purposes in HRM. a. Performance appraisal serves as a control system that can provide managers with the information they need to make good human resources decisions. b. It also allows managers to regularly evaluate their subordinates’ performance in order to provide them with valuable information about their strengths and weaknesses. c. On the basis of performance appraisals, managers distribute pay to employees. d. By rewarding high-performing organizational members, managers increase the likelihood that these human resources are motivated to continue their high level of performance and are more likely to stay with the organization.

Benefits such as health insurance are important outcomes that employees receive by virtue of their membership in an organization. Labor relations encompass the steps that managers may take to develop and maintain good working relationships with the labor unions that may represent their employees’ interests. Managers must ensure that all five of these components fit together and complement their company’s structure and control systems. Each of the five components of HRM influences the others.

The Legal Environment of HRM
Effectively managing human resources is a complex task for managers. The local, state, and national laws and regulations that organizations must follow add to the complexity. The U.S. government’s commitment to equal employment opportunity (EEO) has resulted in a number of laws that managers must follow Equal employment opportunity (EEO) The equal right of all citizens to the opportunity to obtain employment regardless of their gender, age, race, country of origin, religion, or disabilities The treatment of individuals in all aspects of employment— hiring, promotion, training, etc. —in a fair and nonbiased manner.

Equal Employment Opportunity Commission (EEOC) enforces employment laws The Equal Employment Opportunity Commission (EEOC) is the division of the Department of Justice that enforces most of the EEO laws and handles discrimination complaints. The EEOC also issues guidelines for managers to follow to ensure that they are abiding by EEO laws

Changing National Values Economic Disparity Early Legal Developments
Historical Perspective of EEO Legislation Changing National Values Economic Disparity Early Legal Developments Civil Rights Act (1866) Unemployment Relief Act (1933) Executive Order 8802 (1941)

Government Regulation of Equal Employment Opportunity

Contemporary challenges for managers include: Eliminating sexual harassment Accommodating for employees with disabilities Dealing with employees who have substance abuse problems Managing HIV-positive employees and employees with AIDS

Table 12.1 - Major Equal Employment Opportunity Laws Affecting HRM

Recruitment and Selection
Human resource planning: All activities that managers engage in to forecast their current and future needs for human resources Current human resources are the employees an organization needs today Future human resources are the employees the organization will need at some later date. Recruitment: All activities that managers engage in to develop a pool of candidates for open positions Selection: The process that managers use to determine the relative qualifications of job applicants and their potential for performing well in a particular job

Managers must make both demand forecasts and supply forecasts. Demand forecasts estimate the qualifications and numbers of employees an organization will need, given its goals and strategies. Supply forecasts estimate the availability and qualifications of current employees and the supply of qualified workers in the external labor market.

Managers sometimes decide to outsource to fill some HR needs. Outsourcing is when managers contract with people who are not members of their organization to provide goods and services. Managers sometimes outsource because it provides them with increased flexibility and allows them to use human resources at a lower cost. Outsourcing does have disadvantages; managers may lose some control over the quality of goods and services.

The Recruitment and Selection System

Job analysis: Identifying the tasks, duties and responsibilities that make up a job(job description) and the knowledge, skills, and abilities needed to perform the job(job specifications) Needs to be done for each job in the organization Job analysis methods Observing what current workers do or interviewing them Having workers and manages fill out questionnaires Job analysis leads to the creation of a job description

Highlights in HRM

External recruiting Looking outside the organization for people who have not worked at the firm previously Newspapers advertisements, open houses, on-campus recruiting, employee referrals, and the Internet Advantages: having access to a potentially large applicant pool, being able to attract people who have the skills and knowledge desired, and being able to bring in newcomers who may have a fresh approach to problems. Disadvantages: the high cost of external recruitment, the external recruit’s lack of knowledge about the inner workings of the organization, and the uncertainty as to whether they will actually be good performers. Advantages of External Recruiting: - Having access to a potentially large applicant pool - Being able to attract people who have the skills, knowledge, and abilities an organization needs - Bringing in newcomers who may have a fresh approach to problems and be up to date on the latest technology Disadvantages of External Recruiting: - Relatively high costs - Candidates may lack knowledge about the inner workings of the organization - May need to receive more training - Uncertainty concerning whether they will actually be good performers

In spite of the many downsizings and corporate layoffs that have taken place in recent years, external recruiting remains a difficult task because job seekers often do not have the skills and abilities to fill positions that are open. Both job seekers and employees are relying with increasing frequency upon employment websites on the World Wide Web to make connections with each other.

Internal recruiting - Managers turn to existing employees to fill open positions Lateral move: A job change that entails no major changes in responsibility or authority levels Benefits of internal recruiting Internal applicants are already familiar with the organization Managers already know candidates Can help boost levels of employee motivation and morale Is normally less time-consuming and expensive. Disadvantages of internal recruiting include a pool of candidates that may be limited, a tendency among those candidates to be “set” in the organization’s ways, and a lack of suitable internal candidates.

Selection process Managers find out whether each applicant is qualified for the position and likely to be a good performer If multiple candidates meet these two conditions, managers must determine which are likely to be better performers than the others. They have several selection tools to help them sort out the relative qualifications and appraise their potential to be good performers.

Selection Tools Background Information
- Helpful to screen out applicants who are lacking key qualifications - Determine which qualified applicants are more promising than others Interviews - Structured interviews where managers ask each applicant the same job-related questions - Unstructured interviews that resemble normal conversations - Usually structured interviews preferred; bias is possible in unstructured interviews Paper-and-Pencil Tests - Ability tests assess the extent to which applicants possess the skills necessary job performance - Managers must have sound evidence that the tests are good predictors of performance Physical ability tests - Measures of dexterity, strength, and stamina for physically demanding jobs - Measures must be job related to avoid discrimination Performance tests - Tests that measure an applicant’s current ability to perform the job or part of the job such as requiring an applicant to take typing speed test - Assessment centers are facilities where managerial candidates are assessed on job-related activities over a period of a few days References - Knowledgeable sources who know the applicants’ skills, abilities, and other personal characteristics - Many former employers are reluctant to provide negative information

Selection Tools Background Information: To aid in the selection process, managers obtain background information from resumes and job applications. This information can be helpful both to screen out applicants who are lacking key qualifications and to determine which qualified applicants are more promising than others. Sometimes background checks can result in unfair treatment of prospective employees. This can happen when databases report inaccurate information or when employers become biased against an applicant after learning of a minor conviction that has no bearing his or her suitability for the job

Selection Tools Interviews: Almost all organizations use interviews during the selection process. In a structured interview, managers ask each applicant the same standard questions. Situational interview questions present interviewees with a scenario that they would likely encounter on the job and ask them to indicate how they would handle it. An unstructured interview proceeds more like an ordinary conversation. Instead of asking fixed questions, the interviewer asks probing questions to determine what the candidate is like.

Selection Tools Structured interviews are superior to unstructured interviews because they are more likely to yield information that will help identify qualified candidates, and they are less subjective. Even when structured interviews are used, the potential exists for the interviewer’s biases to influence his or her judgment. Interviewers, therefore, must be trained to avoid these biases and other sources of inaccurate perceptions. When conducting interviews, managers cannot ask questions that are irrelevant to the job in question. If they do, their organizations run the risk of costly lawsuits.

Selection Tools Managers can use interviews at various stages in the selection process. Some use interviews as initial screening devices; others use them as a final hurdle that applicants must jump. Managers typically use other selection devices in conjunction with interviews because of the potential for bias and the formation of inaccurate assessments by interviewers.

Selection Tools Paper-and-Pencil Tests: Two kinds of paper-and- pencil tests are used for selection purposes. Ability tests assess the extent to which applicants possess skills necessary for job performance, such as verbal comprehension. Personality tests measure personality traits and characteristics relevant to job performance. Use of personality tests for hiring is controversial. Before using any paper-and-pencil tests, managers should have sound evidence that the tests are actually good predictors of performance.

Selection Tools Physical Ability Tests: For jobs that require physical abilities, such as fire fighting, garbage collecting, and packaging delivery, physical ability tests can measure strength and stamina. Performance Tests: Performance tests measure job applicants’ performance on actual job tasks. Assessment centers take performance tests a step further by having applicants participate in a variety of activities over a few days. Throughout the process, current managers observe the candidates’ behavior and measure performance.

Selection Tools References: Applicants for many jobs are required to provide references from former employers or other sources who know the applicants’ skills, abilities, and other characteristics. These individuals are asked to provide candid information about the applicant. References are often used at the end of the selection process to confirm a decision to hire. Several recent lawsuits filed by applicants have caused managers to be increasingly wary of providing any kind of negative information in a reference, even if it is accurate. The reluctance of many former employers to provide negative information in references sometimes makes it difficult to interpret what a reference is really saying about an applicant.

Whatever the selection tools a manager uses, they need to be both reliable and valid. Reliability: The degree to which a tool or test measures the same thing each time it is used Scores on a selection test should be very similar if the same person is assessed with the same test on two different days. The reliability of interviews can be increased if two or more different interviewers interview the same candidate. Validity: The degree to which a tool or test measures what it purports to measure Managers have an ethical and legal obligation to use reliable and valid selection tools. However, reliability and validity are a matter of degree, rather than all-or-nothing characteristics. - Reliability Example: scores should be similar for the same person taking the same test over time - Validity Example: how well a physical ability test predicts the job performance of a firefighter

Training and Development
Training and development helps to ensure that organizational members have the knowledge and skills needed to perform jobs effectively, take on new responsibilities, and adapt to changing conditions. Training: Teaching organizational members how to perform current jobs and helping them to acquire the knowledge and skills they need to be effective performers Development: Building the knowledge and skills of organizational members to enable them to take on new responsibilities and challenges Before creating training and development programs, managers should perform a needs assessment to determine which employees need training or development and what type of skills or knowledge to need to acquire.

Question What ensures that employees develop the skills and abilities that will enable them to perform their jobs? Recruitment Selection Assessment Training The correct answer is training. Training is defined as teaching organizational members how to perform their current jobs and helping them acquire the knowledge and skills they need to be effective performers.

Needs assessment: An assessment of which employees need training or development and what type of skills or knowledge they need to acquire

Classroom Instruction - Employees acquire skills in a classroom setting - Includes use of videos, role-playing, and simulations On-the-Job Training - Employee learning occurs in the work setting as new worker does the job - Training is given by co-workers and can be done continuously to update the skills of current employees Varied Work Experiences - Top managers have need to and must build expertise in many areas - Employees identified as possible top managers are assigned different tasks and a variety of positions in an organization Formal Education - Tuition reimbursement is common for managers taking classes for MBA or job-related degrees - Long-distance learning can also be used to reduce travel and other expenses for managerial training

Training Classroom Training: Through classroom instruction, employees acquire knowledge and skills in a classroom setting. This may take place within the organization or out side it. Some organizations establish their own formal instruction divisions – some are even called colleges – to provide classroom instruction.

On-the-job training: learning occurs in the work setting as employees perform their jobs.
Co-workers or supervisors can provide on-the-job training, or it occurs simply as jobholders gain experience doing the job. Managers of use on-the-job training on a continuing basis to ensure that their subordinates keep up-to- date with changes in goals, technology, products, or customer needs and desires.

Development Types of Development: Although both classroom instruction and on-the-job training can be used for development purposes as well as training, development often includes additional activities such as varied work experiences and formal education. Varied Work Experiences: Top managers need to understand and have expertise in different functions, products, and markets. To develop managers who will have this expertise, employees with high potential are given a wide variety of job experiences in both line and staff positions.

Development With organizations becoming more global, managers need to develop an understanding of the different values, beliefs, and cultures, regions, and the way of doing business in different countries. Having a mentor can help managers seek out work experiences and assignments that will contribute to their development and gain the most they can from varied work experiences. While some mentors and protégés connect informally, organizations have found that formal mentorship programs can make valuable contributions to the development of managers and employees. Many large corporations reimburse employees for tuition expenses for taking college courses because it is an effective way to develop employees for more challenging positions. To save time and travel costs, managers are increasingly relying upon long-distance learning to formally educate and develop employees.

Development Formal Education: Many large corporations reimburse employees for tuition expenses they incur while taking college courses and obtaining advanced degrees. This is an effective way to develop employees who are able to take on new responsibilities and more challenging positions. To save time and travel costs, managers are increasingly relying on long distance learning to formally educate and develop employees. Videoconferencing technologies are being used to teach courses on video screens in corporate conference rooms and business schools are customizing courses and degrees to fit the development needs of employees in a particular company.

Transfer of Training and Development: Whenever training and development takes place off the job or in a classroom setting, it is vital for managers to promote transfer of the knowledge and skills to the actual work situation.

Performance Appraisal
The evaluation of employees’ job performance and contributions to their organization Traits appraisals Behavior appraisals Results appraisals Objective and Subjective Appraisals: The information upon which appraisals are based is either objective or subjective. Objective appraisal: An appraisal that is based on facts and is likely to be numerical Subjective appraisal: An appraisal that is based on perceptions of traits, behaviors, or results In addition to subjective appraisals, some organizations employ forced rankings, in which supervisors must rank their subordinates and assign them to different categories according to their performance. Trait Appraisals: Assessing subordinates on personal characteristics that are relevant to job performance - Disadvantages of trait appraisals: - Employees with a particular trait may choose not to use that particular trait on the job - Traits and performance are not always obviously linked - It is difficult to give feedback on traits Behavior Appraisals - Assesses how workers perform their jobs—the actual actions and behaviors that exhibit on the job - Focuses on what a worker does right and wrong and provides good feedback for employees to change their behaviors Results appraisals - Managers appraise performance by the results or the actual outcomes of work behaviors Objective appraisals - Assesses performance based on facts (e.g., sales figures) Subjective appraisals: Assessments based on a manager’s perceptions of traits, behavior, or results - Graphic rating scales - Behaviorally anchored rating scales (BARS) - Behavior observation scales (BOS) - Forced ranking systems

Trait Appraisals: When trait appraisals are used, mangers assess subordinates on personal characteristics that are relevant to job performance, such as skills, abilities, or personality. Because traits do not show a direct association with performance, workers and courts may view them as unfair and potentially discriminatory. Behavior Appraisals: Through behavior appraisals, managers assess how workers perform their jobs – the actual actions and behaviors that workers exhibit on the job. Behavior appraisals are especially useful when how workers perform their jobs is important. Behavior appraisals have the advantage of providing employees with clear information about what they are doing right and wrong and how they can improve their performance. Performance feedback from behavior appraisals is more likely to lead to performance improvements since behaviors are much easier for behaviors to change than traits.

Forced-Choice Method Essay Method Trait Methods (cont.)
Requires the rater to choose from statements designed to distinguish between successful and unsuccessful performance. 1. ______ a) Works hard _____ b) Works quickly 2. ______ a) Shows initiative _____ b) Is responsive to customers 3. ______ a) Produces poor quality _____ b) Lacks good work habits Essay Method Requires the rater to compose a statement describing employee behavior.

Management by Objectives (MBO)
Results Appraisals: With results appraisals, managers appraise performance in terms of results or the actual outcomes of work behaviors. Management by Objectives (MBO) A philosophy of management that rates performance on the basis of employee achievement of goals set by mutual agreement of employee and manager.

Question Which of the following types of appraisals is based on facts and is likely to be numerical? Trait appraisal Behavior appraisal Results appraisal Objective appraisal Objective appraisals are those that are based on facts and is likely to be numerical.

Figure 12.5 - Who Appraises Performance?
Self: Self appraisals can supplement manager view Peer appraisal: Coworkers provide appraisal; common in team settings 360 Degree: A performance appraisal by peers, subordinates, superiors, and clients who are in a position to evaluate a manager’s performance

360-Degree Performance Appraisals: In a 360-degree appraisal, a manager’s performance is appraised by a variety of people in a position to evaluate the manager’s performance. The manager then receives feedback based on evaluations from these sources. Trust is a critical ingredient if this type of performance appraisal is going to be effective. Research suggests that 360-degree appraisals should focus on behaviors rather than traits or results, and that managers need to carefully select appropriate raters. Takes great deal of time

Performance Feedback The process through which managers:
Share performance appraisal information with subordinates Give subordinates an opportunity to reflect on their own performance Develop, with subordinates, plans for the future

Performance Feedback Managers can use both formal and informal appraisals. Formal appraisals: An appraisal conducted at a set time during the year and based on performance dimensions that were specified in advance An integral part of a formal appraisal is a meeting between the manager and the subordinate in which the subordinate is given feedback on performance. Because they realize the value of performance appraisals, large corporations have committed substantial resources to updating their performance appraisal systems and teaching employees how to correctly use them. Informal appraisals: An unscheduled appraisal of ongoing progress and areas for improvement

Performance Feedback Guidelines for giving effective performance feedback: Be specific and focus on behaviors or outcomes that are correctable and within a worker’s ability to improve Approach performance appraisal as an exercise in problem solving and solution finding, not criticizing Express confidence in a subordinate ability to improve

Performance Feedback Provide performance feedback both formally and informally Praise instances of high performance and areas of a job in which a worker excels Avoid personal criticisms and treat subordinates with respect Agree to a timetable for performance improvements

Pay and Benefits Pay Includes employees’ base salaries, pay raises, and bonuses Determined by characteristics of the organization and the job and levels of performance Benefits Based on membership in an organization Include sick days, vacation days, and medical and life insurance

Pay and Benefits Pay level: The relative position of an organization’s incentives in comparison with those of other firms in the same industry employing similar kinds of workers Pay structure: The arrangement of jobs into categories based on their relative importance to the organization and its goals, level of skills, and other characteristics - Managers can decide to offer low, average or high relative wages - High wages attract and retain high performers but raise costs; low wages can cause turnover and lack of motivation but provide lower costs

Pay Rates

Pay and Benefits Benefits
Legally required - Social security, workers’ compensation, unemployment insurance Voluntary - Health insurance, retirement, day care Cafeteria-style benefits plans: A plan from which employees can choose the benefits they want

Labor Relations Labor relations: The activities managers engage in to ensure that they have effective working relationships with the labor unions that represent their employees’ interests

Question What are the activities managers engage in to ensure they have effective working relationships with unions? Collective bargaining Labor relations Employee negotiations Labor deal The correct answer labor relations. Labor relations are the activities managers engage in to ensure that they have effective working relationships with the labor unions that represent their employees’ interests.

Labor Relations Unions
Represent worker’s interests to management in organizations The power that a manager has over an individual worker causes workers to join together in unions to try to prevent this Collective bargaining: Negotiation between labor and management to resolve conflicts and disputes about issues such as working hours, wages, benefits, working conditions, and job security - Unions are permitted by the National Labor Relations Act (1935) which also created the NLRB to oversee the relationship between employers and unions. - Not all workers want unions. Union membership costs money in dues and workers might not want to strike. - Union membership is lower today than 40 years ago.

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