The Human Resource Environment

Lesson 1 Overview

Lesson 1 consists of four chapters. The first chapter introduces basic terms and concepts of human resource management (HRM). Chapter 2 introduces trends in HRM. Chapter 3 introduces what’s involved in providing equal employment opportunity in a safe working environment. You’ll learn about the government agencies and laws that regulate the workplace. Finally, Chapter 4 introduces what’s involved in analyzing work and designing jobs.

Human Resources and Company PerformanceAt one time, employers were inclined to think of HRM as an overhead expense, like rent and utilities. That idea faded as thoughtful analysis determined that workers contribute inherent value to the “business of doing business.” It’s now accepted that human resource professionals contribute heavily to an organization’s success.

The concept of HRM implies that human workers are an economic asset. They provide a critical resource that has no substitute. Even when a manufacturing process is mainly operated by robots, humans must build, program, and maintain the robots. You can think of it the following way:

Human resource management means getting the most from types of human capital, which include training, experience, judgment, intelligence, relationships, and insight. It also means getting the best behavior out of human capital, which requires motivation and effort. These factors contribute to organizational performance in terms of quality, profitability, and customer satisfaction. This concept is illustrated in Figure 1.2 in your textbook.

Actual people, including human resource managers, are sophisticated. The concept of “human capital” doesn't encompass what it actually means to be human. That’s understandable in the context of balance sheets and profit-and-loss statements. Nevertheless, you’ll see that the difference between a person as human capital and a multidimensional, often unpredictable, real person presents a core challenge to human resource managers. As you’ll see in this course, human resource professionals must balance the interests of employees with the interests of managers and shareholders.

Responsibilities of Human Resources DepartmentsBelow is a concise list of the functions of HRM. Be prepared to think about them in depth as your course proceeds.

HRM involves the following:

Analyzing and designing jobs Recruiting and hiring employees Training and developing employees Managing performance Planning and administering pay and benefits Maintaining positive employee relations Establishing and administering personnel policies Managing and using human resource data Ensuring compliance with labor laws Supporting the organization’s strategy

The ability to make, analyze, and use data is a trending and sought-after skill in human resource professionals. The section in your text entitled HR How To: Making Analytics Useful and Relevant gives some useful guidelines on what to be focused on when developing analytical skills. Table 1.2 lists the top qualities employers look for in potential employees.

Skills of HRM ProfessionalsThe set of knowledge and skills required for HRM professionals, as defined by the Society for Human Resource Management (SHRM), is illustrated in Figure 1.3 in your textbook and grouped into four competencies:

1. Human relations skills.   HRM people are above all mediators and facilitators of workflow in an organization. Without well-honed social and interactional skills, they’re an impediment to that objective.

2. Decision-making skills.   To hire or not to hire? To support for promotion or to recommend for termination? Decision-making is central to HRM.

3. Leadership skills.   Being a leader doesn’t mean bossing people around. Qualities of leadership include appropriate assertiveness, respect for others, and motivating people to be their best.

4. Technical skills.   For human resource managers, technical skills include knowledge of HRM principles and techniques. In practical terms, you’ll also need to be familiar with computer software to locate and analyze data.

HR Responsibilities of SupervisorsSupervisors have responsibilities that correspond to all HRM functions. If supervisors aren’t fully aware of HRM policies and aims, there’s no effective way for human resource professionals to implement best practices and achieve an organization’s strategies.

Ethics in Human Resource ManagementEthical behavior might best be suggested by a principle that shows up in most of the world’s religions, not to mention most philosophical treatises on ethics: treat others as you would like to be treated. Ethics identifies distinctions of right and wrong and applies those distinctions in word and deed.

Employee rights include the right to:

Free consent Privacy Freedom of conscience Freedom of speech Due process

Standards of ethical behavior in the world of commerce and business rest on four principles:

1. Relations with employees, vendors, customers, and other stakeholders are based on mutual benefit.

2. Employees accept responsibility for the actions of the organization.3. Companies maintain a mission that employees can value as they show up for work each

day.4. Fairness is emphasized. Ideally, everyone’s interests are equally important.

Careers in Human Resource ManagementWhat you’ll learn here may motivate you to think seriously about a career in HRM. If so, you’ll find Figure 1.6 in your textbook interesting. It shows income potentials for HRM occupational titles. The final section of this chapter explains the organization of your text. Table 1.3 gives a concise list of the topics you’ll be studying throughout this course.

Trends in HRM

Changes in the Labor ForceWorkforce characteristics are changing in the following ways.

The workforce is aging.   According to data gathered by the United States Bureau of Labor Statistics (BLS), the fastest-growing age group is employees aged 55 and older. The percentage of workers aged 25–44 is expected to increase only slightly in the near future, and the percentage of workers aged 16–24 is expected to decrease. HRM challenges due to this aging workforce include the following:

Devoting more time and energy to retirement issues Retraining older workers Motivating workers whose careers have reached a plateau Accommodating increasing health-care costs and changing fitness needs

The workforce is becoming more diverse.   In terms of percentages:

There are more women in the workforce than there have been in the past. Ethnic minorities are increasing, largely as an effect of immigration. The percentage of men in the workforce is decreasing.

HRM challenges due to workforce diversity include the following:

Communicating effectively with people from a variety of racial and ethnic backgrounds Providing ways and means of work and career training that accommodate people from a variety

of racial and ethnic backgrounds Establishing even-handed approaches to employee appraisal Establishing work environments that foster creativity Managing compliance with immigration laws and regulations

Requisite worker skills are changing.   Physical fitness and mastery of particular machines or work processes remain important in some kinds of industries. However, new technologies and a changing economy require an increased emphasis on mathematical, verbal, and interpersonal (social) skills. More often, employees need to handle a variety of responsibilities, interact with customers, and think creatively.

HRM challenges due to changing skill requirements include the following:

Seeking out employees with advanced education. Many positions in the present-day economy require a college degree. Other positions require advanced degrees in specific areas, such as marketing, information technology, and management.

Managing the intense competition for jobs among college graduates. HRM professionals must find ways to appraise potential employees with appropriate concern for even-handed selection criteria.

Selecting people for specific jobs within certain industries. In the global economy, many positions don’t require a college degree. Yet they do require the ability to master specific job skills within an industry. For example, information technology (IT) skills specific to a position may best be provided by apprenticeship or ongoing, on-the-job training.

High-Performance Work Systems

As economic and social conditions change, so do the demands on organizations. Organizations must adapt to changing internal and external environments to survive and prosper. Customers demand high quality. Workers search for jobs with flexible hours. Consumer demand shifts rapidly. All of these things must be taken into account and accommodated for.

In this context, organizations are striving to create high-performance work systems, which means making full use of the talents and skills of their employees. Three approaches are foremost:

Knowledge Workers

The present global economy features a shift from manufacturing to service jobs. E-commerce has become a major aspect of marketing. Social media platforms such as Twitter and Facebook are transforming the ways we do business, get information, and socialize. As this happens, most new jobs are cropping up in service occupations, especially those related to education and health care.

The fastest-growing occupations are in the fields of personal and home health aides, physical therapists, and service technicians. While many of these occupations require a college degree, about as many simply require on-the-job training. The point is, the fastest-growing job opportunities are all about acquiring and polishing knowledge-based skills. You’re a knowledge worker if you provide specific, specialized knowledge to an organization. In that context, there’s a growing organizational trend toward hiring people who can think creatively and interact effectively with fellow workers and customers. Be sure to look at Table 2.1 in your textbook, which shows projections for the top 10 occupations expected to have the most new jobs and fastest rates of growth from 2014–2024.

Employee Empowerment

When workers are given responsibilities for making decisions and exercising authority (generally within a work team), they’re said to be empowered. A corollary of this employee empowerment maintains that workers who share the benefits of productivity are expected to accept responsibility for setbacks or losses as well. Looked at another way, this means that empowering employees is giving them an immediate stake in the efficiency and effectiveness of organizational operations.

Teamwork

Teamwork is a key component of flexible, creative job design. In general, a team is an assembly of employees that share and coordinate different skills to produce a product or provide a service. In manufacturing settings, the traditional assembly line is radically modified as work teams assume responsibilities for assembling components and mastering several operational tasks. Typically, teams are empowered to make decisions about work procedures, quality control, and task scheduling. In that context, line supervisors tend to take on the role of facilitators.

Meanwhile, the revolution in electronic communications permits the creation of virtual teams. For example, sales managers can meet via phone or video conferences that link key personnel in, say, Dublin, Ireland; Raleigh, North Carolina; Victoria, British Columbia; and Singapore.

Focus on Strategy

Once upon a time, managers viewed HRM as serving administrative functions. Today, managers are more often interested in allowing human resource specialists to implement or support organizational strategies. The subtopics in this section address six areas where HRM can serve organizational strategies.

High-Quality Standards

Total Quality Management (TQM) is a shared attitude, a dimension of an organization’s culture. The main idea is simple if not easy: Strive to continuously improve people performance and infrastructure. In this sense, infrastructure refers to such things as machinery, communications networks, vehicles, vehicle maintenance, traffic layouts, time management, and routing systems, to name a few. The core values of TQM include the following:

Methods and processes are designed to meet the needs of customers and other stakeholders. All employees must receive training in quality maintenance and improvement. Quality management is designed into products and services to sustain efficiency and eliminate

errors or malfunctions. Cooperation with vendors, suppliers, and customers is encouraged to improve quality and

reduce costs. Managers measure progress by monitoring feedback. Feedback must consist of measurable

data.

Mergers and Acquisitions

Mergers occur when two or more companies are integrated into a single organization. Acquisitions occur when one company buys another company. For example, NBC is a subsidiary (acquired) company of Comcast. In the global economy, mergers are often megamergers. They integrate and combine companies within an industry in several different countries. The Bayer-Monsanto merger is an example because both companies operate in several different countries.

The primary HRM challenge is easing the path toward either an acquisition or a merger. Businesses, even within the same industry, have different cultures and approaches to operations. Human resource managers can help mediate these differences when companies are joined.

Downsizing

Downsizing is often a result of a company’s need to show cost savings to its shareholders, particularly during a recession. Since the recession of 2008–2009, downsizing has stabilized. The workforce is at the mercy of the laws of supply and demand. When demand is low and consumers spending is down, production slows, and not as many workers are needed. Increased mechanization can also create the need for a smaller workforce. Look at Figure 2.5 in your textbook to get a sense of layoffs over the last decade.

The challenge for HRM people has been the increased need to assess performance in order to help organizations be as strategic as possible when making the difficult decision of who to lay off. It also falls on HRM to manage the impact on the suddenly unemployed and boost the morale of the surviving workforce.

Note that presumably humane schemes involving early retirement haven’t been cost-effective. The talents and skills of many who accepted early retirement had to be replaced by new employees—an expensive process. A humane solution for easing the pain of downsizing has been the establishment of placement agencies that can help laid-off people find new jobs.

Reengineering

As companies try to reinvent themselves for new markets, every major function of the organization has to be reengineered—sales, production, marketing, accounting, and the human resources department. In this context, HRM people must deal both with inevitable downsizing as well as retraining people as they’re assigned to new jobs.

Outsourcing

Outsourcing happens when an organization hands over one or more of its functions to another organization. For example, the XYZ Toy Company may hand over its accounting department to an outside firm. The upside of outsourcing is attaining a depth of expertise.

Interestingly, outsourcing trends have had significant effects on human resource specialists. Even as HRM departments may assist a transition to outsourcing, HRM operations are increasingly outsourced to specialized firms. According to one study, eight of ten US companies outsource at least one of their HRM functions.

Expanding into Global Markets

Offshoring is a major feature of globalization. As capital is allowed to freely cross national borders under free-trade agreements, companies have offshored operations to streamline their organizations and profit from reduced labor costs. Initially, offshoring mainly involved

manufacturing. For example, factories in China produce most of the goods for sale in US Walmart stores. Then, electronic communications technology encouraged the offshoring of both professional and service functions. India, for example, participates in the global economy by way of call centers in Mumbai, India for several US companies. Today, it has become so easy to send information and software around the world that even small companies and start-ups have been using offshoring methods to cut costs. However, greater reliance on automation and changing policy in international trade have started a trend toward reshoring, or restoring operations in North America.

HRM professionals must cope with problems associated with global markets, offshoring, reshoring, and immigration. It takes special skills to recruit properly qualified applicants from other countries and cultures. Take a look at Figure 2.6 in your textbook. It shows where immigrants to the United States came from as of 2013. Notice that more than one-third of them came from Asia. As you can imagine, HRM people engaged in this sort of work must have a rather cosmopolitan worldview, adequate familiarity with foreign cultures, and often, considerable linguistic skills. Preparing domestic personnel for jobs in foreign countries is equally challenging.

Technological Change in HRM

This section is a brief introduction to the effects of computer-related technology on human resource operations. Important features of the global economy, computers, and the Internet are shaping HRM operations. The following are a few important points:

Human resource information systems (HRIS) have become central to managing and manipulating HR data. What used to be in manila file folders is now in computer files. Data of all kinds can be analyzed through statistical programs and spreadsheets. A manager who wants a personnel report can access it via the HRIS. In general, digitized HRM data analysis can better support decision making.

In the Internet economy, HRM professionals are expected not only to help motivate employees and ensure that company managers comply with labor laws, but also craft personnel policies that balance fairness to workers with employers’ demands in a brutally competitive global economy.

Electronic human resource management (e-HRM) has become the norm. Increasingly, HRM data can be accessed online by both managers and employees. Manager X can consult the e-HRM data to decide if hiring should focus on District A instead of District B. Employee Y can go online to check on his or her benefit package, look up available vacation time, or register for online, HRM-sponsored training courses. HRM people now spend less time directly answering queries or filing paperwork. An HRIS system encourages self-service. Meanwhile, recruiting—any place in the world—can now take place through online Web postings.

Cloud computing is another technology trend that makes powerful HRIS tools available to even smaller organizations with limited computer hardware. The practice involves using a network of remote servers hosted on the Internet to store, manage, and process data.

Privacy is threatened by networked computers and the Internet environment. Most data collected for human resources is highly confidential and must be properly secured. A common HRM solution to this problem is restricting access to sensitive data by setting up an intranet. An intranet networks a firm’s local computers. Properly authorized passwords can restrict access to particular subcategories of authorized users. Another solution is an intranet platform that includes portal access to the wider Internet.

Change in the Employment RelationshipA New Psychological Contract

Previously, there was an unwritten psychological contract between employees and management. Work hard, and remain loyal to the company. In exchange, you’ll have a secure job and adequate benefits, including a rock-solid retirement plan.

That was yesterday. Today’s world no longer ensures job security. The traditional eight-hour day isn’t universal. Overtime is often expected, and employees are expected to balance work and family responsibilities as well as career goals and training. In short, employees are more or less on their own. The ambitious worker has to be creative and flexible while taking responsibility for his or her career development.

Even though more hours are expected of workers, wages in the United States have been flat or stagnant over the last 20 years—even as worker productivity has increased. It takes two incomes to approach what was the standard single-income, middle-class lifestyle for the years following World War II.

Flexibility

The nature of the global economy being what it is, workers have two options: emigrate to another country or adapt. Needless to say, most adapt. In exchange for fading job security and stagnant wages and salaries, workers are demanding and getting flexibility.

Flexible staffing amounts to alternative work arrangements:

Independent contractors are self-employed individuals, often with multiple clients. They work on a job-to-job basis and are responsible for their own health care, retirement arrangements, and work schedules.

On-call workers work for an organization only when they’re needed. Temporary workers are paid and sometimes provided benefits by staffing agencies. Client

organizations pay the agencies for the use of their temps. Contract company workers—as in the construction industries—work for a company for a

specified time and purpose based on a written contract.

Flexible work schedules are sought by people directly employed by organizations. There are many companies striving to use flexible work schedules, which often includes job sharing, to motivate employees and improve their life-satisfaction and productivity.

All of these aspects pose significant challenges for human resource professionals. You should give some time to the “Thinking Ethically” feature at the end of Chapter 2. What, in your view, should be the advice given by HRM to employers on protecting sensitive data?

HRM RegulationThis chapter gives an overview of government regulatory bodies that are intended to provide equal hiring opportunities, fair labor practices, and safe working conditions.

All three branches of government affect HR functions.

1. The legislative branch, composed of the US House and Senate, is charged with enacting laws in response to society’s needs. An example is Title VII of the Civil Rights Act.

2. The executive branch, under the president, houses a large number of quasi-judicial regulatory agencies, such as the Securities and Exchange Commission (SEC). (The term quasi-judicial refers to the legally sanctioned enforcement powers of such agencies.)

3. The judicial branch, consisting of federal district appellate (appeals) courts and the Supreme Court, may overturn legislative acts under the principle of judicial review.

Equal Employment OpportunityConstitutional Amendments

The Fourteenth Amendment ensures equal protection to all citizens under law and forbids depriving individuals of life, liberty, or property without due process of law. Under due process, the accused has a right to know the nature of the charges brought against him or her, a right to legal representation, and a right to a fair, speedy trial. The equal protection clause has been successfully used in countering reverse discrimination related to affirmative action programs.

Legislation

The Civil Rights Acts of 1866 and 1871 were meant to extend and specify implied legislation following Abraham Lincoln’s Emancipation Proclamation of 1863. The 1866 act provides equal property rights and equal rights to enter into binding contracts. The 1871 act grants citizens the right to bring suit against the government in federal courts.

Under the Equal Pay Act of 1963, men and women are entitled to equal pay for equal work. Here, the word equal refers to equivalent levels of skills and responsibilities.

Title VII of the Civil Rights Act of 1964, passed under Lyndon Johnson, created the Equal Employment Opportunity Commission (EEOC). Employers are prohibited from hiring discrimination based on race, color, religion, sex, or national origin. The act applies to any

organization with 15 or more employees. The act also forbids employers from retaliating against employees for opposing a perceived (alleged) violation of the stipulations of Title VII.

The Age Discrimination in Employment Act (ADEA) of 1967 forbids discrimination against employees based on age (40 or older up to an accepted retirement age). In effect, a company’s hiring, promotion, and firing policies shouldn’t discriminate against older and, as a rule, better-paid employees simply on the basis of age. Figure 3.1 in your textbook graphs the frequency of age discrimination complaints from 2001 to 2015. Looking over the graph, consider the fact that the acquired skills and experience of older workers are often critical to organizational success.

The Vocational Rehabilitation Act of 1973 was passed to enhance employment opportunities for people with disabilities. The act is enforced by the Employment Standards Administration of the Department of Labor.

The Vietnam Era Veterans' Readjustment Act of 1974 requires federal contractors to take affirmative action that favors veterans of the Vietnam War.

The Pregnancy Discrimination Act of 1978 is an amendment to Title VII that applies to women. It forbids employer discrimination against women in relation to pregnancy, childbirth, or medical conditions associated with pregnancy or childbirth.

The Americans with Disabilities Act (ADA) of 1990 created considerable challenges for human resource managers. Figure 3.2 in your textbook gives an overview of the wide range of physical, neurological, emotional, and psychological disorders covered under the act. HRM is faced with the problem of legally establishing the existence or extent of disabilities in relation to the demands of a specific position or job. The act requires employers to take reasonable steps to accommodate employees with disabilities.

The Civil Rights Act of 1991 expanded relief to victims of discrimination. Table 3.2 in your textbook shows the relationship between damages allowed and the number of employees in an organization.

The Uniformed Services Employment and Reemployment Rights Act of 1994 is intended to protect members of the armed services who are called to active duty. Above all, the act requires employers to reemploy workers who have been absent in fulfillment of active duty requirements. For example, reservists called to active duty are to be rehired into positions consistent with the responsibilities and pay of the jobs they left when called to active duty.

The Genetic Information Nondiscrimination Act (GINA) of 2008 prohibits the use of genetic information in health insurance and employment decisions for companies with 15 or more employees. The act also requires companies to keep any genetic information acquired confidential and prohibits harassment of any employees based on genetic information.

The Lilly Ledbetter Fair Pay Act of 2009 amends the Civil Rights Act of 1964 and allows the 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination to reset with the receipt of each new paycheck affected by the discriminatory action. This retroactivity provision can benefit people challenging a wide variety of discriminatory practices.

Table 3.1 in your textbook summarizes major EEO laws, what they cover, and the agencies responsible for enforcement.

Executive Orders

Two executive orders affect HRM policies: Executive Order 11246 issued by Lyndon Johnson prohibits federal contractors from hiring discrimination based on race, color, religion, sex, or national origin. It also specifies that organizations that meet certain standards must submit and

implement affirmative action plans. Executive Order 11478 issued by Richard Nixon requires the federal government to hire people based on merit and fitness. The prohibition of discrimination based on race, color, religion, sex, or national origin is reaffirmed under this order.

The Government’s Role in Providing for Equal Employment Opportunity

Two enforcement agencies oversee employer compliance with EEO laws.

The Equal Employment Opportunity Commission (EEOC) is responsible for enforcing most EEO laws. When individuals feel they’ve been discriminated against, they may file a complaint with the EEOC directly or with state-level agencies that mirror the federal EEOC. Complaints must be filed within 180 days of the alleged incident, but according to the Lilly Ledbetter Fair Pay Act, an incident can be defined as receiving a paycheck when determining pay discrimination. In Figure 3.3 of your textbook, a bar graph shows the relative number of complaints filed under different categories. The highest number of complaints is related to retaliation, although proportional numbers of complaints related to race, disability, and sex are also quite high. Your text outlines ways the EEOC monitors employers. It also explains the importance of guidelines published by the EEOC and other executive-branch regulatory agencies that are taken under consideration in court actions. One of these is the EEOC’s Uniform Guidelines on Employee Selection Procedures.

The Office of Federal Contract Compliance Programs (OFCCP) is responsible for enforcing executive orders that cover companies doing business with the US federal government. Businesses with contracts of $50,000 or more must not discriminate in employment based on race, color, religion, sex, or national origin. They must also submit an affirmative action plan with three basic components:

1. Utilization analysis, which compares race, sex, and ethnic composition of the company’s workforce relative to the race, sex, and ethnic composition of the available labor force.

2. Goals and timetables, which specify the percentages of women and minorities that the company plans to utilize. These percentages are intended to be more flexible than strict quotas.

3. Action steps, which specify the ways the affirmative action plan will be implemented, not only for race, sex, and ethnic composition but also for workers with disabilities and Vietnam War veterans.

Businesses’ Role in Providing for Equal Employment OpportunityAvoiding Discrimination

Disparate treatment refers to intended or unintended differential treatment of employees based on race, sex, ethnicity, national origin, age, or disability. Examples might include refusing to hire women with school-age children or choosing to promote someone over equally qualified candidates because he or she is white, black, Asian, Christian, or Muslim.

To avoid disparate treatment, employers can assess their hiring or promotion policies to seek out sensitive criteria. Companies can also focus on clearly specifying job requirements. In any case, questions often remain. The courts have maintained that sex and race may, in some circumstances, be a bona fide occupation qualification (BFOQ). Bona fide means “good faith.” For example, perhaps a male sales rep will have an advantage over a female sales rep when a company is conducting business in a foreign country. Or, it may be appropriate to limit locker-room attendant positions to whichever sex is using a locker-room. Overall, however, it’s difficult to identify genuine BFOQs.

Disparate impact refers to workplace situations wherein neutral, good faith employment policies lead inadvertently to de facto (actual) discrimination. An example offered in your text has to do with employee referrals of family and friends for open positions. The intent is to use referrals to create a pool of qualified applicants. The presumably unintended result could be the unintentional omission of groups not already represented by the employer. A common test for disparate impact is the four-fifths rule. In effect, if the hiring rate for a minority group is less than four-fifths of overall hiring, there is evidence of disparate impact. Figure 3.4 of your textbook illustrates an example of disparate impact.

A company can avoid claims of discrimination by carefully adhering to EEO policy. HRM professionals are likely to bear the burden of policy implementation. Affirmative action and reverse discrimination are the two poles of a dilemma. In general, the goal of affirmative action is hiring job applicants or admitting college students in such a way that the percentage of accepted minorities is consistent with their proportional representation in the eligible or relevant population. In general, reverse discrimination occurs when recruitment policies allow strict quotas to dictate hiring or admittance. The remedy seems to be sensible flexibility. The courts tend to tolerate treating race or some other kind of minority status as a factor, not a final determinant, in overall hiring or admittance policies.

Providing Reasonable Accommodation

Employer accommodation occurs most often with respect to religious practices and employee disabilities. For example, some denominations of Islam require women to wear a head covering, and certain Muslim denominations are expected to recognize five prayer periods each day. Muslim women’s dress requirements aren’t likely to be much of an issue. However, workplace breaks and work schedules may have to be adjusted for observant Muslims’ prayer periods. The varying situations of employees with disabilities may require redesigned workspaces and other kinds of accommodations. Study Figure 3.5 of your textbook to get an idea of the kinds of accommodations that may be necessary for disabled workers. In that context, recognize that EEO workplace accommodations may be waived if the cost of implementing them is excessive in light of a company’s resources.

Preventing Sexual Harassment

In general, sexual harassment includes unwelcome sexual advances, requests for sexual favors, or inappropriate verbal or physical contact. Sexual harassment exists when:

Submission to any of the above is an implicit or explicit condition of continued employment Submission or rejection of this sort of conduct is used as a criterion for evaluating an employee’s

performance The inappropriate conduct interferes with an employee’s capacity to do his or her job by

creating an intimidating, hostile, or offensive work environment

Sexual harassment may be overt or subtle. The most obvious cases involve a quid pro quo situation. This means conditions of employment, such as promotion or pay raises, are contingent on a person’s accepting or rejecting sexual advances. A subtler form of sexual harassment occurs when workplace conditions create a hostile working environment. Most often, women are the target of sexual harassment.

Valuing Diversity

An organization is responsible for creating its culture. As cultural, racial, gender, and ethnic diversity become more common in the workplace, employers can actively promote a culture that recognizes and honors diversity. HR departments can be instrumental in fostering such a culture.

Occupational Safety and Health Act (OSH Act)

The OSH Act was a comprehensive response to work-related deaths reported year by year in the 1960s. By 1970, the figure was roughly 15,000. The act established two new agencies. Under the Department of Labor, the Occupational Safety and Health Administration (OSHA) is responsible for inspecting employers, applying safety and health standards, and assessing fines for violations to businesses engaged in interstate commerce. The US Department of Health conducts research to establish worker safety criteria for different kinds of jobs and industries, mainly through the National Institute for Occupational Safety and Health (NIOSH). The Department of Health is also responsible for training employers to comply with the act.

General and Specific Duties

The OSH Act’s general-duty clause describes the overall mission of the act. Every employee under the jurisdiction of the OSH Act is to be provided a workplace free of hazards that may result in injury or death. Employers are required to keep records of work-related deaths and injuries over the period from February of a given year to April 30 of the following year. Figure 3.6 in your textbook shows OSHA Form 300A—a report form that summarizes information about work-related injuries and illnesses.

The act also specifies rights, including the right to:

Request an inspection Have a representative present during that inspection Have dangerous substances identified Receive prompt, accurate, timely reports on hazard risks and exposures Post employer violations at the work site

Enforcement of the OSH Act and Employee Rights and Responsibilities

OSHA regulations prohibit notifying employers of impending inspections in advance. OSHA’s Hazard Communication Standards, as well as many states’ right-to-know laws, require employers to fully disclose health risks associated with hazardous substances. Under OSHA standards, employers are required to provide material safety data sheets (MSDSs) for chemicals that employees are exposed to. Because state standards may be tougher than OSHA standards, HRM departments must keep track of both kinds of standards to do their jobs and maintain worker health and safety.

Impact of the OSH Act

The OSH Act has made a difference. That isn’t to say that employer compliance is always what it should be. Many large companies are cited for OSHA standards violations year after year. Figure 3.7 in your textbook graphs the substantial decline in incidents of injuries and illnesses from 2003 to 2014. This data justifies the regulatory actions favoring safe and humane workplaces. The “Did You Know” feature in your textbook graphs the top 10 leading causes of workplace injuries in 2013.

Employer-Sponsored Safety and Health Programs

Employer-sponsored safety and health programs should:

Identify and communicate job hazards to employees Reinforce safe practices through internal media (such as newsletters, memos, websites, and

lunchroom posters) Promote safety internationally

The third goal listed above reflects the realities of work environments overseen by multinational corporations. In practical terms, effective control over safety and health programs may be quite limited in some places where companies do business abroad. Many foreign countries, including primary trade partners like Mexico and China, are lax when it comes to worker health and safety.

Workflow AnalysisIn the process of workflow design, managers analyze the sequences of tasks that lead from inputs to work activities to outputs (products or services). Jobs make up a set of related tasks or duties. Positions in an organization are filled by people who do the jobs called for in that position. For example, positions are mapped out on a table of organization. People who are selected to occupy those positions are responsible for the jobs required in those positions.

In general, raw inputs such as materials and data are joined by equipment and human resources as inputs required for work activity. Work activity results in outputs. That, in a nutshell, is the outline of workflow. Workflow can also be thought of as a system. In practical terms, that means

the components of input and work activity are connected systematically to produce desired outputs. Figure 4.1 in your textbook illustrates workflow.

Workflow Design and an Organization’s Structure

Organizations adopt structures that are considered most efficient and effective for producing desired outputs. For example, functional organization is illustrated by the layout of mass production work on an assembly line. In functional organizations, workers have little discretion or authority and are assigned simple, repetitive tasks. Management is strictly top down. Under varieties of departmental organization, sets of responsibilities are assigned to operational divisions, such as sales by territory, marketing, accounting, production, and so on. In general, when jobs require teamwork and delegated authority, there will be some kind of divisional organization. Ad agencies, for example, are typically divided into coordinated teams devoted to demographic research, electronic media design, and an art department that works with project teams assigned to agency clients. Approaches to job analysis can be different, depending on an organization’s structure.

Job AnalysisIf, as an HRM professional, you don’t know what a job entails or how it’s performed, you can’t be expected to do your job. Without job analysis, you can’t carry out staffing, plan training programs, or appraise job performance. You need to understand the concepts of job description and job specification to be successful.

Job Descriptions

A job description is a comprehensive summary of tasks, duties, and responsibilities (TDRs) required in a particular job. Figure 4.2 in your textbook shows a sample job description.

Job Specifications

What knowledge, skills, abilities, and other characteristics should a person have to perform a particular job? In this context, knowledge refers to job-related factual information. Skills are an individual’s proficiency in performing certain tasks, like repairing mechanical devices, using different kinds of computer software, or working with numbers. A person’s ability refers to an overall capacity to apply knowledge and skills in an effective manner. Finally, other characteristics might include personality traits like motivation, sociability, or persistence. Altogether, this concept-set is referred to by the acronym KSAO.

In terms of job qualifications, KSAOs are people characteristics. They aren’t directly observable. Therefore, an alternative or complementary approach to fitting people to jobs is assessing behaviors. Job behaviors are observed when people perform tasks, tend to their duties, or show that they’re capable of taking responsibility for their actions. While KSAOs are central to selecting people for employment positions, assessment of behaviors helps us know just how well

a new employee fits into a job. Looking at both of these kinds of criteria can tell us about a person’s capacity to learn. A high capacity to learn is very valuable.

Sources of Job Information

Basic sources of job information include interviewing people engaged in a job and consulting data gathered by the US Department of Labor. If you want to understand the applied skills of a drill press operator in a machine shop, interview a drill press operator and observe the work. If you want an inside view of what it takes to be a salesperson in a sporting goods retail operation, interview such a salesperson. There’s a downside to getting information from a current job holder, though. People may emphasize the importance of their job to a firm’s success and exaggerate the value of what they do.

The Labor Department created the Dictionary of Occupational Titles (DOT). This was meant to help civil and private employers have a sense of the overall labor market in terms of roughly 12,000 categorized jobs. The DOT isn’t all that useful in appraising or defining jobs in the new global economy. To address that problem, the Labor Department has established the Occupational Information Network (O*NET). It’s accessible online, and its databases provide extensive information on job tasks, work styles in different contexts, and requisite skills.

Position Analysis Questionnaire

Probably the best-researched instrument for job analysis is the 194-item Position Analysis Questionnaire (PAQ). The many items are designed to represent work behaviors, job characteristics, and work conditions in a wide variety of jobs. The main drawback of the PAQ is that it requires a high level of reading ability. The six factor groupings of the questionnaire items include:

1. Information input—Where and how workers get the information necessary for job performance2. Mental processes—Reasoning, decision making, planning, and information processing in

performing a job3. Work output—Physical activities, tools, and devices required by workers to do the job4. Relationships with other people required to do the job5. Job context—The physical and social context of any given job6. Other characteristics associated with a job beyond the factors outlined

Fleishman Job Analysis System

The Fleishman Job Analysis System is dependent on firsthand information about worker requirements, mainly gathered from experienced employees. The survey gathers data on 52 ability categories, including written communication, manual dexterity, stamina, originality, and deductive reasoning. The written ability component of the Fleishman instrument produces a scalar response. That is, the subtest score ranks written communication ability on a scale from 1 to 7, with 7 being the highest level.

Importance of Job Analysis

Just about every HRM program requires information gleaned from some approach to job analysis. Such information is necessary for:

Work redesign Human resource planning Selection Training Performance appraisal Career planning Job evaluation

Trends in Job Analysis

In the rapidly changing global economy, jobs are increasingly seen as aspects of an organization’s structure and strategies. In that sense, jobs are more often viewed as flexible work nodes in a workflow system. There’s even a lot of talk these days about dejobbing, which means encouraging employees not to limit themselves by their job descriptions. In this view, the concept of jobs is becoming obsolete.

Job Design

Job design is a process of defining how work will be performed. However, keep in mind—the major emphasis is on different approaches to job design depending on perceived needs dictated by an organization’s structure and strategies. Four elemental approaches to job design are shown in Figure 4.5 of your textbook.

Designing Efficient Jobs

In industrial manufacturing, a focus on efficiency gave rise to the field of industrial engineering. Especially during the 1930s, there was a great interest in time-and-motion studies. The objective was determining the best way to perform tasks. Efficiency reduces costs and, in that sense, is always desirable. However, a narrow focus on efficiency—as applied to assembly line work, for example—tends to create boring, repetitive jobs.

Designing Jobs That Motivate

This concern with efficiency wasn’t abandoned. However, industries that had to compete for top-flight employees recognized that efficiency alone wasn’t enough. Studies revealed that sustaining high levels of productivity was heavily dependent on designing jobs that motivated workers. The Job Characteristics Model, developed by Richard Hackman and Greg Oldham, has been widely adopted. The model emphasizes:

Skill variety—Workers tend to find jobs more intrinsically satisfying if several different skills are required.

Task identity—Workers are motivated to higher performance levels when they feel they’re getting credit, or satisfaction at least, from the outputs they personally produce.

Task significance—When workers perceive that their work enhances the lives of other people, they feel good about their work. Feeling good about one’s work is motivating.

Autonomy—Workers are motivated to higher levels of performance when they’re empowered to make decisions about how to pursue tasks.

Feedback—Getting clear and immediate job-related feedback from managers is motivating. Getting credit is motivating; getting constructive criticism also can be motivating.

The more of these motivating characteristics a job includes, the more likely a worker will be motivated. Figure 4.5 in your textbook summarizes the characteristics of motivating jobs compared with jobs that aren’t motivating.

Job enlargement refers to broadening the types of tasks performed in a job. There are two approaches to job enlargement. Job extension combines several different tasks into one job. Job rotation doesn’t enlarge a specific job. Instead, people are rotated to different jobs in a production process. The enlargement consists of having an overall view of what’s involved in processes, such as producing ceramic components for catalytic converters used by auto manufacturers.

Job enrichment happens when workers are granted expanded decision-making power. The idea of job enrichment comes from the two-factor theory of Frederick Herzberg. His research showed that people are more highly motivated by intrinsic factors, like the meaningfulness of the job, as opposed to extrinsic factors, like pay.

Self-managing work teams can be thought of as relatively self-reliant work modules within an organizational structure. In principle, team members have authority to schedule work, hire team members, resolve performance problems, and take on duties typically assigned to management. In general, team schemes tend to instill autonomy, skill variety, and task identity into the average workday.

Flexible work schedules may be established through flextime schemes or through job sharing. Flextime is a scheduling policy that allows full-time employees to choose when to start or end their workday, with all employees being present during the middle hours of the workday. Job sharing is a scheme whereby two part-time employees fulfill the tasks and responsibilities of a single job. A compressed workweek scheme is not, strictly speaking, a flextime alternative. However, its use has been found to please many workers while reducing overhead costs and employee-commuting expenses. A typical compressed workweek has employees working four ten-hour days a week instead of five eight-hour days. Figure 4.6 in your textbook illustrates flextime, job sharing, and a compressed workweek.

Telework refers to working from remote locations through the Internet. This arrangement is occurring more often. Commuting time is eliminated, and parents can be home when the kids get back from school. The challenge for remote workers is the self-discipline required to stay focused on work schedules and deadlines.

Designing Ergonomic Jobs

The study of the interface between human physiology and the physical demands of the workplace is vital for people in the field of ergonomics. These specialists also work with physical anthropologists and structural engineers to design airplane seats, sports shoes, and the interiors of automobile cabins.

In the world of work, ergonomics is mainly concerned with redesigning office equipment and tools to make them better fit human physiology. Ergonomic design that affects worker productivity is cost-effective. For example, computer workstations can be designed to reduce the risk of carpal tunnel syndrome, and office chairs can be designed to reduce back strain.

Designing Jobs that Meet Mental Capabilities and Limitations

These days, many jobs require extensive information processing. Jobs can be designed to reduce information overload, a downside of technology. An HRM specialist can help workers deal with software upgrades, email, cell phones, and new approaches to teleconferencing.

Lesson 2 Overview

Lesson 2 consists of three chapters. Chapter 5 explores how organizations carry out HR planning. It starts with identifying the steps that go into developing and implementing an HR plan and moves into exploring the recruiting process. Chapter 6 describes the selection process used within HRM. The information in this chapter is helpful to those interested in not just HR, but also the pursuit of any general managerial position. Chapter 7 describes how to plan and carry out an effective training program in the context of the organization’s strategy.

The Process of Human Resource PlanningA basic function of an HRM department is implementing organizational strategies. To do that, it’s necessary to forecast the company’s demand for labor within the accessible labor force. The first step is forecasting the company’s labor demand. Figure 5.1 in your textbook is an overview of the five-part human resource planning process.

Forecasting

In forecasting the demand for labor, HR professionals must get a good estimate of the kinds of jobs and numbers of employees required to fulfill organizational strategies. As a simple example, it might be forecast that the company will need three software designers to upgrade a sales-data program, eight people to install the upgrades in workstations, one project manager, and one assistant project manager. The big picture is likely to involve all kinds of jobs to fulfill the full set of company strategies. Therefore, HR analysts will need to predict labor market trends.

The most sophisticated approach to forecasting demand is trend analysis, which applies statistical models to determine labor-market trends. For example, the model may show that the company is likely to need 15 salespeople over the next six months. The key statistics applied in this sort of modeling are called leading indicators, which predict organizational demand.

Determining labor supply generally begins with determining a firm’s internal human resources. The question will be: How many people with specified job skills are already available within the company? Once that’s determined, the next step is modifying the model by accounting for projected retirements, terminations, voluntary turnovers, promotions, and transfers. A transitional matrix is a statistical procedure that can be used for this purpose. Table 5.1 in your textbook provides an example of a transitional matrix for an auto parts manufacturer, and can help you understand how such a matrix can be used to assess and predict internal labor supply over time.

Determining labor surplus or shortage is a matter of contrasting labor demand and supply. You can use the text discussion in conjunction with Table 5.2 in your textbook to understand HR planning options in the event of either a projected surplus or shortage of desired workers in various job categories. Reducing a surplus may include such things as downsizing, pay reductions, and early retirement. Notice that the amount of suffering caused should be considered when reducing a surplus. Avoiding a shortage might be addressed by increasing overtime, outsourcing, and hiring externally.

Goal Setting and Strategic Planning

Here, the options in Table 5.2 are discussed in some detail.

Downsizing strategies are strongly related to the corporate efforts to compete in the global economy. The main reasons companies engage in downsizing include the following:

Reducing costs—labor costs are the major cost of doing business. To reduce the number of employees is to reduce labor costs.

Replacing labor with technology—Machines that automate work procedures tend to reduce labor costs.

Mergers and acquisitions—there are nearly always employees affected due to overlapping work positions. The sales force for two newly combined companies will probably end up with more salespeople than were needed before the merger or acquisition.

Moving to more economically advantageous locations—there have been two trends here. First, the US has seen a steady migration of companies into the Southeast and Southwest states, mainly in search of lower wage demands and less impact from unions. Second, under free-trade agreements, many jobs have been offshored to countries such as Mexico and India.

The discussion of the effects of downsizing should be considered carefully. The short-term gain for shareholders in mergers and acquisitions may not lead to long-term corporate profitability. Downsizing disrupts communities and can lead to lower long-term productivity and profits.

Early retirement programs tend to inflict less suffering on older employees. However, early retirees often include some of the company’s irreplaceable talent. As a result, the costs of recruiting replacement workers may exceed the cost savings. Phased retirement programs may address this problem. In this arrangement, older key talent is phased out gradually, perhaps by reducing their hours.

The most widespread approach to downsizing has involved hiring temporary workers, subletting work contractors, and outsourcing. Temporary workers reduce costs because they exclude benefits. Up to 40 percent of the pay package for a full-time employee is composed of health care, retirement, vacation time, and other benefits. Benefits of equivalent value may be provided by the agency that provides temps.

Contractors can be hired more cost efficiently than full-time employees. They can be hired for specific periods of time for specified jobs. Third-party contracting companies and agencies may cover benefits for their employees. However, many contract workers are self-employed individuals who may not have affordable access to things like health care or a retirement plan.

Outsourcing transfers some functions to outside firms while retaining employees that serve a company’s core competencies. For example, a tour guide company may find it best to outsource accounting and marketing to outside companies. In that way, the company can give its full attention to organizing and guiding trips. Here are some guidelines for outsourcing and offshoring:

Seek out experienced providers with adequate resources. Don’t offshore operations that are either proprietary or require stringent security measures. Start small and monitor progress.

Look for providers to outsource work in areas that promote growth, such as organizations with expertise that can help a company tap new markets.

Implementing and Evaluating the HR Plan

Implementing and evaluating is the final stage of the HR planning process. Here, the most obvious concern is determining whether or not the plan has successfully accommodated labor shortages or surpluses. In any case, one or more HR professionals should have the responsibility of providing timely reports to management.

Applying HR Planning to Affirmative Action

Affirmative action adds another measure of complexity to challenges faced by HR employees. A workforce utilization plan can address the diversity issue by showing to what extent minority percentages in job categories are consistent with percentages in the general population.

Recruiting Human Resources

Because it’s difficult to fully determine future labor needs and market trends, HR professionals often accumulate a pool of potential hires. For example, based on forecasting, HR departments may invite potential candidates to submit applications for short- or long-term reference. In any case, the process of identifying and attracting potential employees (recruiting) involves three areas: Personnel policies, recruitment sources, and the characteristics of the recruiter. Figure 5.2 in your textbook shows recruiter traits and behaviors that are important in both job vacancy characteristics and applicant characteristics.

Personnel Policies

Any organization’s personnel policies amount to its decisions in how to carry out HRM, including recruiting. Personnel policies relevant to recruiting include the following:

Internal versus external recruiting—some companies prefer to recruit within the organization, especially those concerned with maintaining a tight corporate culture. Also, internal recruiting fosters access to successive promotions. This can be a powerful motivator for career-minded employees.

Lead-the-market pay strategies—offering pay levels that are higher than average within an industry can attract top talent and compensate workers for high-stress jobs that may also be hazardous.

Employment-at-will policies—in accordance with differences in state laws, companies may adopt employment-at-will policies, in which workers can be summarily terminated at the discretion of an employer. Alternatively, due-process policies lay out specific procedures that allow an employee to contest or appeal termination. Employees tend to prefer due-process policies because they offer a measure of job security.

Image advertising—brand image advertising attracts potential employees, especially if the ad themes and content suggest personality traits the potential candidate can identify with. The second purpose of image advertising is creating a positive corporate image for consumers.

Recruitment SourcesInternal Sources

Internal sources for recruitment offer several advantages:

The applicants are well known to the organization.

The applicants are familiar with the company and have accurate information about what the job entails.

Recruiting internally is generally cheaper and faster than external recruiting.

External Sources

External sources may be best for recruiting the following types of people:

People with special talents or experience, especially for upper-level positions Entry-level applicants, mainly to begin grooming them for integration into the company’s culture Outsiders, who may have new ways of looking at things and can spur innovation

Direct applicants and referrals make up the largest percentage of new hires. About 22 percent of new hires are from referrals. Direct applicants make up about 31 percent of new hires. In Figure 5.3 in your textbook, notice the relatively low percentage of hires from college recruiting and job fairs.

Advertisements in Newspapers and Magazines

Clearly, many companies need to advertise job openings. However, HRM specialists should remember the following:

Companies advertise because they seldom are able to fill all their employment needs from direct applicants and referrals.

Job advertising is relatively expensive. The quality of applicants tends to be low.

Electronic Recruiting

The Internet has had an enormous effect on recruiting. Newsprint ads are still around, but increasingly, people are looking for jobs online. Consider some highlights:

Company websites allow job seekers to research a company online. Computer-literate people in search of a job tend to be better informed about what they might expect from a company.

Most company websites offer a link to employment opportunities. Often, such links permit an applicant to post a resume and application to the company’s HR department.

Smaller companies can post job openings to job-posting sites like Monster.com, Indeed, and Career Builder. Meanwhile, many industries maintain websites with links to particular companies.

Under the Social Security Act of 1935, people getting unemployment compensation are required to be registered with a local state public employment agency. The agencies make an effort to place unemployed clients in jobs. Organizations can post job openings with these agencies.

While government employment agencies mainly serve blue-collar workers, private employment agencies tend to serve white-collar workers. People can sign on with one of these private

agencies regardless of whether or not they’re currently employed. Some of these agencies actively represent upper-level managerial types, such as CEOs, CFOs, and COOs. Colleges and universities generally have their own placement services. Beyond campus interviewing, many companies provide internship programs and job fairs. Currently, the companies most active in campus recruiting are in search of potential talent for high-tech electronic, engineering, aerospace, defense-related, and science-based industries in genetic research and biochemistry.

Evaluating the Quality of a Source

HR professionals need to evaluate the relative yield of their mix of recruitment sources. A yield ratio gives the percentage of applicants who successfully move from one stage of the recruitment process to the next. Yield ratios tell which sources are most productive. Another measure of recruitment success is the cost per hire, which is calculated by dividing the total cost of a source by number of people hired to fill the job vacancy. A low cost per hire indicates an efficient recruitment source. Table 5.3 in your textbook shows the results of a hypothetical recruiting effort.

Recruiter Traits and Behaviors

In the recruiting process, the recruiter enters the scene relatively late. At that point, the applicant will probably have decided for or against the job and may have gathered a lot of information about both the job and the company. Thus, the candidate may be somewhat skeptical of the recruiter.

However, the characteristics of the recruiter make a difference. In particular, applicants tend to respond positively to recruiters who show a positive attitude and provide information. On the other hand, the behavior of the recruiter appears to have an uncertain relationship with whether or not an applicant accepts a job offer. Studies suggest that the realistic job preview approach produces mixed results. What seems to be most important is the organization’s pay, security, and opportunities for advancement.

Here are some basic guidelines for enhancing the recruiter’s impact:

Provide timely feedback. Avoid offensive behavior. Consider using recruiter teams that include both HR professionals and job experts.

Selection ProcessIn general, prior to making a selection, steps in the selection process may include the following:

Screening applications and résumés Testing and reviewing work samples Interviewing candidates Checking references and backgrounds

Figure 6.1 in your textbook summarizes the process. However, it varies quite a bit from organization to organization. At a minimum the process is identifying people with the correct knowledge, skills, abilities, and other characteristics (KSAO) for the job. The KSAO variables can be measured using a variety of selection tools, including standardized tests and structured surveys.

Reliability

Reliability refers to the extent to which a measurement tool is free of random error so that test results are consistent from subject to subject. For example, say you’re using a standardized personality test with 20 five-option multiple-choice items. Each item is meant to assess one of five primary personality traits like “sociability” or “conscientiousness.” Four items of the 20 are devoted to each of the five traits, but they’re scattered around among the 20 items. After administering the test, you can check out how well responses are correlated.

For example, if item 7 and item 18 are “sociability” measures, you can apply a statistical correlation test to see how often responses to item 7 are consistent with responses to item 18. If you find that response option 5 selected for item 7 always appears when the subject chooses response option 5 in item 18, the two measures are said to be perfectly positively correlated. In such a case, the correlation coefficient is 1.0. If, on the other hand, you find that an option 5 response in item 7 always appears along with an option 1 response in item 18, the two items are said to the perfectly negatively correlated. The correlation coefficient is –1.0.

Statistical correlation measures the extent of variation between variables. Anything you can measure that isn’t a constant is a variable. For example, looking at 1,000 cases, you might find that high IQ scores tend to be positively correlated to income. People with higher IQ scores tend to earn more money. However, note the word tend. In the real world, correlations of precisely 1.0 or –1.0 appear almost never. Correlations measure relative randomness between variables that can be matched and mapped on a graph. Therefore, what you’ll actually find are coefficients like .083 or –0.32.

Validity

Validity is the extent to which a test measures what it’s supposed to measure. Like tests for reliability, statistical tests for validity also rely on correlation coefficients. Measures of relative body fat aren’t a valid measure or predictor of intelligence. However, measures of IQ may be valid predictive measures of job performance.

Criterion-related validity has to do with what one is looking for. If the criterion is job performance, you’ll seek out measures correlated to job performance. For example, intelligence scores and job performance indicators—like productivity—are positively correlated variables. In your textbook, Figure 6.2 graphs two criterion-related measurements.

In job performance,

Predictive validation refers to measures that tend to be correlated to future performance.

Concurrent validation refers to measures applied to a current work force. Content validity is affirmed if test items are consistently correlated to situations or problems

that happen on the job. Construct validity is affirmed when you find that measures of abstract test variables, like

“ability,” are actually observed in employee performance.

Ability to Generalize

The measured attitudes and behaviors within one’s organization might or might not be generalized to other organizations, even within the same or similar industries. For example, HR policies that motivate oil field workers may or may not motivate billing clerks or hospital orderlies.

Practical Value

Selection methods like tests and interviews should predict accurately how applicants will perform. However, it’s also important that what’s discovered in analyzing selection data is useful to an organization. In general, validity, reliability, and data add economic value to a selection method. Moreover, if the economic benefit of a selection method is greater than the cost of using that method, the selection method has utility. Utility means economic gain for the organization. The “HR How To” feature in your textbook can help you better understand the topic of data analytics in hiring.

Legal Standards for Selection

Building on material from Chapter 3, here’s a summary of key legal standards relevant to employee selection:

The Civil Rights Act of 1991 and the Age Discrimination Employment Act of 1967 place requirements on the choice of selection methods. For example, selection methods that exclude minorities must justify that policy as critical to the business.

The Civil Rights Act of 1991 also prohibits preferential treatment that advantages particular minority groups.

Equal employment opportunity laws affect the kinds of information organizations may gather on application forms or during interviews. In your textbook, Table 6.1 contrasts permissible and impermissible questions for applications and interviews.

The Americans with Disabilities Act (ADA) of 1991, as you’ve learned, requires employers to provide accommodation to workers with different kinds of handicaps.

The Immigration Reform and Control Act of 1986 requires employers to verify and maintain records on the legal rights and status of immigrants working in the United States.

Job Applications and Résumés

An organization can gather reasonably accurate information through résumés, application forms, background checks, and references. In principle, these methods are relatively inexpensive. On

the other hand, the volume of the paperwork presents a challenge. Check out the “HRM Social” feature in your textbook to see how social media might be used to conduct background checks.

Application forms can ask for all kinds of information as long as they comply with governmental regulatory strictures. The basics include the following:

Contact information Work experience Educational background An applicant’s signature

Figure 6.3 in your textbook shows a sample application form.

Résumés are generally an applicant’s first approach to an organization. While they may provide much of the same information one might derive from an application form, résumés are structured to sell the applicant. Résumés sometimes omit some information, emphasize other information, and may even unethically provide inaccurate or misleading information.

References may be helpful. However, like résumés, they tend to be somewhat biased. In any case, HR professionals and employers usually call references only after a candidate has reached the short list.

Background checks are commonplace. Eight out of ten large organizations and about two-thirds of smaller organizations require background checks. Mostly, background checks are looking for records of misdemeanors or felonies. In the United States, where the great majority of criminal offenses are violations of drug laws, that’s the sort of record most likely to show up. Another important objective of background checks is verifying academic credentials.

Employment Tests and Work Samples

There are two broad categories of employment test:

Aptitude tests are meant to assess how well a person can acquire skills and abilities. The standard for aptitude tests is the General Aptitude Test Battery (GATB) used by the US Employment Service.

Achievement tests measure a person’s existing knowledge and skills.

Organizations need to check out the validity and reliability of tests before plugging them in to recruitment policies. Table 6.2 in your textbook summarizes sources of information on employment tests.

Physical Ability Checks

Physical ability checks may be in order when jobs require physical strength, stamina, or excellent hand-eye coordination. While such tests may be vital for assessing loading dock workers or fighter pilots, they’re seldom of key interest in establishing employability in the modern

workplace. Further, incautious applications of such tests may run afoul of regulatory stipulations, such as prohibitions on gender or disability discrimination.

Cognitive Ability Tests

Cognitive ability tests tend to be like or identical to intelligence tests. Typically, all such tests are meant to assess verbal, quantitative, or reasoning ability. These kinds of abilities may be critical for jobs that are complex or have rapidly changing circumstances. People in search of supervisory, managerial, or entry-level executive positions can expect to take these kinds of tests.

Job Performance Tests and Work Samples

There are all kinds of job performance tests. In general, they’re meant to identify an applicant’s fitness for a particular job. Keyboarding speed is helpful for a data input job. In-basket tests assess a person’s ability to handle several complex tasks under pressure; managerial candidates are likely to have to take these kinds of tests. To keep costs down, some job-performance tests rely on computer simulations that present candidates with virtual problems. If you’re looking for job as a graphic designer, illustrator, or journalist, you’ll probably be expected to produce samples of your work.

Personality Inventories

As companies rely increasingly on work teams, the use of personality inventories has expanded. In business, the most commonly used test identifies the following five traits:

Extroversion Adjustment Agreeableness Conscientiousness Inquisitiveness

The downside of personality tests is the ability of some test takers to guess the desired responses. Table 6.3 in your textbook summarizes five major personality dimensions measured by personality inventories.

Honesty Tests and Drug Tests

Organizations suffer when employees are untrustworthy. Therefore it’s understandable that screening tests have been used in the recruiting process. For a time, polygraph tests were popular, even though administering them required a high level of expertise and, even then, they often produced inconclusive results. The passage of the Polygraph Act of 1988 banned the use of polygraphs for screening job applicants. Since then, private firms have replaced them with paper and pencil tests. Although the validity of these tests is uncertain, they may be modestly predictive of employee theft of employers’ property.

In our society, the use of alcohol and legally prohibited drugs is widespread. Companies are often compelled to test for alcoholism or drug abuse. Identifying alcohol-related problems is difficult because alcoholic beverages are legal, widely used, and nearly impossible to detect after a short time. Meanwhile, general rules for employer administered drug tests include the following:

Administer tests systematically to all applicants for the same job. Use drug testing for jobs that involve safety hazards. Send a report of the test to the applicant along with information about how to appeal the test

results or apply for retest. Respect applicants’ privacy by administering tests in an unobtrusive atmosphere and ensuring

that the results are kept confidential.

Medical Examinations

Medical examinations may be vital for some kinds of jobs, like flying a passenger airliner or operating a heavy-duty construction crane. Also, it makes sense for a new employee to have passed a medical exam so that employers have a benchmark for assessing instances of work-related illness or injury. However, laws can make medical exam requirements problematic. Charges of discrimination may accompany physical exam requirements imposed on women or people with disabilities.

Interviews

The interviewing stage of employee selection generally involves supervisors and work-team members along with HR professionals.

Here are some different approaches to interviewing:

In a nondirective interview, the interviewer has discretion in posing questions. Candidate responses may evoke new questions, including open-ended questions. This sort of interview may not be reliable, and there’s a risk of illegal questions.

A structured interview establishes a set of questions for the interviewer to ask. Generally, the questions are directly job-related, in search of information about the candidate’s skills, relevant knowledge, and experience.

A situational interview is a type of structured interview. The candidates are asked to explain how they might respond to problems and situations that arise on the job. The situational interview is considered to have a high level of predictive validity for the candidate’s likely job performance.

A behavior description interview is a situational interview during which candidates are asked to describe and explain how they responded to past job-related problems and situations. A candidate’s discussion of prior work experience is found to have a high level of predictive validity.

Panel interviews are, of course, conducted by panels. Several members of the organization meet with the candidate face to face.

Advantages and Disadvantages of Interviews

Interviews allow a face-to-face encounter with the candidate. However, studies show that interviews aren’t necessarily the most reliable or accurate basis for selecting a candidate. Research reveals that interviews can be invalid, unreliable, and biased against people from disparate social groups, including racial minorities and women. The solution to these kinds of problems is keeping interviews narrow, structured, and standardized. The aim should be to gain information on a few, selected qualifications, perhaps including social skills, aptitudes, and prior experience.

Preparing to Interview

A key to successful, useful interviewing is preparation. The time allotted for the interview should be sufficient and the interviewer should collect all the necessary documents and review them beforehand.

Selection Decisions—How Organizations Select Employees

The typical process for arriving at a selection decision is described by the multiple-hurdle model. Each stage of the process—application, resume screening, testing, reviewing work samples, and interviewing—are hurdles. A candidate who clears one hurdle moves on to the next stage, hopefully to arrive on the short list. An expensive alternative to the hurdle model is the compensatory model. Most of the candidates are allowed to pass over each hurdle. At that point, the candidate scores at each stage can be compared. This approach allows a high score in one assessment area to compensate for a low score in some other assessment area.

Communicating the Decision

When a candidate has been accepted, the job offer should be conveyed to the successful candidate by someone in the HR department. The terms and conditions of employment, including the starting date and compensation, are included in the formal offer. The person in the HR department must maintain a complete record of the candidate’s progress through the selection process, including all relevant documents and the candidate’s reply to the offer. The responsible person must stay in close contact with the relevant supervisor or supervisors to convey either the offer’s refusal or acceptance.

Training Linked to Organizational NeedsRapid change in work environments is a characteristic of the global economy. In turn, a central driver of change is technological change. HR professionals must manage the need for employee training.

As a rule, the HR training programs are developed through instructional design. Instructional design is a systematic process of working out training schemes to meet an organization’s specified needs. Figure 7.1 in your textbook illustrates the stages of instructional design. They

include needs assessment, getting employees ready for training, program planning, implementation, and evaluation.

Needs AssessmentAny approach to training needs assessment must address questions in three broad areas: (1) organization, (2) person, and (3) task. Answers to these questions are central to the three aspects of the needs assessment.

Organization analysis assesses the appropriateness of any kind of training so that it fits the organization’s needs. For example, is the organization seeking to reduce or expand its workforce? Do skills need continual upgrading for personnel performing particular kinds of tasks? Does the organization have in-house resources for pursuing particular training programs, or will there be a need for using external resources? Assuming that a training program can be fitted to the organization’s budget, will management choose to make the investment?

Person analysis focuses on determining individuals’ need and readiness for training. Answers to three questions summarize what’s involved in person analysis:

Are performance deficiencies a result of inadequate knowledge, skills, or abilities? If so, training can help; if not, other remedies may be sought.

Who needs the training? Are the people who need the training ready for it? (Not everyone who might benefit from

training is psychologically ready to deal with it.)

Task analysis involves identifying the tasks, knowledge, aptitudes, behaviors, and skills necessary to a training program. Understandably, person and task analyses are carried out at the same time. A standard approach to task analysis is working out a job description that specifies tasks, necessary equipment, working conditions, time constraints, and so on. To begin the process, HR professionals interview employees and supervisors to prepare a preliminary list of job tasks. Then they validate the list by sharing it with employees and supervisors. At that point, the analyst asks these people to fill out a questionnaire that includes questions about the importance, frequency, and difficulty of the job tasks.

Readiness for TrainingEmployee readiness characteristics include the following:

Cognitive ability: People who are ready to learn must, above all, have the necessary cognitive skills. These typically include verbal ability, math ability, and a capacity for using logic to solve problems.

Motivation: People learn best when they’re motivated to learn. Employees are most likely to be motivated if they perceive clear benefits from the training.

The key components of the work environment include the following:

Situational constraints: The potential benefits of training may be limited by things like inadequate funding, an absence of material resources, or inadequate time during the workday for the training. Addressing situational constraints increases the effectiveness of a training program.

Social support: People tend to be motivated when they’re encouraged, praised, and otherwise supported by supervisors, trainers, and fellow trainees. Social support helps people want to learn because people are social creatures. We identify with the goals and norms of a group when we’re made to feel a part of it. Table 7.1 in your textbook provides useful guidelines for what managers should do to support training.

Planning the Training ProgramObjectives of the Program

In general, training programs with clear and narrow objectives are more likely to benefit the trainees and the organization. Following are characteristics of effective training objectives:

A statement of what the employee is expected to do Measurable standards Identification of needed resources

In-House or Contracted Out?

HR professionals may question whether training should be conducted in-house or contracted out. As you’ll see in the “Did You Know?” feature in your textbook, over half of US companies reported using outside vendors for training programs. General instruction is most often outsourced, but custom content and even learner support may also be provided by outside vendors. Employing outside vendors can be quite expensive, especially when the training involves highly technical operations.

An organization’s training administration is typically managed by an HRM professional. The standard procedure for acquiring access to training expertise and services is through a bidding process. Selected vendors are sent a request for proposal (RFP). Those vendors then convey proposals that provide information relevant to the training needs. The organization weighs the pros and cons of the proposals and selects the vendor that seems to be best.

Choice of Training Methods

While a single training method such as classroom instruction may be preferable for some training programs, there’s no one perfect training method for all organizations everywhere. Quite often it’s best to combine several methods. Table 7.2 in your textbook categorizes the three broad training methods—presentation, hands-on, and group-building. A complement to Table 7.2 is Figure 7.2, which shows the predominance of instructor-led classroom training methods over other alternatives.

Training Methods

Classroom instruction tends to include several components. Lectures are often complemented with overheads, PowerPoint slides, question-and-answer sessions, role playing, or discussions.

Audiovisual training: Conventional audiovisual (AV) training included films or videos presented in the classroom. More often today, sources are stored on CDs or DVDs that trainees can use at their convenience.

Computer-based training: The advent of computers was also the advent of distance learning, e-learning, and electronic performance support systems, which have proven to be effective, low-cost alternatives.

1. Distance learning allows students or trainees in remote locations to complete courses through online access to materials, discussion boards, instant messaging, email, and virtual classrooms.

2. E-learning is similar to distance learning. The difference is that e-learning within organizations may take place over a company’s intranet as well as through website access that provides additional resources.

3. Electronic performance support systems (EPSSs) provide access to skills training or expert advice on problems that occur on the job.

On-the-Job Training

On-the-job training (OJT) is often the best way to instruct employees on job tasks. People involved in actual work situations are also exposed to the company culture, coworker interaction, approved behavioral norms, and supervisory or managerial styles and expectations.

Apprenticeships are work-study programs that provide progressive steps in skills mastery under supportive supervision. Apprenticeships combine classroom and OJT components. Apprenticeships are increasingly offered in community colleges.

Internships are OJT programs cosponsored by educational institutions and corporate organizations. For example, a student pursuing a degree in industrial engineering could spend part of the school year in apprenticeship-like mentoring and working with experienced industrial engineers.

Characteristics of effective OJT programs include the following:

A policy statement Specification of who is accountable for the OJT program Organizational review of comparable OJT programs Trained managers and peers Lesson plans, materials, procedural manuals, training manuals, learning contracts, and progress

report forms Establishing a prospective trainee’s skills

Simulations

Simulations create a virtual environment that’s similar to a real-life situation. The simulator allows trainees to test their understanding and skills in a risk-free environment. In online simulations, trainees often create identities for themselves called avatars. Some simulations aim to be complete virtual realities that provide interactional, three-dimensional environments. The downside of using simulators is their expense. They must be upgraded continually to address changes in real-world environments.

Business Games and Case Studies

Business games and case studies strive for an ideal goal. They immerse trainees in real-life cases or hypothetical situations that allow trainees to analyze and evaluate information that affects the outcome of the games.

Behavior Modeling

Behavior modeling is, in fact, an important way we learn behaviors and social norms. We observe others’ behavior and imitate it to be acceptable in social groups or social situations. Behavioral modeling can be used to teach employees appropriate and productive behavior in workplace settings.

Experiential Programs

Often used for upper-level managers and executives, experiential programs help the trainees gain teamwork and leadership skills and learn to deal with novel situations. As a rule, an experiential program should be closely related to business challenges and issues. However, experiential programs also include adventure learning. These may be outdoor activities like whitewater rafting or wilderness hiking.

Team Training

Team training helps people to depend on each other. It’s used extensively in military and first-responder training. In the business world, it’s used for training nuclear power plant operators and airline crews. However, team training is also well suited to all kinds of business contexts.

Cross-training enables team members to do each other’s jobs. Coordination training focuses on training teams to coordinate their actions, share information,

and reach fact-based team decisions. Team leader training focuses on the skills needed for effective leadership.

Action Learning

Another form of group building, action learning, assembles groups of employees to meet the challenges of a hypothetical or actual situation. A common form of action learning in

manufacturing organizations organizes teams to meet regularly to brainstorm new ways to perform tasks or cut costs.

Implementing the Training Program: Principles of Learning

Table 7.4 in your textbook summarizes the ways that training helps employees learn. Following are characteristics of effective training:

Communicates learning objectives clearly Presents information in memorable ways geared to helping trainees link what they’re learning

to their jobs Breaks the material into chunks Uses familiar concepts, terms, and examples Selects physical or virtual settings that closely mirror the work environment Gives trainees ample opportunities to practice new behaviors Provides frequent and timely feedback

Written materials should have an appropriate reading level. To improve readability, use the following guidelines:

Concrete words Short sentences Short paragraphs Checklists and illustrations

Measuring Results of Training

Course designers should work out the ways course objectives and content can be evaluated and measured while the course is being developed.

Evaluation Methods

The training should create on-the-job use of the skills, knowledge, and behaviors instilled, and the organization should measure this transfer of training. Assessments of training should include the evaluation of the outcomes. Relevant training outcomes are related to training goals and organizational performance.

An experimental approach can assess the success of a training regimen. Two matched employee groups are identified and their skills are evaluated. One group gets the training, while the other group doesn’t. After the training is complete, both groups are again evaluated to see how much better the trained group performs than the untrained group.

Applications of Training

Currently, the most widespread use of training programs is for onboarding, or employee orientation, and diversity training. Onboarding is important because it prepares new employees

for full participation in the organization. Figure 7.4 in your textbook provides an overview of a comprehensive onboarding process. There isn’t a lot of long-term research into the effectiveness of diversity training, although the evidence that does exist suggests that diversity training does work. Evidence suggests that diversity training is most effective if it’s part of management’s long-term commitment to managing diversity as an opportunity for people to learn from one another and acquire teamwork skills.

Lesson 3 Overview

Lesson 3 starts with Chapter 10, which examines a variety of approaches to performance management, including the strengths and weaknesses of each approach. Then it moves to Chapter 8, which focuses on employee development and its role within the organization. This chapter emphasizes the types of skills, knowledge, and behaviors that are strengthened by each development method, so employees and their managers can choose appropriate methods when planning development. Finally, Chapter 11 explores the dual challenges of separating and retaining employees, distinguishing between involuntary and voluntary turnover and how each affects the organization. The separation process is described with an emphasis on how to manage the process fairly.

The Process of Performance ManagementThe process of performance management has three phases. In step 1, defining performance, managers identify and specify relevant aspects of performance such as productivity, reliability, and creativity. In step 2 employees are appraised. In step 3, employees get feedback, which could be good news, OK news, or bad news. Figure 10.1 in your textbook illustrates the process.

Purposes of Performance ManagementThe purposes of the performance management process should include the following:

Improving links of employee performance to business results Differentiating levels of employee performance Communicating the organization’s mission, values, and vision

Someone in the organization must establish the performance management system, the standards and procedures for employee appraisal. Generally, that would be a team of managers, HR professionals, supervisors, and often, employees.

Criteria for Effective Performance ManagementSelecting performance measures is central to the performance management system. Criteria that determine effective performance measures include the following:

Fit with strategy Validity Reliability Acceptability Specific feedback

Figure 10.2 in your textbook is a Venn diagram that sorts areas of contamination, validity, and deficiency. Here, measures are valid to the extent that a job performance measure and actual job performance overlap. Table 10.1 in your textbook summarizes basic approaches to performance management.

Methods for Measuring PerformanceMaking Comparisons

Levels of employee performance are differentiated using scales or standards.

Simple ranking lets managers differentiate employee performance in a group simply by ranking them from lowest to highest.

In the forced-distribution method, employees are assigned to categories such as “exceptional,” “exceeds standards,” “meets standards,” “needs improvement,” and “unacceptable.”

In the paired-comparison method, employees are given points for outperforming their peers.

Rating Individuals

Instead of ranking employees, a manager can assess individuals against established standards for dimensions like knowledge, teamwork, initiative, creativity, problem solving, communication, and so on. The most common approach to rating employee attributes in this way is a graphic rating scale. The problem with a graphic rating scale is a lack of reliability. Different raters are likely to evaluate concepts such as “knowledge” or “teamwork” differently.

To get around this problem, some organizations use mixed-standard scales. Here an abstract term like “communication” is represented by several statements that relate to or imply the

presence or absence of communication skills. The resulting ratings data can then be manipulated statistically to arrive at averages that are somewhat more reliable. Figure 10.3 in your textbook is an example of a graphic rating scale, while Figure 10.4 is an example of a mixed-standard scale.

Rating behaviors is an employee appraisal option in which managers identify behaviors that contribute to successful task completion and then record instances of those desired behaviors.

In the critical-incident method, managers observe and record specific examples of employees behaving in either effective or ineffective ways.

A behaviorally anchored rating scale (BARS) builds on the critical-incident method to define performance dimensions in terms of specific details.

A behavioral observation scale (BOS) is a variation on BARS. However, where the BARS approach discards many critical-incident examples, BOS uses a lot of them to define all the behaviors necessary for effective performance. Figure 10.5 in your textbook gives an example of a behavioral observation scale.

Organizational behavior modification (OBM) is based on the belief that people tend to repeat behaviors that yield desired results. In organizational settings, desired behaviors are reinforced through praise or other substantive rewards.

Measuring Results

Two popular criteria for measuring and assessing results are measuring productivity and management by objectives (MBO). Measuring productivity requires defining the desired result or output. In management by objectives, productivity aims are based on organizational objectives. In an MBO system, goals are established at all levels—from the top to the bottom of the organizational hierarchy. See Table 10.2 in your textbook to view two example MBO objectives for a bank.

Total Quality Management

Under a total quality management (TQM) approach, measurements of employee attributes and work results are combined. Overall, the rationale of TQM is continuous improvement, such as sharper employee skills and improved customer satisfaction. There are two kinds of TQM feedback:

Subjective feedback from managers, peers, and customers focuses on employees’ personal attributes—such as cooperation, initiative, and conscientiousness.

Objective feedback has to do with quantifying aspects or outputs of the work process. These might include everything from sales made, to complaints resolved, to units shipped per week.

Under TQM, every system aspect related to organizational goals is managed through statistical quality control. For example, if average customer complaints in May is 15, actions will be taken to address that fact by aiming for fewer than 12 by the end of June.

Sources of Performance Information

Managers are the traditional appraisers of employee performance. However, employee performance involves interactions with many other people who can offer insights and information about how an employee performs. Beyond managers, other sources of information include the following:

Peers—a person’s coworkers Subordinates—people who are supervised by the employee in question Self—the employee Customers—clients who may have relevant firsthand insights into the employee’s performance

Errors in Performance MeasurementTypes of Rating Errors

People often make mistakes. Nevertheless, it’s in everyone’s interest to keep rating errors to a minimum. Knowing a bit about the sources of errors can help.

The similarity effect describes how people tend to give more favorable ratings to people they perceive as similar to themselves.

Contrast errors occur when a person rates an employee by comparison with another employee instead of using an objective standard.

Distribution errors occur when raters use only a part of a rating scale. The halo effect occurs when a manager rates a person on the basis of a single outstanding trait.

Ways to Reduce Errors

Most people fall into errors more or less unconsciously. Remedies include training that warns against these kinds of errors and a clear set of criteria applicable to a job.

Political Behavior in Performance Appraisals

Some raters may decide to rate underperformers more highly than what’s reasonable and high-level performers lower than their achievements would ordinarily merit. The main casualty of politically motivated rating shenanigans is trust. An organization can’t function effectively if trust is lacking. Where trust is lacking, motivation falters and goals are deflated.

Giving Performance Feedback

Delivering appraisal feedback to employees can be uncomfortable for appraisers and employees. There are measures that can ease the stress.

Scheduling Performance Feedback

The annual appraisal may remain a tradition, but feedback also needs to be more or less continuous. When shortcomings appear, they need to be addressed as soon as possible.

Preparing for a Feedback Session

Managers should be well prepared for each formal feedback session. The session is best held in a neutral site, like a conference room. Managers should enable employees to be well prepared and complete a self-assessment ahead

of time. The manager’s and the employee’s assessments can be used as a foundation for a dialogue.

The “HR How To” in Chapter 10 of your textbook will help you understand the need for choosing the right words during a feedback session.

Conducting the Feedback Session

The discourse in a feedback session should emphasize behavior, not personalities. Also, the session is best ended with goal setting and scheduling follow-up sessions. Managers tend to take one of three approaches in a feedback session:

In the “tell-and-sell” approach, managers give the employees their rating then proceed to justify them.

In the “tell-and-listen” approach, managers tell employees their rating and then let the employees tell their side of the story.

In the “problem-solving” approach, managers and employees work together to solve performance problems. Studies have indicated that this is the superior method.

Finding Solutions to Performance Problems

In general, employees with high levels of ability and motivation meet or exceed standards. However, in cases where ability is weak and motivation is low, employees tend not to meet standards. Or, when they do meet standards, there’s room for improvement.

Legal and Ethical Issues in Performance Management

The material in this section provides additional insight into the legal requirements for performance management. This section also extends topics you’ve already explored. The issue of electronic monitoring and employee privacy can be difficult. Here, you can explore the matter in a bit more detail. As you read, ask yourself: How can management monitor employee performance without an unwarranted invasion of privacy?

Training, Development, and Career ManagementFollowing are features of the current business climate:

Organizations and employees must continually upgrade their knowledge, skills, and behaviors. As more companies operate internationally, employees must deal with the customs and

behaviors of people from different cultures. Companies increasingly expect employees at all levels to take on management roles. As companies organize work in terms of projects or customers as opposed to specialized

functions, employees have become familiar with a variety of technical and interpersonal skills. When it comes to development and training, employee training and learning may not apply to

currently held jobs. In short, development is about preparing for change.

Meanwhile, ideas about development for careers have changed. The traditional concept of career implied linear progression up a positional ladder within an organization. Recently, however, as a result of downsizing and restructuring, the concept of a protean career has gained currency. A protean career path requires employees to reinvent themselves as new skills and knowledge are acquired in step with changes in the business environment. Table 8.1 in your textbook gives a summary comparison of training and career development, while the “Best Practices” box is an informative discussion of how KPMG, a leading accounting firm, provides development opportunities for future leaders.

Approaches to Employee Development

As Figure 8.1 in your textbook shows, there are four frequently applied approaches to employee development.

Formal Education

Either in the workplace or offsite, organizations may support a wide range of formal educational programs:

Workshops and short courses may be tailored to fit the organization. Such programs may be coordinated short courses or seminars supported by local colleges or universities.

Organizational programs of study may include part- or full-time (on campus) progress toward a master’s degree in business administration (MBA).

Independent institutions like Harvard or the Wharton School of Finance offer graduate training in executive management.

Distance-learning programs provide busy people with graduate programs in business and business administration.

Assessment

Assessment involves gathering information about employees to provide them with feedback on their performance. The most common purpose of assessment-geared employee appraisal is identifying people with management potential. In many organizations, the methods of assessment are those of appraisal-in-general. However, in larger, more sophisticated organizations, assessment also relies on psychological tests.

The Meyers-Briggs Type Indicator (MBTI) is the most popular psychological inventory for employee development. The MBTI is derived from the work of Carl Jung, a Swiss psychologist whose work was nearly as influential as that of his mentor, Sigmund Freud. Jung’s eight psychological types are derived from the four psychic functions as modified by one’s degree of introversion or extraversion. Myers-Briggs added a final dichotomy that has to do with psychological style or worldview.

Assessment centers are usually located away from the job site. Multiple raters assess (as a rule) six to twelve employees through conducting exercises. The main use of assessment centers is to find out if employees have the personality characteristics and administrative and interpersonal skills required for managerial jobs.

Benchmarks are used as a tool for assessing manager performance. The 16 skills of the benchmark tool are derived from studies that have identified lessons executives learn in coping with critical events in their careers.

Performance appraisals and 360-degree feedback may be applied to employee development. Some examples include the following:

Employees must clearly understand the difference between current and expected performance. The appraisal process must identify clearly how performance may be improved. Managers must be trained to deliver timely employee performance feedback.

Job Experiences

Most employee development occurs through job experience. Development implies accepting the challenges of new experiences, learning new skills, and gaining new knowledge. Figure 8.2 in your textbook illustrates the paths managers may encourage employees to follow toward enhanced development. Paths to enhanced development might include job enlargement; job rotation; transfers, promotions, and downward moves; and temporary assignments with other organizations.

Interpersonal Relationships

Most successful mentoring relationships develop informally because the senior employee and the protégé share common values and interests. Younger employees tend to attract mentors if they appear emotionally stable, are adaptable to new situations, and show strong needs for power and achievement. Both the mentor and the protégé tend to benefit from a productive relationship. The

protégé has a defender and confidant. He or she is also more visible to upper management. At the same time, a mentor gains interpersonal skills and may even be inspired by a gifted protégé.

Coaching is helping and guiding. However, the connection of a coach and the coworker or subordinate isn’t so much an achievement collaboration as it is a practical relationship. According to research, coaching helps managers by identifying areas for improvement and setting goals.

Systems for Career Management

Figure 8.3 in your textbook summarizes the steps and responsibilities in the career management process.

Self-assessment: Employees gather information to determine their career interests, values, attitudes, and behavioral tendencies. Self-assessment tools typically provided by an HR department include psychological tests. These may include the MBTI, the Strong-Campbell Interest Inventory, and the Self-Directed Search. Figure 8.4 in your textbook offers a sample self-assessment exercise.

Reality check: The HR department (or someone assigned this responsibility) provides employees information about how their skills and abilities fit within the organization’s goals and plans. Employees are responsible for identifying skills they would like to develop in light of available opportunities.

Goal setting: The employees set short- and long-term goals. The goals typically fall into the following categories:

Desired positions Level of skills to apply Work setting Skill acquisition

Action planning: The outcome of action planning often leads to a career development plan. Figure 8.5 in your textbook offers a sample career development plan. This is a formal document that would be signed by the employee, the immediate manager, and the employee’s mentor. However, employees can also benefit from drafting a private, personal career development plan.

Development-Related Challenges

The glass ceiling continues to plague many female employees. Sexism has long been with us. Ideally, organizations can use employee development systems to crack the glass, so to speak. This makes sense because research shows that women are often at a disadvantage due to lack of access to training programs and developmental job experience.

Succession planning has become a thorny issue for many organizations. The aging workforce, early-retirement programs that delete experienced talent arbitrarily, and downsizing all contribute to the problem. Good succession planning is all about identifying and grooming potential managers and executives. Figure 8.6 in your textbook illustrates seven steps in an effective succession plan.

Dysfunctional managers may be characterized by arrogance, insensitivity to others, weak conflict management skills, inability to adapt to change, inability to work with teams, and inability to meet organizational objectives. There are programs that have been developed to deal with dysfunctional managers.

Managing Voluntary and Involuntary TurnoverInvoluntary turnover occurs when an employer terminates an employee for some reason, such as illegal drug use, a business downturn, or restructuring that involves downsizing. Employees who are involuntarily terminated often would prefer to keep their jobs.

Voluntary turnover happens when an employee chooses to leave an organization—often when the organization would prefer to keep that employee on the payroll.

Either kind of turnover costs a company productivity and recruiting costs. Moreover, in instances of voluntary turnover, the loss of talented employees is an additional cost. Meanwhile, in instances of involuntary turnover, costs may include lawsuits and even violence. Table 11.1 in your textbook shows the costs associated with turnover.

Employee SeparationPrinciples of Justice

A key employee-separation issue is employees’ perception of an organization’s fairness or unfairness. Employees are more likely to view organizational personnel practices as fair when there’s evidence of outcome fairness, procedural justice, and interactional justice.

Outcome fairness is perceived when employees view turnover decisions as just. Procedural justice is perceived when employees feel that fair methods are used to determine

outcomes. Policy consistency and absence of employer bias are major aspects of procedural justice.

Interactional justice is perceived when employees feel that personnel actions are respectful of employees’ feelings.

Figure 11.1 in your textbook illustrates the principles of justice.

Legal Requirements

Employers must meet legal standards for hiring and firing. A major role for HR managers is establishing and communicating clear discipline standards. The formal policy must clearly define categories and types of misbehavior and specify appropriate organizational responses to particular instances of misbehavior. Managers and supervisors must be trained to comply with the formal policy, and personnel actions must be documented meticulously. You should become intimately familiar with four major areas related to employee discipline: wrongful discharge, discrimination, employee privacy rights, and notification of layoffs.

Wrongful discharge is improper firing. There are two important contexts for instances of wrongful discharge:

Termination may violate an implied contract. For example, the formal policy may require a warning administered to an employee for any first instance of failing to meet a safety standard, such as wearing a hard hat on a construction site. If a supervisor fires a worker for a first offense in failing to wear a hard hat, the implied contract is violated.

A discharge action may violate public policy. An example might be discharging an employee for refusing an order to dump toxic chemicals into a sewage system. Another might be discharging an employee for reporting instances of illegal behavior or filing a deposition related to an investigation of alleged illegal organizational behavior.

Discrimination refers to uneven or biased organizational actions that disadvantage women, people of color, or people in some other legally protected category. A soundly prepared formal personnel policy should clearly identify potential discriminatory actions. Not only is discrimination unethical, it can lead to financially damaging legal actions on the part of persons who even perceive instances of discrimination.

Employees’ privacy rights must be balanced against both organizational and public interests. The issue is further confused as organizations enact policies that affect employees’ conduct during nonworking hours—such as formally discouraging cigarette smoking on or off the job to contain healthcare costs. Table 11.2 in your textbook lists measures for protecting employees’ privacy.

Notification of layoffs: Under the federal Workers’ Adjustment Retraining and Notification Act, organizations with 100 or more employees must provide 60 days’ notice of layoffs that will impact 50 or more full-time employees. If such notice isn’t given, employers may be liable for back pay and benefits.

Progressive Discipline

The hot-stove rule asserts that discipline is like a hot stove, which burns any and all of those who fail to heed its warning.

The concept of progressive discipline implies following a formal policy that provides increasingly serious consequences for instances of misbehavior. Figure 11.2 in your textbook summarizes progressive discipline responses from an unofficial warning to termination.

Organizations need to use disciplinary measures that are legal, fair, and effective. Disciplinary actions must be consistent, and penalties should properly reflect the seriousness of the offense. Typical disciplinary issues in organizations include tardiness, absenteeism, unsafe work practices, poor quality or quantity output, sexual harassment, showing up for work drunk or high, stealing company property, and cyberslacking.

Alternative Dispute Resolution

In administering fair, just, and legal disciplinary policies, disputes may be managed by alternative dispute resolution (ADR). Many disputes involve conflicts between labor and management. Four common, progressively more formal techniques are the open-door policy, peer review, mediation, and arbitration.

Employee Assistance Programs

Employee assistance programs (EAPs) tend to be fully integrated into organizational health and benefit plans. It costs less to implement EAPs to help employees deal with addictions or other disorders than it costs to replace the employees.

Outplacement Counseling

In today’s business environment, people are terminated for various reasons—sometimes on a large scale. Losing a job ranks very high among stressful life events, not far removed from the impact of divorce or losing a loved one. People who have lost their jobs must deal with depression, anger, and fear. Outplacement counseling programs can help ease the pain and help the organization avoid expensive legal suits and violence. The objective of effective outplacement counseling is helping people feel that losing a job isn’t the end of the world.

Job Withdrawal

Organizations are diminished or enhanced to the extent that workers are fully committed to and engaged in their jobs. Ensuring job commitment isn’t just about keeping people from quitting, however. The more important challenge is coping with job withdrawal. Job withdrawal happens when employees disengage from job commitment physically, mentally, or emotionally.

Job Dissatisfaction

There are four main categories of the causes of job dissatisfaction: personal dispositions, tasks and roles, supervisors and coworkers, and pay and benefits.

Personal dispositions are personality differences. In particular, job dissatisfaction is higher among people who exhibit negative affectivity and negative core self-evaluation. Some people tend to see the world in general through dark glasses, and some individuals have low self-esteem. People with high self-esteem tend to succeed in the workplace; they view setbacks as challenges. People with low self-esteem tend to respond to workplace problems with anger.

Tasks and roles: The best predictor of job dissatisfaction is the job itself. In particular, people tend to be unhappy about jobs that are tediously simple and repetitive, physically stressful, or perceived as unimportant. Roles are parts people play in social scenes or settings. All social roles are learned in a process called socialization. Role problems in the workplace include

Role ambiguity, which means that the demands of the job role are unclear Role conflict, which happens when the demands of the job are incompatible or contradictory Role overload, which occurs when there are too many expectations associated with the job

Supervisors and coworkers can also be sources of job dissatisfaction. Dealing with some bosses and coworkers is difficult. Research shows that managers and supervisors must value employees’ work, and that turnover is higher when employees don’t feel that their values and beliefs are compatible with those expressed in an organization.

Pay and benefits, when less than the industry standard, can cause significant job dissatisfaction. For most people, a job is the sole source of income and financial security. Also, in our society, low pay is identified with low social status, which also means that low pay is often associated with low self-regard.

Behavior Change

Managers can respond to employee complaints and grievances reactively or proactively. In a reactive response, managers view grievances as threats and tend to react with hostility. In a proactive response, managers listen, sort out frivolous from reasoned complaints, and take measures to address legitimate employee grievances. For the good of the organization, they entertain constructive behavior changes. On the other hand, failure to react proactively to reasonable grievances can lead to lawsuits, strikes, and reduced productivity.

Physical and Psychological Job Withdrawal

Organizations that aren’t inclined to address worker grievances and complaints may drive employees into their own kind of reactive mode. Some leave the company. However, because jobs can be scarce, a common strategy is passive resistance. People show up late or leave early. Some call in sick. Others waste vast amounts of time. The “HR Oops!” feature in Chapter 11 of your textbook looks at excuses employees make to stay away from work.

In any case, keep in mind that withdrawal may be more psychological than physical. Job involvement declines or fades away as employees stop identifying with the job. They show up for work but their heart isn’t in it. As that happens, organizational commitment is also likely to wither.

Job Satisfaction

To prevent job withdrawal, employers need to sharpen their focus on promoting job satisfaction. In general, promoting job satisfaction largely entails addressing the sources of dissatisfaction.

Personal dispositions: HR specialists can screen applicants and recruit people who are predisposed to job satisfaction.

In addition, job tasks and roles should be addressed. Things go better in the following situations:

Job complexity is challenging. Work is perceived as meaningful. Recall that the major predictor of job satisfaction is a good fit

between an employee’s values and the values expressed in a job. Clear and appropriate roles are established for each and every job. In this context, employers

are tending to establish policies that are more “family friendly.”

Given that role problems run just behind job problems when it comes to job dissatisfaction, it makes sense to address role issues. HR professionals can do that using a role analysis technique. Basically, this is a formal process for identifying expectations associated with a role. Figure 11.6 in your textbook illustrates the steps in the role analysis technique.

Supervisors and coworkers are the two most important influences on job satisfaction. People are likely to be satisfied in their relationships with either group if there’s a culture of shared values, with coworkers and supervisors providing social support and helping an employee attain valued outcomes.

Pay and benefits matter when it comes to negotiating with a prospective job candidate. HR professionals can help by tracking job pay levels in similar industries. Also, when it comes to pay structuring, two things should be kept in mind. Compensation should increase over time if employees meet expectations. Second, employees in the same job should receive the same pay.

Monitoring job satisfaction periodically can help to detect trends and possible problems. Conducting surveys is a typical and practical approach to monitoring job satisfaction. This approach is made easier by the fact that many satisfaction scales have been well tested for reliability and validity. Another widely used measure of job satisfaction is the Job Descriptive Index (JDI). The JDI assesses specific aspects of satisfaction such as pay, coworkers, the job itself, supervisors, and promotion opportunities. Figure 11.7 in your textbook shows a sample of the JDI. Other scales measure overall or general levels of satisfaction by posing broad questions such as, “How satisfied are you with your job?” A faces scale, such as that shown in Figure 11.8 in your textbook, is visual, not verbal.

Lesson 4 Overview

Lesson 4 consists of Chapters 12, 13, and 14, which all focus on employee compensation. Chapter 12 describes how managers weigh the importance and costs of pay to arrive at a structure for levels of pay. There are several considerations that influence these decisions: legal requirements related to pay, economic forces, the nature of the organization’s jobs, and employees’ judgments about the fairness of pay levels. Chapter 13 continues to build on these concepts with a focus on performance-related or incentive pay and how incentives can be used for individuals, groups, and executives. Chapter 14 discusses the important role of benefits as a part of employee compensation, and defines major types of employee benefits such as benefits required by law, paid leave, insurance policies, and retirement plans.

Decisions about PayLabor is usually a company’s number one expense. So, if a company doesn’t work out a realistic, consistent, cost-effective policy for paying employees, things aren’t likely to go well. Pay may be too low or too high. Employees doing the same job may be getting different pay.

To work out a pay plan, managers must establish a pay structure. To do that, they must establish a job structure and decide on pay levels. Job structure determines how much workers will be paid for different jobs within the organization. Pay level is the average amount the organization pays for a particular job. However, keep in mind that a pay structure doesn’t establish precisely how much an employee will be paid. The pay structure establishes a range of pay for a given job. Figure 12.1 in your textbook illustrates issues related to developing a pay structure.

Legal Requirements for PayEqual Employment Opportunity

Government regulations must be taken into account when establishing a pay structure. As mentioned in Lesson 1, equal employment opportunity laws forbid many types of discrimination. However, the formal absence of discriminatory pay practices doesn’t guarantee equal pay for

equal work. In general, for various reasons, white males receive higher pay. The “HR Oops!” feature in Chapter 12 of your textbook gives some insight into the pay disparity issue for women.

In thinking about this pay-disparity issue, consider the concept of comparable worth, which is the idea that people should be paid equally for jobs that require equivalent skills, levels of responsibility, and experience. In any case, most researchers agree that part of the problem is cultural. Some of the bias in favor of males is cultural: Men were once traditionally the primary wage earners. Such ideas still infect managerial decisions.

Minimum Wage

The federal Fair Labor Standards Act (FLSA) of 1938 is the legal legislative framework for determining the minimum wage. However, because a job paying minimum wage isn’t high enough to lift a single person—much less a family—out of poverty, some states have established a higher minimum wage. Additionally, some states have made efforts to establish a minimum living wage based on the cost of living in a given region.

Overtime Pay

The FLSA requires overtime pay for wage earners who work more than 40 hours per week. Under the FLSA, that means time-and-a-half. If your hourly wage is $10.00, you’ll earn $15.00 for each overtime hour. Figure 12.2 in your textbook shows how to go about computing overtime pay. Keep in mind that overtime pay rules apply to such things as attending required classes or on-the-job travel time.

Under FLSA, white-collar workers earning a salary above an established level, professionals, and executives, are among people considered exempt from overtime pay requirements. However, the standards for exemption are complicated and may not always seem equitable.

Child Labor

Child labor laws are meant to protect people under the age of 18 from exploitation that impacts health, safety, or educational opportunities. Because states and localities may impose other restrictions, and because the FSLA stipulations aren’t always clear, child labor laws and standards are complicated.

Prevailing Wages

Under the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936, workers must be paid at a level commensurate with the local prevailing wage levels. Typically, prevailing wage levels have been based on wage levels set by labor unions. The objective of these bills is to sustain relative pay equity for federal contract workers.

Economic Influences on Pay

Pay decisions are affected by market forces. Organizations must be profitable to survive, and face the challenge of keeping costs low and also attracting and paying for top talent.

Product Markets

For a business organization, the product market consists of its relevant competitors. If a company’s labor costs are higher than those of competitors, it’s at a disadvantage in the product market and must pass on the extra costs to consumers or lose profitability. Product markets establish the upper limit on what employers can pay employees. A company may try to push up to that limit to attract top talent. That might be accomplished by automating work processes—thus reducing overall labor costs. However, the strength of the product market remains the primary determinant of what to pay employees.

Labor Markets

Organizations compete for human resources within labor markets. A basic rule of any labor market is simple: Employers who offer the best pay attract more job applicants. This basic principle establishes the minimum employers must pay to attract the employees they need. To configure a pay structure, HR professionals must gather data on what the other organizations are paying.

Pay Level: Deciding What to Pay

The market rate, which is the pay level established by the balance of supply and demand, might seem to be the most profitable pay rate. However it could make sense to establish pay levels above the prevailing market level to attract top talent. The “Did You Know?” feature box in Chapter 12 of your textbook gives information on median annual earnings for several occupational categories.

Gathering Information about Market Pay

To compete for talent, organizations often use benchmarking—comparing an organization’s practices with those of successful competitors. Pay surveys are a typical tool for comparing compensation and are available for many kinds of product and labor markets. One major source of wage information is the Bureau of Labor Statistics. The “HR How To” feature in Chapter 12 of your textbook explains how the Bureau of Labor Statistics website can be used.

Employee Judgments about Pay FairnessHow do employees evaluate the fairness of a pay structure? Employee perception of pay equity and fairness directly affects an organization’s well-being.

Judging Fairness

According to equity theory, employees measure outcomes like pay against their inputs—what they contribute to the organization through their job. In general, employees compare their pay and contributions with workers in other organizations, with employees at various levels in their own organization’s hierarchy, and with employees in the organization who do the same or similar jobs.

If the ratio of inputs to outputs (pay) is seen as balanced, pay is seen as equitable. If the ratio is unfavorable, so that outputs are overweighed by inputs, pay is seen as inequitable. Figure 12.3 in your textbook illustrates opinions about pay equity. Keep in mind that we’re thinking about perceptual judgments, which may or may not match the measurable facts.

Communicating Fairness

Managers must be aware of employee perceptions. When indicators of perceived inequity arise, measures should be taken. Most often, this means communication with employees. Make information available. For example, if drill press operators in one branch of the company are being paid less than drill press operators in another plant, managers should show that living costs are significantly lower in the first area.

Job Structure: Relative Value of JobsOrganizations design pay structures based on the relative contributions of jobs. The main approach to this concern is job evaluation, an administrative process for measuring the jobs’ relative worth. This task is usually assigned to a trained job-evaluation committee. What the committee does is identify the compensable factors of the job. A compensable factor is a job characteristic that’s valued by the organization. Table 12.1 in your textbook shows a job evaluation in terms of some compensable factors.

Pay Structure: Putting It All TogetherHaving gathered a body of salient information, an organization establishes a pay structure by combining pay rates, pay grades, and pay ranges. There are three general pay structures:

Hourly wages—a pay rate per hour worked Piecework rates based on numbers of units produced Salaries dispensed on a weekly, biweekly, or monthly basis

Pay Rates

Pay rates are established differently for key positions and nonkey positions. Key positions typically include executives or, in some cases, technical specialists vital to organizational goals or projects, such as a highly credentialed biochemist in a pharmaceutical company. The main

way pay rates are established for key positions is through surveys of pay rates in comparable industries. Nonkey jobs are rated using the organization’s job evaluation points in relationship to a range of salary or wage rates to create a pay policy line. Figure 12.4 in your textbook graphs a pay policy line. Individual jobs should fall somewhere near the policy line. To the extent that they do, they reflect the pay structure of the market. Actual pay policy in a given organization may stipulate higher or lower salaries than those in the broader market.

Pay Grades

In large organizations with possibly thousands of jobs, whole groups of relatively similar jobs are placed within a pay grade. Civil service jobs are grouped into pay grades, as are military organizations that recognize hierarchies based on rank. The downside of pay grades is a possible failure to identify distinctions among actual job requirements.

Pay Ranges

Organizations need some flexibility in setting pay for individual jobs. Therefore, a pay structure typically specifies a pay range for similar jobs within a category or within a pay grade. The pay range specifies a minimum, midpoint, and maximum.

Figure 12.5 in your textbook graphs a sample pay range structure. The salary ranges are the tone blocks. Notice that the ranges may overlap. The highest pay within one range may exceed the lowest salary for the next-highest range. This is intentional, not accidental. Management may want to keep a skilled, experienced employee in a job.

Pay Differentials

Organizations often adjust pay to reflect working conditions. Pay may be a bit higher for a night shift, because most employees prefer day shifts. Quite often pay is adjusted to reflect the cost of living in different geographic locations. Indeed, a survey of US businesses revealed that about half of them adjust pay to reflect cost of living. Pay differences of this sort are called pay differentials.

Alternatives to Job-Based Pay

The traditional approach to establishing a pay structure is by way of precise definition of a job’s tasks and responsibilities. However, this approach can become dysfunctional as companies adjust to changes in the business environment that call for flexibility and innovation. In short, job-based pay structures may work against a company’s best interests. Two alternatives to job-based pay structures are as follows:

Delayering reduces the numbers of levels in a company hierarchy. This groups a wider variety of jobs, tasks, and skills under one managerial roof. When a company decides to shift toward project-based operations, this allows supervisors and managers to assemble a wider variety of skills, abilities, and knowledge from within that level. These broader groupings are often referred to as broad bands.

Skill-based pay systems, which are pay structures that set pay based on employees’ skills or knowledge levels. This kind of pay scheme makes sense in organizations that must continually upgrade technological skills related to information technology (IT).

Pay Structure and Actual PayAn HR department is usually responsible for crafting an organization’s pay structure. HR professionals must also monitor the extent to which the pay structure policy is actually being implemented. The classic approach to this responsibility is determining the ratio of average pay to the midpoint of a pay range. This measure is called a compa-ratio. Here’s how it’s calculated in organizations that use pay grades:

1. Pick a pay grade.2. Add up the salaries of all the people in that pay grade.3. Divide that number by the number of employees to get the actual salary average.4. Divide that number by the range midpoint value established by the pay structure policy.

If the ratio is very close to one, all is well. The pay structure is being implemented properly. If the ratio is much above one, the company may be overpaying employees. If the ratio is significantly lower than one, employees are being underpaid. Figure 12.6 in your textbook shows how to find a compa-ratio.

Current Issues Involving Pay StructureTwo current issues are pay during military duty and pay for executives.

As discussed in Lesson 1, the Uniformed Services Employment and Reemployment Rights Act (USERRA) requires employers to make jobs available to their workers upon their return from active duty if they’ve been away for up to five years. What you’ll learn here is that some companies provide salary supplements to employees who are away fulfilling military obligations.

The discussion of executive compensation may make you either uncomfortable or envious, depending on your point of view. The fact is, by comparison with other countries, US executive compensation packages seem to many to be excessive

Incentive PayWhen selected behaviors are rewarded by pay, the pay serves as a motivating incentive. In general, incentive pay energizes, directs, and controls employee behavior. Effective incentive plans meet the following requirements:

Performance measures must be linked to the organization’s goals. Employees must believe they can meet performance standards. The organization must give employees the resources they need to meet their goals.

Employees must value the rewards given. Employees must believe the reward system is fair. The pay plan must take into account that employees may ignore any goals that aren’t rewarded.

Pay for Individual PerformanceAs you consider the five approaches to incentive pay, try to imagine the advantages and disadvantages of each approach.

Piecework Rates

Piecework rates are based on quantities of units produced. They’re most suitable for simple, repetitive tasks. In a straight piecework plan, workers are paid for the quantity of what they produce. Workers who exceed the average make more money. An alternative to the straight piecework plan is a differential piece rate plan, in which a standard production quota is established. Workers producing more than the quota are paid more per unit, and those producing less are paid less per unit. A disadvantage to piecework schemes is that the concentration on quantity can reduce quality and customer satisfaction.

Standard Hour Plans

Standard hour plans are also quantity-oriented incentive plans designed for production workers. Workers are paid extra for completing work faster than is specified for a particular task. For example, if the standard time for replacing an alternator in an auto shop is one hour and the worker completes the task in less than an hour, the worker gets paid the full amount specified for the standard time.

Merit Pay

A merit pay plan links pay increases to ratings on performance appraisals. Nearly all organizations have some kind of merit pay plan. To provide fairness to a merit pay plan, employers may use a merit increase grid. A downside of merit pay plans is that they can get expensive in a hurry. One possible remedy is adjusting merit pay increases to current rates of inflation on a periodic basis. Table 13.1 in your textbook gives a sample merit pay grid. Notice that it’s based on two factors: the individual’s performance rating and their compa-ratio. This approach gives the best pay increases to the best performers and to those whose pay is relatively low.

Performance Bonuses

Bonuses linked to performance can be effective employee motivators. They also provide an organization with the flexibility needed to reinforce behaviors that are important to organizational strategies. For example, one-time retention bonuses may be used to help retain top-talent employees after a merger or acquisition.

Sales Commissions

Be sure to differentiate two basic kinds of sales commissions. Commissions based on sales may complement a base salary. In other plans, employees are paid on a straight commission basis. Straight commission plans are fairly standard for real estate agents and auto dealership salespeople. The downside to straight commission plans is that excessive focus on closing sales may encourage misrepresentation of facts or bait-and-switch sales techniques. Salespeople with a decent base salary are freer to develop customer goodwill that can pay off in the long run.

Pay for Group PerformanceGainsharing

Gainsharing is adopted by organizations that are focused on increasing productivity and efficiency by arranging for employees to get a share of the company’s financial success.

The Scanlon plan is a popular approach to gainsharing that gives employees a bonus when the ratio of labor costs to the sales value of production is below a standard. The bonus is an incentive meant to encourage workers to increase productivity and reduce labor costs. Figure 13.3 in your textbook shows how to find the gain in a Scanlon plan.

Note how the distribution of gains works. The organization keeps a share of the gain to enhance their bottom line. A portion of what remains goes into a reserve account for access during years when the gain is nothing or negative. The account is closed out at the end of each year, and any remaining surplus is distributed to employees.

Group Bonuses and Team Awards

Group bonuses and team awards differ from gainsharing in that they reward the performance of employee groups or teams based on performance measures such as cost savings, productivity, project completion, or meeting deadlines. Both gainsharing and group or team bonuses may foster cooperation. However, contrasted with gainsharing, group bonuses may also create unhealthy competition among groups.

Pay for Organizational PerformanceOrganizations link pay to their overall performance in various ways.

Profit Sharing

Under profit sharing, a percentage of corporate profits are distributed among employees, independent of their base pay. Companies use profit sharing incentives to encourage employees to become more committed to organizational goals. However, evidence is mixed as to how well profit sharing improves a company’s performance.

Stock Ownership

Under stock ownership plans, employees become part owners of the company. The effect on motivation can be much like that of profit sharing. In direct stock ownership plans, employees can purchase company stock that they can hold or sell as they see fit.

Another approach to stock ownership plans is granting employees stock options. Traditionally, stock options have been granted to top executives as a part of their compensation package. However, especially beginning in the 1990s, some corporations began to offer stock options to employees at every level. Stock options permit employees to purchase shares of company stock at a fixed price, generally over a long-term period. Stock option plans can be troublesome. In particular, upper-level managers who hold large stock options may be tempted to boost market share prices artificially. A few executives may earn large short-term gains even as the company collapses.

Employee Stock Ownership Plans

In employee stock ownership plans (ESOPs), the most common form of employee ownership, share entitlements to stock are distributed among employees. The stock itself is held in a trust on behalf of the employees. When employees leave the company, they can sell their shares back to the company. Or, if the company is publicly owned and is traded on the NYSE or some other exchange, they can sell their shares at market value (less broker commission). However, if company performance languishes, there will be a significant impact on employee-held equity. On the upside, ESOPs build company pride, allow employees a genuine say in company policies, and can motivate employees. Figure 13.5 in your textbook shows the number of ESOPs in several years from 1975 up to 2013.

Balanced ScorecardGiven the uncertain advantages and explicit disadvantages associated with incentive pay schemes, organizations may adopt a plan that balances different kinds of incentive pay plans. A popular method is to create a balanced scorecard. Imagine a mix of incentive plans that does the following:

Satisfies the long-term interests of shareholders Improves product quality to satisfy customers Increases organizational efficiency Fosters the acquisition of skills and knowledge that make a company innovative

To create a balanced scorecard, a company assesses and evaluates the kinds of incentives that would be appropriate for specific company performance indicators such as sales, production efficiency, customer relations, and return on investment (ROI). Therefore, the balanced scorecards for engineers, salespeople, or line supervisors will be distinct even though all of them are linked to organizational goals. To get a sense of what a balanced scorecard looks like, study Table 13.2 in your textbook. Notice the four performance measures as they relate to an incentive

schedule with three parts—base goal per month at budget, target level, and stretch level. The goal reached will determine the level of incentive pay for each performance category.

Processes that Make Incentives WorkEmployee participation in pay-related decisions leads to employee empowerment. Employee empowerment, in turn, can lead to higher levels of motivation and increased productivity.

Meanwhile, open and effective communication with employees tends to reinforce employee perception that incentives are fair. Given that observation, the HR department must be sensitive to employee perceptions when communicating changes in incentive plans. This is bound to happen as a company revises goals to meet changes in the business environment.

Incentive Pay for ExecutivesExecutive compensation mixes short-term incentives and long-term incentives. Short-term incentives may include annual bonuses based on profits or return on investment. Long-term incentives tend to consist of stock options and stock-purchase plans. In general, short-term incentives reward immediate performance and long-term incentives keep the executive focused on the long-term health of the company. According to a Business Week survey, nearly 80 percent of executive pay is in the form of stock options and other incentives for long-term performance objectives.

Performance measures for executives vary. Most people, including the general public, stock holders, and regulators with the Securities and Exchange Commission (SEC), maintain that executive pay should be linked directly to performance. Yet, by far the most publicized issue in executive pay has been the absence of a link between performance and pay. In many instances, executives continued to receive high compensation even when company performance faltered. A significant effort to reform this situation is a balanced scorecard for executives. The balance can be achieved by broadening the criteria for compensation. Along with shareholder value, the criteria may include customer value and employee value.

This chapter wraps up with a discussion of ethical issues related to executive compensation. The main issue here is the apparent difficulty of adopting incentive plans that actually encourage executives to focus on productivity, product quality, and customer satisfaction. As scandal after scandal has shown, insider trading and schemes to artificially inflate share prices may result in enriching a few people at the top while drawing the company toward bankruptcy, vanished retirement funds, and thousands of lost jobs.

The Role of Employee BenefitsBenefits are an important part of employee compensation for several key reasons:

Employees expect them. The law requires some benefits, such as Social Security contributions. Beyond legally required benefits, employers offer health, retirement, and insurance benefits to

compete effectively in the labor market.

Benefits have become an increasingly high percentage of total compensation. See the evidence for this in Figure 14.1 in your textbook.

Benefits Required by LawFrom the mid-1800s until well into the 1900s, people were pretty much on their own. The customs and traditions of a mainly agrarian, rural society remained even as America was growing into an industrial giant. There was no widespread public sense that government should provide a platform for prosperity or economic security. As a result, the entire period—up until 1929—was marked by intermittent, devastating recessions and a widening gap between haves and have-nots. All of this came to a head with the advent of the Great Depression in 1929. Suddenly it became clear to some among the social elite that capitalism itself was in danger of being overthrown. In response, Franklin Roosevelt’s administration created the New Deal. Executive and legislative initiatives during the 1930s established the framework for today’s systems.

In 1935, the Social Security Act established old-age insurance and unemployment insurance. Survivor’s insurance was added in 1939 and disability insurance was added in 1956. Under the Kennedy and Johnson administrations (1960–1968), Medicare parts A and B were passed into law. Altogether, these laws and amendments constitute the Old Age, Survivors, Disability and Health Insurance (OASDHI) program we know as Social Security.

Unemployment insurance was mandated as an adjunct provision of Social Security. It serves four functions aimed at reducing the pain of unemployment:

Payments offset lost income due to involuntary unemployment. The unemployed are assisted in their search for jobs. Taxes on employers levied to sustain the unemployment insurance program are an incentive for

employers to stabilize employment. Income provided to workers during short-term layoffs allows employers to rehire them, and, in

that way, maintain access to workers’ skills.

The states are technically in charge of managing their own unemployment insurance programs. However, across the board, the level of an employer’s unemployment insurance taxation is determined by that employer’s experience rating. In effect, that rating punishes employers who have a past history of significant layoffs. Their tax rates are higher. Thus, employers are rewarded for keeping layoffs to a minimum. Requirements for unemployment insurance eligibility include having been employed for (as a rule) 52 weeks, not having been fired for cause, being available for work, and actively seeking work.

Workers’ compensation laws passed by the states encourage employers to maintain safe working conditions, including measures taken to ensure that managers and workers abide by safety regulations. As with unemployment insurance, assessed taxes that support workers’ compensation are lower for employers with a favorable experience rating. Workers’ compensation laws follow a no-fault liability principle. This means employees don’t have to show that employers were grossly negligent to be eligible for payments. In exchange, employers are protected from lawsuits provided they haven’t intentionally contributed to workplace conditions that threaten workers’ health and safety by way of willful disregard of safety rules. Overall, about nine out of ten workers are covered under workers’ compensation laws. Compensation benefits generally include disability income (usually around two-thirds of the worker’s wages), medical care, death benefits, and rehabilitation services. The benefits are tax free.

Unpaid family and medical leave is provided by the Family and Medical Leave Act (FMLA) of 1993, which requires employers with 50 or more employees within a 75-mile radius to provide up to 12 weeks of unpaid leave after childbirth or adoption, or to care for a seriously ill child, spouse, parent, or employees themselves. Under the act, employers are required to preserve a person’s job—or its equivalent—while the employee is on leave. The act doesn’t apply to employees with less than one year of service, employees who work fewer than 25 hours a week, or the 10 percent of employees who earn the company’s highest income.

US policies for family and medical leave are regressive in comparison with Japan and the countries of Western Europe. Paid leave is mandated in these countries. Further, all of them also have some form of cost-efficient universal or single-payer health insurance provided at a much lower cost than is the case in the United States. US employees may be forced to minimize their use of unpaid leave benefits. Single mothers, for example, typically can’t afford unpaid leave for more than a few weeks or even a few days. Table 14.1 in your textbook summarizes the benefits required by law.

Optional Benefits ProgramsSome benefits, which may include group insurance, paid leave, or a retirement plan, aren’t mandated. Employers may offer them nonetheless for the good of the company or as an ethical assumption of responsibility for employee welfare and the common good. The most widely offered optional benefits are paid leave for vacations and holidays, life and medical insurance, and retirement plans.

Paid Leave

The main categories of paid leave are vacations, holidays, and sick leave. However, organizations may also provide paid leave for jury duty, funerals of close relatives, or military duty. Figure 14.2 in your textbook shows the percentages of full-time workers with access to selected benefit programs, from medical care to paid holidays.

Group Insurance

Medical insurance is, for most people, the most important benefit. Our complicated medical care system has a variety of aspects. Most recently, in 2010 Congress passed the Patient Protection and Affordable Healthcare Act, which made many new changes for health insurance companies and employers regarding providing health insurance. Employers with at least 50 employees must now provide affordable care and minimum essential coverage as defined by the government for all full-time or equivalent full-time employees based on a look-back period. Employers that are required to do this but don’t meet the requirements face severe penalties.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 is a federal law requiring employers to allow employees to extend their health insurance coverage at group rates for up to 36 months after a qualifying event, such as termination for other than misconduct.

Here are some of the health-related options from which an employer can choose:

Managed care Health maintenance organization (HMO) Preferred provider organization (PPO) Flexible spending account Consumer-driven health plan (CDHP) Employee wellness program (EWP)

Figure 14.3 in your textbook compares the health care costs in a few countries. The US cost is the highest, even though affordable access to health care is uneven and inequitable.

The “HRM Social” feature in Chapter 14 of your textbook shows how social media tools can increase utilization of wellness programs, which can greatly reduce a company’s health care costs.

Other kinds of group insurance include the following:

Life insurance Short-term disability insurance Long-term disability insurance Long-term care insurance

Retirement Plans

Social Security is a vital resource for many older Americans. However, Social Security was never intended as more than an income supplement to keep older people out of abject poverty. Figure 14.4 in your textbook displays the various sources of income for people over age 65. In other words, most people can’t sustain anything close to the lifestyle of their working years without additional resources. That’s why retirement plans are so important. Contributory plans are funded by both the employee and the employer. Noncontributory plans are funded entirely by the employer.

Defined-benefit plans must meet the requirements of the Employee Retirement Income Security Act (ERISA) of 1974. ERISA increased the responsibility of pension plan trustees to protect retirees, to establish certain rights related to vesting, and to make the investments portable. Vesting means the employee has a right to receive the pension. Portability means the pension savings can be moved if a person moves to another company.

The Pension Benefit Guarantee Corporation (PBGC) is a federal agency that insures retirement benefits and also guarantees employees’ benefits if the employer runs into hard times. Employers fund the PBGC by paying a flat annual rate per employee into the fund ($27 for single-employer plans in 2016). Of course, an employer’s retirement plan may be underfunded. If it is, the employer isn’t contributing enough to the fund to meet future obligations. In such cases, the employer is required to pay additional premiums based on the extent of shortfall.

Defined-contribution plans offer an alternative to defined benefit plans. In such plans the organization sets up an individual account for each employee and specifies how much they must invest—as opposed to how much money will be paid out at retirement. The payout will depend on how well an employee’s account performs. Commonly used defined-contribution plans include the following:

Money purchase plans Profit-sharing and employee stock ownership plans Section 401(k) plans

Defined-contribution plans free the employer from risks that the investment won’t perform as well as expected. The responsibility for wise investing is shifted to the employee. Figure 14.5 in your textbook compares the values of retirement savings as a function of how early in one’s life the plans are started.

Cash balance plans combine the advantages of defined-benefit plans and defined-contribution plans and feature individual accounts, as in a 401(k) plan. However, the contributions are made by the employer, usually as a percentage of the employee’s salary. The money earns interest, and employers guarantee this rate. Cash balance plans are advantageous for younger employees who can allow the account to grow. Also, they reduce company pension costs. However, a switch to a cash-balance from a defined-benefit plan is hard on older employees who have put in years of service.

Government requirements for vesting and communication fall under the stipulations of ERISA, which guarantees employees’ vesting rights. ERISA’s reporting and disclosure requirements coordinate inputs form the Internal Revenue Service, the Department of Labor, and employees. Namely, within 90 days of an employee’s signing on to a plan, he or she must receive a summary plan description (SPD). Also, on request, the employer must provide an employee with an individual benefit statement. The statement describes the employee’s vested and unvested benefits.

“Family-Friendly” Benefits

Organizations can use new kinds of benefits to address employee wants and needs. Following are four kinds of benefits that help meet the needs of families:

Family leave Child care College savings Elder care

Other Benefits

A wide range of company benefits can be implemented. Traditional examples include employee discounts on merchandise, onsite health care for minor problems, subsidized cafeterias, and moving expenses for employees who are relocating from other places. Other examples include tuition reimbursement and onsite stress-management facilities. Tuition can be an investment in employee development. Onsite recreational facilities or counseling services can help workers cope with ever-increasing work demands.

Selecting Employee BenefitsThere are three basic criteria for selecting employee benefits:

The organization’s objectives The employees’ expectations and values The benefits’ costs

Table 14.2 in your textbook summarizes a typical organization’s benefit objectives.

Legal Requirements for Employee BenefitsTax Treatment of Benefits

The IRS goes easier on the tax treatment of benefits if they’re considered qualified plans. For a plan to be qualified, it must meet specified standards. For example, in the case of pensions, nondiscrimination rules work against plans that would favor top management. Pension plans should be made available to a wide range of employees. Before offering pension plans or other benefits, an organization should have the plan reviewed by experts who can remove discriminatory aspects.

Antidiscrimination Laws

Men and women should have equal access to benefits. So, for example, the fact that women live longer than men means that a company will pay out more in pensions, on average, for women

than for men. Some companies tried to require women to pay higher income percentages into their retirement plan before that practice was ruled illegal in a 1978 Supreme Court ruling.

Under the Pregnancy Discrimination Act, pregnancy should be treated like any other disability, and under the Age Discrimination in Employment Act (ADEA) and amendments, employers must not discriminate against people over 40. Also, early-retirement incentive programs must meet certain standards. It’s forbidden to coerce employees to retire. Their acceptance of such an incentive must be voluntary. On the other hand, the Equal Employment Opportunity Commission (EEOC) has ruled it legal to reduce employees’ health benefits after they become eligible for Medicare.

Finally, under the Americans with Disabilities Act (ADA), employees with disabilities must have equal access to health insurance coverage.

Accounting Requirements

Company financial statements must meet the requirements of the Financial Accounting Standards Board (FASB). Mainly, FASB regulations require financial statements to be true and clear representations of the actual financial status of a company. Additionally, the FASB requires that employers set aside funds needed for retirement plans. Paying pensions out of current operating funds isn’t allowed.

Communicating Benefits to EmployeesCommunication is central to any organization’s vitality. So, it’s no surprise that one aspect of effective organizational communication is informing employees about their benefits. Surprisingly, research shows that many job applicants and employees are unaware of their benefits or what they entail. Effectively informing employees about the nature, costs, eligibilities, and purposes of their benefits is important. Employees will fail to value their benefits if they don’t know what they are or what they offer.

Managers and HR professionals must work out attractive, intelligible ways to get the message out. For example, emails, websites, pamphlets, and benefits manuals can be produced professionally and updated periodically, and training sessions can be devoted to explaining benefits and their value.

Lesson 5 Overview

Lesson 5 explores two other important HR considerations—collective bargaining and labor relations and global HR management—and concludes with a summary of how effective investment in HRM and high-performance work systems are strategically imperative for organizations. Chapter 15 explores HR activities in organizations where employees belong to unions or are seeking to organize unions. It describes the scope and impact of union activity and summarizes related government laws and regulations. Chapter 16 begins by describing how the global nature of business is affecting HRM in modern organizations, and moves on to exploring how global differences among countries affect an organization’s decisions about HR. The lesson, and the course, ends with Chapter 9, which summarizes the role of HRM in creating an organization that achieves a high level of performance—measured in terms such as quality, long-term profits, and customer satisfaction.

Role of Unions and Labor RelationsThe capitalist system originated in trade. As early as the 1600s, English and Dutch merchants would buy shares in overseas trading ventures. The shares would represent the value of the cargo or merchandise to be traded or sold in distant markets. Profits on trade ventures were distributed depending on the values of the shares held by the investors. However, the modern labor movement originated as an international response and reaction to the capitalist excesses of the Industrial Revolution. As factories began to produce goods at an unprecedented rate, antagonism arose between workers and management. It was in the interest of shareholders to pay workers as little as possible. It was in the interest of workers to strive for fair wages based on the market value of their labor. In fact, at the outset of the Industrial Revolution, wages were near abject poverty and working conditions were dismal. Child labor was abused, worker safety provisions were weak or lacking, and 16-hour days were common.

In the United States and elsewhere, the labor movement was a gradual and often bloody process of redress for these kinds of conditions. The central feature of the movement became the organization of workers into unions. As labor unions became a force, universities began training managers in the field of labor relations. Labor relations involves three levels of decisions:

Labor relations strategy: Organizations must decide if they’ll work with unions or develop their business with nonunion workers.

Negotiating contracts: If unions are to represent company workers, decisions must be made in negotiating labor contracts. Contract issues include pay, working conditions, and benefits.

Administering contracts: The terms of labor contracts must be enforced—both by union leaders and managers. Decisions must be made about how that will be done.

National and International Unions

Craft unions have a long history. In medieval times, carpenters, stone masons, metalsmiths, shoemakers, artists, and other trades were organized under craft guilds. The guilds used an apprentice system to train artisans and protect the guild’s market share. Craft unions work to restrict artisan licensing under performance codes that justify and maintain high wages. Conversely, industrial unions aim at organizing large numbers of workers with a variety of occupations to influence policy makers.

Earlier in the labor movement, most union members in the US worked for private-sector manufacturing, mining, and refining industries. Today, most national unions are affiliated with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). The AFL-CIO isn’t a union. It’s an association of unions formed to influence business associations like the National Chamber of Commerce and the National Association of Manufacturers. In 2005, several unions broke away from the AFL-CIO to form an alliance called Change to Win. This group, including four unions, represents more than 5.5 million workers.

Local Unions

Most national unions consist of local units. For example, CWA Local 2101 is part of the national CWA union of public and private telecommunications workers and is based in Baltimore, MD. However, local membership depends on the type of union. The jurisdiction of a craft union might cover a city or a region. An industrial union local may be associated with a single large facility or several smaller enterprises in a specific locality.

Union local members participate in union business in various ways. They elect local officials, vote on proposals to strike, approve or disapprove specifics of a labor contract under negotiation, and, typically, elect a union steward. The union steward serves as a contact and mediator between workers and management. Union local members can go to the steward with complaints or questions. In turn, the steward will communicate these reports to management.

Trends in Union Membership

In the United Sates, union membership peaked in the 1950s. It’s been declining ever since. Factors contributing to the decline in union membership include the following:

Changes in the structure of the economy Management efforts to control costs Human resources practices

Government regulation

Figure 15.1 in your textbook graphs trends in US union membership for wage and salary earners. Note that as overall union membership has declined, union membership in the public sector has increased remarkably. On the next page, Figure 15.2 compares union membership in selected countries. The graph percentages measure union membership and coverage. Coverage refers to the extension of union-standard benefits to people who may or may not be union members. In the United Kingdom and Canada both union membership and coverage are more than twice that of the United States. Although union members are a small share of the US workforce, they’re a significant part of the labor market for some industries. The “Did You Know?” feature in your textbook presents some statistics on current US union members.

Unions in Government

Over one-third of government workers are union members, and a large share are covered by collective bargaining agreements. The American Federation of State, County, and Municipal Employees (AFSCME) has more than 1.6 million members. Members include working and retired nurses, park rangers, school librarians, corrections officers, and many other white-collar and clerical workers.

One reason that government union membership remains strong is that regulations and laws support the right of government workers to organize. Executive Order 10988 of 1962 established collective bargaining rights for federal employees. By 1970, most states had passed similar laws. Strikes are illegal for federal workers, and for state workers in most states. At the local level, there are some exceptions, with teachers and public service workers more likely to have the right to strike, depending on the state.

Impact of Unions on Company Performance

Unions have both negative and positive effects on an organization’s performance. However, most studies have found union workers to be more productive than nonunion workers. Also, unions have been an effective HR arm of many organizations. Under many contracts, unions have been expected to recruit and train new employees through apprenticeship programs.

Goals of Management, Labor Unions, and SocietyManagement Goals

The primary goal of management is increasing profits. In light of that fact, managers worry that unions obstruct efforts to reduce labor costs and raise the risk of work stoppages. Therefore, management focuses on limiting increases in wages and benefits while maintaining as much control as they can over work rules and schedules.

Labor Union Goals

In general, unions are focused on improving wages and working conditions for union members. Additionally, union members are paid better than nonunion workers. Also, unions are concerned with sustaining union solidarity. Therefore, they favor pay based on seniority rather than on individuals’ performance.

Keeping up a flow of new union recruits is vital to union power. The larger the union membership, the greater its effects on wages and working conditions. To ensure a steady flow of new union members, unions place a high priority on negotiating two types of contract provisions:

1. The check-off provision stipulates that the employer will automatically deduct union dues from workers’ pay on behalf of the union.

2. Security provisions, which include the following: a. In a closed shop, a person must be a union member before they can be hired. For

employees covered under the National Labor Relations Act (NLRA) of 1935, closed shop provisions are illegal.

b. In a union shop, new employees must join the union within a specified time period, usually 30 days.

c. In an agency shop, the payment of union dues is required, although the employee doesn’t have to join the union.

d. Maintenance of membership rules don’t require union membership. However, employees who do join the union are required to remain members for some period of time, such as the length of the current labor contract.

All of these provisions are aimed at addressing the free rider problem. A free rider is an employee who benefits from the presence of a union without paying dues to belong to the union. If enough employees can receive services without paying dues, the union might not have enough financial resources to operate successfully.

Societal Goals

Early on in the labor movement, unions were seen as a way to balance labor and management. More recently, concerns have been raised questioning the effects of organized labor on corporate competitiveness and setting flexible goals. Overall, even opponents of organized labor recognize the need for unions. Senator Orrin Hatch’s words about the need for unions, which can be found in Chapter 15 of your textbook, imply that a society’s goal for unions is to ensure that workers have a voice and that they’ll always be necessary as long as there are employers who take advantage of workers.

Laws and Regulations Affecting Labor Relations

National Labor Relations Act

The National Labor Relations Act (NLRA) of 1935, also called the Wagner Act, marked a dramatic shift in the balance of power between labor and management. It marked a crescendo of concern about the nation’s economy during the Great Depression. Section 7 of the NLRA gives employees the right to organize, form unions, and bargain collectively through representatives of their own choosing.

However, several kinds of employees aren’t covered by NLRA regulations. They include supervisors, children employed by their parents, independent contractors, and others.

Section 8(a) of the NLRA specifies and prohibits unfair labor practices. Most of them are related to employer actions that restrict the labor rights established in the bill. The “HR How To” feature in Chapter 15 has excellent tips for avoiding unfair labor practices.

Laws Amending the NLRA

The Taft-Hartley Act of 1947 was, in effect, a legislative initiative aimed at blunting the full force of the NLRA. The most striking effect of the Taft-Hartley Act allowed the states to establish so-called right-to-work laws. Right-to-work laws make union shops, agency shops, and maintenance of membership rules illegal. Figure 15.3 in your textbook identifies right-to-work states. They’re primarily in the Southeast, the Mountain West, and the heartland prairie states. These are largely rural regions with politically conservative views and lower wage expectations than one finds in the Northeast or along the Pacific coast.

National Labor Relations Board

The National Labor Relations Board (NLRB) enforces the provisions of the Wagner Act. The board is a federal agency that consists of a five-person panel, a director, and 52 regional and other field offices. Technically, the NLRB has jurisdiction only over employers engaged in interstate commerce. However, that casts a very wide net. Most businesses engage directly or indirectly in interstate commerce. The NLRB doesn’t initiate investigations. It responds only to calls for an investigation submitted by a relevant party—usually an employee. The NLRB has two main functions:

Representative elections Prevention of unfair labor practices

The NLRB has the authority to issue cease-and-desist orders for an unfair practice. The board can also reinstate employees and set aside the results of an election found to have been conducted improperly.

Union Organizing

The Process of Organizing

Union organizing begins when union organizers get their message out to employees. Traditionally, organizers approach workers and invite them to sign an authorization card. If 30 percent of employees sign a card, the organizing process can continue. If 50 percent or more of employees sign an authorization card, the employer can be invited to accept the union voluntarily. This doesn’t happen often, but if it does, the NLRB certifies the union.

If the employer refuses, or if fewer than 50 percent of employees signed cards, the NLRB conducts a secret-ballot election, which is either a consent election or a stipulation election. If the NLRB representative detects irregularities in the election, arrangements are made for a new election. Once a majority vote has been determined, the NLRB certifies the union. The parties can then proceed to negotiate a labor contract.

Management Strategies

Union organizers argue that a union can improve workers’ wages, work conditions, and benefits. Management strategies are designed to counter those arguments. In big companies, pamphlets, audio-visual presentations, and website promos may be honed to a fine edge by outside consultants, such as industrial psychologists. In a small company, an owner or management representative may gather the employees and argue the case against the union. However, management frequently resorts to illegal means to fend off a union. Employees stirring up pro-union sentiment are fired. Overt coercion and intimidation may come into play.

Union Strategies

Beyond traditional person-to-person persuasion, union officials may apply other tactics. One creative alternative is to offer employees associate union membership. The memberships aren’t linked to the employee’s workplace and they don’t allow the associate to get involved in collective bargaining. Instead, they offer credit cards, discounts on health or life insurance, and other types of benefits. The idea is to generate pro-union sentiment that can one day be harvested when authorization cards are passed around.

Unions can also fund corporate campaigns aimed at generating public, financial, and political pressure on employers while contracts are being negotiated. Table 15.1 in your textbook lists what supervisors should and should not do to discourage unions. Providing business information and trying to solve employee problems are on the to-do list. Threats, bribery, and expressing hostility to unions in general should be avoided.

Decertifying a Union

The Taft-Harley Act sparked the right-to-work movement. It also stipulated that employees should be free to organize resistance to unions and vote them out. This decertification process follows roughly the same procedures as certification, but in reserve.

Collective BargainingCollective bargaining is the process of negotiating a labor contract. Typical issues addressed are pay, benefits, hours, working conditions, and dealing with employee grievances. Bargaining structures vary. In some cases, the organizing process is limited to a narrow slice of employees that wish to join a craft union. In other cases, several different facilities within an organization are to be organized into a union. Table 15.2 in your textbook lays out the broad range of issues typically resolved through collective bargaining. Many of these issues—like grievance procedures and pay structures—are directly related to the concerns of HR managers.

Bargaining over New Contracts

In general, labor and management representatives need to do their homework before negotiations begin. Goals must be set. Performance figures need to be gathered and assessed. Old contracts must be reviewed for problems. Preparation is particularly important when a new union is negotiating its first contract. Four basic approaches to contract bargaining are

Distributive bargaining Integrative bargaining Attitudinal structuring Intraorganizational bargaining

In reality, actual negotiations may involve all of these approaches.

When Bargaining Breaks Down—Work Stoppages

Although the majority of negotiations don’t end in strikes, negotiations sometimes break down and union members vote to strike. One well-known example is the Writers Guild strike, which suspended television and film production for months. Partly that occurred because there were also sympathetic strikes by other unions associated with the interests of the writers. Actors, production assistants, cinematographers, costumers, set designers, and even grips, lighting technicians, carpenters, and caterers rose up in support of the strike. As this example illustrates, strikes directly and indirectly affect many people. In a lockout, the employer excludes workers from the workplace until they meet certain conditions, and may hire replacement workers.

Although work stoppages may bring parties back to the negotiating table, they’re hard on both workers and employers. Because of this, work stoppages involving 1,000 or more workers has declined steadily since the 1970s to historically low levels today, as shown in Figure 15.4 in your textbook.

Alternatives to work stoppages include mediation, the use of fact finders, and arbitration. The fact-finder alternative is most often used in negotiations with government bodies. A fact finder should be a neutral party. Both sides present arguments, facts of the case, and other information before a government committee or panel—possibly even a committee of the US Congress.

Because these hearings are public, they may increase pressure on the disputants to resolve their differences.

Contract AdministrationContract administration is the day-to-day monitoring and enforcement of the terms of a labor contract. The process is easiest when the language of the contract is clear. While contract administration may have to be carried out in major disputes or strikes, the great majority of administrative actions have to do with employee grievances. This requires administering an established grievance procedure.

Steps in a typical grievance procedure generally begin with interactions between the shop steward and the employee with the complaint. Often, the issue can be resolved at that level. If not, the next three steps involve increasingly formal actions, such as a written grievance report submitted to a production superintendent. If all else fails, the final step may occur when the union appeals a grievance to an arbitration board. A judgement reached through arbitration is legally binding.

Figure 15.5 in your textbook illustrates the steps in resolving an employee grievance. Study it carefully.

Labor-Management CooperationThe traditional view of labor-management relations maintains that the parties are antagonists with opposed and conflicting interests. In recent decades, however, there has been a drift toward exploring and implementing strategies for labor-management cooperation. Research suggest that employees familiar with the older view prefer the cooperative approach. Cooperation between labor and management can include the following:

Employee engagement in decision-making Self-managing employee teams Labor-management problem-solving teams Broadly defined jobs Sharing financial gains and business information with employees

Paradoxically, labor-management efforts to establish cooperative relationships have run up against the NLRA stipulation forbidding employer domination or interference in areas of wages, grievances, and working conditions. However, because the NLRB favors employee participation in management decisions, paths around this obstacle can and have been addressed. In the long run, the issue may boil down to finding effective ways for managers and employees to share the same goals and encourage equitable rewards all around.

HRM in a Global Environment

The global economy we know today evolved through the interplay of imperialism and trade networks that go back many hundreds of years. For example, the Roman Empire at its height united much of Europe and other countries around the Mediterranean into a trade zone that reached as far as Arabia, China, and India.

The current global economy emerged after World War II with the creation of the World Bank and the International Monetary Fund (IMF). It reached full flower after the fall of the former Soviet Union in 1991, largely in the electronic communications revolution that brought us personal computers and the Internet. Politically and economically, the global economy today is characterized by the following:

Complex trade relations among the dominant countries, emerging economic giants, and less-developed countries. The emerging economic giants include the US, China, India, Germany, and Japan. The smaller but dynamic economic powers include Korea, Singapore, and Thailand.

Free-trade blocs include the European Union (EU) and the North American Free Trade Agreement (NAFTA). The EU includes nearly all of the Western European countries. NAFTA includes Canada, the United States, and Mexico.

Transnational trade regulation under the World Trade Organization (WTO), which mediates trade disputes among more than 100 member countries

The free flow of capital across national borders, which facilitates foreign investment, offshoring, and multinational arrangements that distribute production tasks among several nations. For example, products stamped Made in Japan may include parts manufactured in Indonesia, India, and Malaysia.

Multinational corporations (MNCs) that operate in many counties. United States–based examples include IBM, McDonalds, General Motors, Coca-Cola, Exxon, and Archer-Daniels Midlands. Other examples include Nestlé (Switzerland), Nokia (Finland), Daewoo (South Korea) as well as Sony, Honda, Mitsubishi, Toyota, and Nissan, which are all based in Japan.

Many of the giant corporations are banks linked through complex back-and-forth flows of capital that create constantly fluctuating currency values and international markets for equities—bonds, stocks, and so on. Even “mom-and-pop” operations can do business anywhere on the globe using computers and the internet. The growth of international business activity has had, and will continue to have, major impacts on HRM.

Employees in an International Workforce

Organizations may operate in several countries. The parent country is the country where a corporation is based. For example, an employee who works for GE in a US facility and is a US citizen is a parent-country national. A host country is a country—other than the parent country—in which a foreign organization operates a facility. For example, a citizen of Argentina who works in a local Coca-Cola bottling plant is a host-country national. A third country is a country that’s neither a host country nor the parent country. For example, US-based Goodyear might hire an Australian national to manage a Brazilian facility. The manager would be a third-country national.

A company that operates overseas must decide whether or not to hire employees who are parent-country, host-country, or third-country nationals. Most often, they’ll select employees from all

categories. However, in general, employees assigned to work in a foreign country are called expatriates.

Employers in the Global Marketplace

Organizations that aim to do business abroad become globalized in successive steps. A company might begin by shipping products directly to foreign customers. The company becomes an international organization when its managers decide to set up facilities in one or more foreign countries. Perhaps these could simply be service centers for the products marketed overseas. The company goes multinational when it begins operating facilities in several foreign countries to keep production and distribution costs to a minimum. In general, multinationals aim to move operations from high-cost to lower-cost locations. The costs in question are mainly the costs of labor, but a favorable location may also reduce distribution costs.

A global organization locates facilities and operations based on any location’s potential to produce products or services effectively, efficiently, and flexibly for different markets. While a multinational company might see cultural differences as obstacles to be overcome, the global organization uses cultural differences to its advantage. Production and design standards for products or services are tailored to the culture of a specific market.

Figure 16.1 in your textbook illustrates levels of global participation, and the “Best Practices” feature gives some insight into how Etihad Airways, based out of Abu Dhabi, UAE, competes for international air travelers by recruiting an international workforce.

Factors Affecting HRM in International MarketsCulture

Cultures vary along specific and identifiable dimensions. Business (and HRM) practices that work well in one culture may fall flat in another culture. There are several dimensions to consider:

Individualism versus collectivism Power distance Uncertainty avoidance Masculinity/femininity Long-term/short-term orientation

HRM practices that don’t take account of cultural differences are likely to run into trouble. The “HR Oops!” feature in your textbook highlights some cross-cultural management blunders and what was learned from them.

Education and Skill Levels

A general trend for the global economy as a whole is an increasing demand for knowledge workers. To the extent that educational attainment in different countries runs counter to that trend, there may be difficulties in recruiting qualified applicants. Underdeveloped countries afflicted with poverty or civil unrest may be unlikely to provide a suitable labor force. Laborers may have to be imported. On the other hand, some countries, like India, offer fairly high skill levels for lower wages.

Economic System

Socialist countries like Sweden or Denmark provide greater access to well-educated people because education is free, while capitalist countries like the United States limit access to higher education due to high tuition costs. In reality, though, all modern developed countries blend aspects of socialism and capitalism. For example, the US offers Social Security and Medicare. Meanwhile, Sweden’s capitalist enterprises are profitable, competitive players in the global economy. The higher taxes paid in countries like Sweden, Germany, and France tend to offset salary differentials because basic needs like healthcare, vacation, pension benefits, and college education for one’s children are covered.

Political-Legal System

Government laws and regulations tend to reflect a country’s culture and affect HR policies of hiring, discrimination, termination, organized labor rights, and training. In Europe, the power of socialist parties does make a difference. For example, it’s taken for granted in Western Europe that labor representatives should be present on corporate boards of directors.

HR Planning in a Global EconomyWhen organizations decide to operate internationally, HR professionals must help with decisions related to the following issues:

Recruiting employees for offshore facilities Choosing locations and weighing advantages and disadvantages of foreign options Profitably outsourcing or offshoring organizational functions Developing processes for hiring and terminating workers. (For example, US labor laws allow US

companies to hire people for peak seasons and lay them off during slack seasons. This practice is forbidden in some other countries.)

Selecting Employees in a Global Labor Market

A company doing business abroad must understand local business and social customs. To address that need, companies often hire local employees who better understand worker inclinations and expectations. This can be a more cost-effective strategy than assigning parent-country employees overseas.

In some cases, the best solution is hiring immigrant employees. This is done most often through importing highly-skilled knowledge workers and immigrant workers from host countries where they’re employed in one of the company’s foreign facilities.

Whether an organization imports immigrants or hires third-party or parent country nationals, criteria have been established based on factors associated with success overseas. Research has shown that an employee’s success in completing an overseas assignment depends greatly on the comfort and support of his or her spouse and family. The “HRM Social” feature in Chapter 16 of your textbook discusses the use of online communities to support expatriate spouses. Personality also is a major success predictor. Employees who are extroverted, agreeable, and conscientious are more likely to cope well with the emotional adjustment cycle that accompanies posting to a foreign country.

The four-step emotional adjustment cycle starts with a honeymoon phase, wherein excitement and euphoria are the dominant emotions. This brief phase is followed by culture shock, learning, and adjustment. Figure 16.2 in your textbook illustrates the emotional cycle associated with a foreign assignment. An alternative to foreign immersion is having employees become virtual expatriates. They visit the country periodically, while carrying out routine business via phone or video conferences and emails.

Training and Developing a Global WorkforceTraining and development programs should implement learning goals that will be effective for all participating employees, regardless of their country of origin. Also, when employees are assigned or transferred abroad, they must be trained to handle the challenges of living in a foreign country. Training should be fitted to cultures. Table 16.1 in your textbook summarizes the effects of culture on training design.

Cross-Cultural Preparation

Cross-cultural preparation may often involve training for family members as well as for the employee. The learning process has three phases:

Preparation for departure should include language instruction and orientation to a foreign country’s culture. The US government, the Department of State, and various private companies provide excellent tools for language instruction. Cultural-orientation sessions can be greatly enhanced if people from that culture are available as teachers or consultants.

The assignment itself must be clearly understood. Formal instruction should relate the assignment to the organization’s goals and strategies. Mentors may be provided who can help familiarize employees with a particular foreign culture.

Preparation for return home mainly involves keeping in touch. As the assignment proceeds, employees and their families can receive company newsletters and articles from the employees’ hometown newspapers.

Some survey reports have shown the United States to be one of the most challenging foreign assignments. Foreigners tend to get distorted views of life in the US from Hollywood films and TV shows. They may be fearful of getting mugged on a subway or becoming victims of police brutality. Perhaps, above all, foreigners have trouble relating to the relentless pace of daily life, especially in urban areas.

Performance Management across National BoundariesThe principles of performance management tend to apply regardless of the country. However, there’s no question that what’s appropriate in one culture may be inappropriate in another. For example, language and gestures that are fine in Denmark may be found insulting or obscene in Saudi Arabia.

Compensating an International WorkforceThe basic challenge for HR specialists when offering benefits, establishing pay structures, and setting up standards for incentive pay is reconciling the striking differences among countries and cultures.

Internationally, pay structures vary immensely. What’s considered a fair wage in Jakarta, Indonesia, would be considered outrageously exploitive in Frankfurt, Germany. In general, wage disparity among countries can be quite difficult to reconcile. For example, let’s say a French company wants to transfer an engineer from Lyon to Budapest, Hungary. Typical pay for engineers is much lower in Hungary than it is in France. If the salary offered to a French expat engineer is similar to the standard salary for engineers in Hungary, the offer is almost certain to be declined. On the other hand, if the agreed upon salary is commensurate with French standards, the Frenchman’s Hungarian colleagues will consider his salary excessive and unfair. Figure 16.3 on in your textbook compares the earnings for selected occupations in three countries—Germany, South Korea, and Mexico.

Incentive pay in the US and Europe differs with respect to stock options. In the US, the relationship between measures of company performance and levels of executive compensation are often either weak or nonexistent. In Europe, on the other hand, stock option incentives are linked directly to performance measures, such as an increase in the company’s share value.

Employee benefits disparities are also striking. For example, 90 percent of Swiss workers have pension plans, and all workers have them in France. In the US, many full-time employees have no pension benefits. Paid vacation time is also more generous in European countries than it is in

the US. This is the case even though Americans work far more hours per year than workers in France, Norway, the Netherlands, or the United Kingdom. Further, most developed countries have some form of nationalized health care system that’s available simply on the basis of citizenship. Figure 16.4 in your textbook compares the hours worked per year in eight countries.

International Labor RelationsOrganized labor influences are stronger in European countries than they are in the US, and this fact affects labor relations wherever American-based multinational parent companies operate in European host countries. However, this is only one kind of issue confronting HR specialists. Differences in labor law must also be reconciled. Rules for organizing differ, as do approaches to labor negotiating. For example, in the US, collective bargaining usually involves a union and specific company. In Germany, unions negotiate with entire industries. Further, in some cultures cooperative approaches to labor management relations may be standard. In others, the competitive rivalry of labor and management interests may be foremost. Finally, in some countries, labor unions are nonexistent.

Managing ExpatriatesSelecting Expatriate Managers

A successful expat manager is sensitive to the host country’s cultural norms, sufficiently flexible to adapt to those norms, and strong enough to cope with culture shock. According to expatriates, the most important qualities for an expatriate manager are the family situation, flexibility and adaptability, job knowledge and motivation, relational skills, and openness to other cultures. Table 16.2 in your textbook lists topics for assessing candidates for overseas assignments.

Preparing Expatriates

Given that a selected manager will already have the requisite job skills, the focus of preparation is cross-cultural training. The thrust of the training is giving trainees an appreciation of the host culture, enabling them to adapt to different behavioral norms. Interestingly, this requires an increased awareness of one’s own culture. Unconscious behaviors and attitudes must be brought to light to better understand how they differ in the host culture. One may learn, for example, that the outgoing personality style favored in the US is seen as abrasive and rude in other cultures. Vital aspects of cross-cultural training include the following::

Becoming familiar with business etiquette, like when to shake hands, when to bow formally, how to address a colleague or superior, and, perhaps, when not to tell a joke

Getting practical information on housing, schools, shopping, and health care resources Obtaining language training—even if one already has a passing familiarity with the language of

the host country, additional study and practice can be important. In other cases, the host country language presents serious challenges to American English speakers. Examples might

include Hindi, Urdu, Russian, or Arabic. Regardless, intense language training can give an expat an important edge.

Figure 16.5 in your textbook offers interesting reading: it highlights some impressions of Americans by visitors to the US.

Managing expatriates’ performance mainly involves a periodic flow of emails and phone conversations between the expat and superiors in the parent country. The objective is assessing and appraising the expat’s performance relative to the mission’s goal, offering suggestions, and sometimes deciding when or if to broaden the expat’s authority. If training foreign workers is the goal, appraisals of that process are also in order.

Compensating Expatriates

The essence of compensating managerial expatriates is determining the equivalent buying power of an employee’s home country salary in relationship to host country costs of housing, taxes, goods and services, and a reserve for other expenses. Most organizations use a balance sheet approach to determine the total amount of expatriates’ pay package. Basically, the objective is to ensure that expatriates’ living standards while abroad are reasonably similar to what they enjoy in their home country. Figure 16.6 in your textbook shows how a compensation balance sheet is used for determining expatriate compensation. Figure 16.7 shows a sample international assignment allowance form. The “Did You Know” feature in Chapter 16 shows the most expensive cities to live in, distributed over three continents.

Helping Expatriates Return Home

Helping expatriates return home may not be as simple as it might seem. An expat who has been abroad for several years will experience culture shock in reverse. That shock may be amplified by changes in the expat’s home culture during the absence. Also, in many cases the expat’s standard of living may be reduced. Many foreign posts include luxuries such as servants, a chauffeur, and membership in exclusive clubs. Two strategies can assist the repatriation process:

Communication: Expats should receive a steady flow of communication from the parent company and their home community. At the same time, however, the expat should be responsible for maintaining contact with company managers and executives at home.

Validation: Recognizing and praising an expat’s contribution while abroad is important. In short, validation accelerates and eases the process of repatriation.

High-Performance Work SystemsIn traditional managerial practice, decisions about HR, organizational structure, and adaptations of technology were treated as more or less unrelated. Just the opposite is true of high-performance work systems. The essential nature of a high-performance organization is the finely tuned integration of organizational elements, from company structure to job design to selecting

employees and beyond. A high-performance organization is a system, not an assembly of parts and pieces.

The elements of a high-performance work system include the following:

Organizational structure Task design The right people Rewards systems Information systems

Figure 9.1 in your textbook illustrates the components of a high-performance work system.

Outcomes of a High-Performance Work System

Figure 9.2 in your textbook shows the relationships among the elements of a high-performance system. Outcomes of a high-performance work system include interesting jobs, satisfied workers, low absenteeism, and therefore, lower costs. High quality, combined with satisfied workers, generates satisfied customers, which leads to higher sales and higher profits.

Conditions that Contribute to High PerformanceThere are four vital dimensions related to producing conditions for a high-performance system:

Teamwork and empowerment Knowledge sharing Job satisfaction Ethical behavior

Teamwork and Empowerment

As mentioned in Lesson 1, employers increasingly seek to empower employees to make decisions related to their job tasks. A basic strategy to achieve that is the use of work teams. Consider these preview points:

Empowerment and teamwork increase productivity to the extent that they improve job satisfaction and better utilize employees’ talents and skills.

The empowerment process requires managers to link and coordinate team member’ roles while providing the team with all the resources it will need.

In a high-performance system, all employees, not just managers or task experts, are empowered to solve problems.

Employees who come up with innovations are rewarded with bonuses.

Knowledge Sharing

For more than a decade, employers have been interested in developing learning organizations. Key features of a learning organization include the following:

Continuous learning: To do this effectively, employees must understand the entire work system, including relationships among jobs and work units (such as teams). For employees, the objective of continuous learning is ever-increasing knowledge that can enhance their skills in service to organizational goals.

Shared knowledge: A narrow focus on job-related training is replaced by training that encourages sharing knowledge and teamwork. Recall the cliché often used by coaches: “There’s no I in the word team.”

Critical, systematic thinking: Employees are encouraged to detect relationships among ideas or patterns in performance data to search out innovative solutions.

A learning culture: A learning culture creates and promotes conditions that encourage flexibility and experimentation. Risk-taking is encouraged, even though some tentative experiments may not work out as hoped. (The best learning sometimes comes from making mistakes.)

Valued employees: Management recognizes that the foundation of the organization’s performance is the collective knowledge of its employees.

Job Satisfaction

Research supports the contention that job satisfaction is positively related to productivity, customer satisfaction, and shareholder return on investment. Similar relationships have been found in nonprofit and government organizations. The “Did You Know?” feature in Chapter 9 shows that only one-third of US workers describe themselves as engaged.

Some organizations are striving to go beyond mere job satisfaction to foster employee passion for their jobs. To feel this way about one’s work is also referred to as occupational intimacy. In any case, the art of enhancing job satisfaction can grow in importance as organizations turn to employee empowerment, teamwork, and knowledge sharing to create flexible, competitive organizations.

Ethics

Ethical behavior builds trust, and trust enhances an organization’s image and may attract talented employees who value ethical standards. Obviously, ethical behavior is a major HRM concern.

Efforts to promote ethical behavior in an organization generally begin with drafting a code of ethics. However, this won’t be enough unless the importance of the code is conveyed to all levels of the organization and breaches of ethical conduct are identified and addressed swiftly.

HRM’s Contribution to High Performance

Effective HR practices are vital to an organization’s competitiveness and performance. However, based on research findings, narrow focuses on particular areas, like pay structure or employee selection, aren’t the best way to go. HR practices are more likely to boost organizational performance when focuses fit together well and are in line with the organization’s goals.

The “HR Oops!” feature in Chapter 9 of your textbook illustrates the advantage of prioritizing succession planning and leadership development: Few companies feel prepared for future talent needs. Failing to take proactive steps now can result in big disadvantages with competitors later. Table 9.1 in your textbook summarizes HRM practices that can help organizations achieve high performance.

HRM practice can contribute to high performance in the following ways:

Job design can help when tasks and role relationships are structured in ways appropriate to employee empowerment and teamwork.

Recruitment and selection processes need to be geared to more than finding people who have a suitable background for a particular job. This means identifying candidates who are creative, capable of initiative, and capable of cooperative efforts in team settings. Psychological and personality tests can help.

Extensive training and development are part and parcel of a learning organization. Therefore employee development is a major focus for HR professionals. A high-performance organization has a major interest in investing in employee training that can produce future leaders.

Performance management is a process. The process involves encouraging and moderating individuals’ skills and abilities and employees’ behaviors to produce the objective results needed to fulfill an organization’s goals. Put another way, performance management consists of HR strategies for achieving organizational goals.

Guidelines for creating a performance management system that supports organizational goals include defining and measuring performance in concise terms, linking performance measures to customer needs, and measuring and correcting for the effects of constraints such as economic limitations or the nature of the corporate culture. Figure 9.3 in your textbook graphically depicts employee performance as a process.

Compensation

Compensation is mentioned in Lesson 4, which covers methods for linking pay to performance. Many of these methods apply directly to creating HR policies related to high performance by individuals or teams. Job satisfaction and performance are enhanced by employee empowerment that includes participation in pay decisions.

HRM TechnologyIn general, the technology used by HR managers involves the automation of routine tasks by way of computers, networked computers, and software developed for HRM applications:

Transaction processing is calculations applied to reviewing and documenting HR decisions and practices. These might include employee relocations, benefits allocations, training expenses, and other sorts of transactions.

Decision support systems are types of software designed to help managers make decisions. They can allow a decision maker to assess hypothetical “what-if” scenarios. For example, if incentive pay is increased in the sales department, what’s the probability that sales will increase sufficiently to offset the added cost?

Expert systems are computer software configurations that incorporate decision rules used by people who are experts in their field. An expert system is designed to recommend the same actions that a human expert would make, given specified conditions, variables, and constraints. In short, one accesses the virtual expert, inputs relevant data, states the specific problem, and asks for recommendations.

Human resource information systems (HRIS) incorporate all the previous systems. An HRIS system depends on relational databases, in which data stored in different files can be linked or related to each other to produce reports, tables, graphs, or other data displays. Data stored in a particular file is organized into fields. Fields typically include things like employee names, job status, Social Security number, hiring date, pay rate, and so on. So, for example, if you wanted to relate hiring date to pay rate, you could create a graph. You might find that new hires earn lower or higher rates as a function of time on the job, depending on the established pay structure.

Human resource management online (e-HRM): As mentioned in Lesson 1, more companies are engaged in sharing HR data over the Internet, although intranets may be used to ensure compliance with employee privacy requirements or provisions. Effects of e-HRM include allowing employees to access HRM data directly, such as the company’s pay structure, permitting administrative and data gathering activities by HR departments, and linking people all over the globe. E-HRMs create virtual companies that exist because managers and employees are linked by the Internet, regardless of their geographic location.

Effectiveness of HRMMeasuring the effectiveness of HRM depends primarily on HRM audits or on analyzing the effects of HRM programs. In either approach, HR professionals identify their “customers” as the organization as a whole or its divisions. The customer concept is employed because the organization is dependent on HR activities to provide talented and motivated employees. Table 9.2 in your textbook summarizes a customer-oriented perspective on HRM.

Human Resource Management Audits

An HRM audit is a formal review of HRM function outcomes. Functions include staffing, compensation, benefits, training, employee appraisal, development, and overall effectiveness as reflected by such markers as turnover rates, absenteeism rates, and net income per employee. The audit may also assess EEO compliance, labor relations, succession planning, and workplace safety maintenance.

Table 9.3 in your textbook summarizes key measures of success for an HRM audit. Information for the audit is gathered from available documents or database files, documents specifically designed for an audit, and surveys.

Analyzing the Effect of HRM Programs

Specific programs or activities can be analyzed, and that analysis might be focused on a program’s success in realizing goals. Training programs can be analyzed by measuring their results in terms of enhanced productivity, fewer on the job accidents, or reduced instances of sexual harassment. An analysis focused on economic value can compare the program costs in dollars relative to benefits reckoned in dollars.