Human Resource Management - 101

7/22/2019 Human Resource Management - 101

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CH 19] Business 101 The Basics 19-1

Chapter 19

Human Resource Management

Learning Goals

1. Discuss the functions of a specialized human resourcedepartment and the continuing responsibilities of all departmentsfor the effective use of human resources.

2. Explain the concept of human resource planning and outline the

major steps involved in the process.

3. Discribe how each step in the recruitment and selection processcontributes to finding the right person for the job.

4. List the categories of employees covered by equal employmentopportunity laws and explain the major laws affecting humanresource decisions in this area.

5. Explain the different methods of training operative employeesand present and potential managers.

6. Compare performance appraisal to effective human resourcemanagement.

7. List the different forms of compensation and to explain wheneach form should be used.

8. Explain different types of employee benefits and the likelychanges in future employee benefit programs.

9. Describe the role of OSHA in protecting employee health and

safety.


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192 Human Resource Management [CH 19

Chapter OverviewThe key resources to accomplishing a firms goal are the people employed by

that busienss. The acquisition, training, motivation, and retention of qualifiedpersonnel is a critical factor in determining the success or failure of any businessfirm. As a consequence, most organizations devote considerable attention to themanagement of human resources.

Human resource management can be defined as the process of acquiring,training, developing, motivating, and appraising a sufficient quantity of qualifiedemployees to perform the activities necessary to accomplish organizationalobjectives; and developing specific activities and an overall organizational climateto generate maximum worker satisfaction and employee efficiency. While theowner-manager of a small organization is likely to assume complete responsibilityfor human resource management, larger organizations use company specialistscalled human resource managers to perform these activities in a systematic manner.The position is becoming increasingly important because of increased competition,government intrusion, emphasis on cost control, complex wage and benefitprograms, and a changing work force.1Human resource managers, also known aspersonnel managers, assume primary responsibility for forecasting personnel needsand recruiting and aiding in selecting new employees. They also assist in training

and evaluation, and administer compensation, employee benefits, and safetyprograms.

This chapter discusses the critical process of human resources management.Employee selection process and techniques used to ensure recruitment of qualifiedindividuals will be examined. Also discussed are employee training, development,and counseling; and promotions, transfers, and separations. Lastly, employeecompensation, benefits, and safety will be analyzed.

Human Resource Management as an

Emerging Managerial FunctionA hundred years ago, companies hired workers by posting a notice outside their

gate, stating that a certain number of workers would be hired and the day of hiring.The notice might have listed skills, such as welding or carpentry; or it might simplyhave listed the number of workers needed. On hiring day people would appear at thefront gatea small number in prosperous times, large crowds during periods ofunemploymentand the workers would be selected. The choices were oftenarbitrary; the company might hire the first four in line or the four people who lookedthe strongest or the healthiest. Workers operated under a precise set of strict rules. Awhimsical example of one such list is shown in Figure 19.1

Two Perspectives on Human Resour ce ManagementHuman resource management can be viewed in two ways. In a narrow sense, it

refers to the functions and operations of a single department in a firm: the humanresource or personnel department. Most firms with 200 or more employees establisha separate department with the responsibility and authority for selecting and training

personnel.In a broader sense, human resource management involves the entireorganization. Even though a special staff department exists, general management isalso involved in training and developing workers, evaluating their performance, andmotivating them to perform as efficiently as possible.

The core responsibilities of human resource management are the following: Human resource planning Recruitment and selection Training/management development Performance appraisal Compensation and employee benefits.

human resource

management

Process of acquiring, training,developing, motivating, andappraising a sufficientquantity of qualifiedemployees to performnecessary activities; anddeveloping activities and anorganizational climate condu-cive to maximum efficiencyand worker satisfaction.


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Trained personnel from the human resource department are typically involved incarrying out each of these responsibilities. However, the responsibilities are typicallyshared with line managers, ranging from the company president (who is involved inoverall planning) to first-line supervisors (who may be involved in preliminaryinterviews with applicants and in employee training). By accomplishing these criticaltasks, the human resource management department achieves its overall objectives of(1) providing qualified, well-trained employees; (2) maximizing employeeeffectiveness in the organization; and (3) satisfying individual employee needsthrough monetary compensation, employee benefits, advancement opportunities, andjob satisfaction.

Human Resource PlanningThe formulation of organizational objectives results in clear guideposts for

evaluating performance, but resourceshuman and otherare necessary for theirachievement. Human resource planning is the development of a comprehensivestrategy for meeting the organization's future human resource needs. It is the processby which management makes certain it has the right number of people with theappropriate skills in the right place and time.

Human resource planning involves three steps. First, present human resources

Figure 19.1 Rules for Clerks, 1890

1. This store must be opened at sunrise. No mistake. Open at 6:00 a.m. summer and winter. Close about 8:30 or 9 p.m. the year round.

2. Store must be swept and dusted, doors and windows opened, lampsfilled and trimmed, chimneys cleaned, counters, base shelves, andshowcases dusted, pens made, a pail of water and the coal must bebrought in before breakfast, if there is time to do it and attend to allthe customers who call.

3. The store is not to be opened on the Sabbath day unless absolutelynecessary and then only for a few minutes.

4. Should the store be opened on Sunday the clerks must go in aloneand get tobacco for customers in need.

5. The clerk who is in the habit of smoking Spanish cigars, beingshaved at the barber's, going to dancing parties and other places ofamusement, and being out late at night will assuredly give hisemployer reason to be over suspicious of his integrity and honesty.

6. Clerks are allowed to smoke in the store provided they do not waiton women while smoking a "stogie."

7. Each store clerk must pay not less than $5.00 per year to the churchand must attend Sunday school regularly.

8. Men clerks are given one evening a week off for courting and two ifthey go to prayer meeting.

9. After the 14 hours in the store, leisure hours should be spent mostlyin reading.

Source:Delbert J. Duncan, Charles E Phillips, and Stanley C. Hollander, Modern Retailing Management(Homewood, IL: Richard D. Irwin, 1972).

human resource planning

Developing a comprehensivestrategy for meeting futurehuman resource needs.

human resource forecastDetermining personnel needsin terms of numbers of indi-viduals and their requiredskills.


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must be assessed. At this stage, management determines whether the present workforce is appropriate for the firm's current needs and whether it is being usedproperly. Second, the human resource forecastof future personnel needs must beconducted. This forecast compares current employee skills and their projected skillsat some future date with the expected organizational needs at that date. Third, aprogram is developed for meeting future human resource needs. The forecast servesas a blueprint for training current employees and recruiting new employees to meetorganizational needs as they occur. Figure 19.2 identifies the steps involved in thedevelopment of the human resource planning sequence.

Job Analysis, Job Descri ption, and Job Specif icationHuman resource planning cannot be accomplished without a clear picture of

current and potential employees' skills and qualifications. Three techniques areuseful in providing this information: job analysis, job description, and jobspecification.

Job analysisis the systematic, detailed study of a job; it identifies and examinesthe elements and characteristics of a job and the requirements of the person assignedto the job. From the job analysis, the human resource department develops a jobdescription, a document specifying the objectives of a job, the work to beperformed, the responsibilities involved, the skills needed, the relationship of thejob to other jobs, and the working conditions. Next, the job specificationthewritten description of the special qualifications required of a worker who fills aparticular jobis prepared. The specification lists experience, education, specialskills, and other requirements. For example, the Delta Air Lines job specification forflight attendants lists such minimum qualifications as at least 20 years of age, twoyears of college, and good vision that must be correctable to 20/20.

As Figure 19.3 illustrates, the job specification is typically included as a sectionof the job description. This type of document is invaluable to human resourcedepartments seeking qualified applicants for job openings. For example, anAbsolute Advantage Software recruiter hiring an associate programmer for theposition described in Figure 19.3 must ensure that the applicant has a bachelor's

degree related to computer science or equivalent experience and several skills andabilities essential to job performance. The document also lists qualifications that aredesirable but not essential at the time of employment. They may be used by therecruiter or the department manager in evaluating a large number of applicants andselecting a few finalists. First used in factory jobs, detailed job descriptions arecommon today in retail stores, offices, banks, and almost all large organizations.

Employee Recruitment and SelectionThe human resource manager plays an important role in selecting employees.

The recruitment and selection process results from human resource planning and isbased on the philosophy, "Don't try to fit a square peg into a round hole!" Addingnew employees is expensive, and recruitment costs alone are very high. Interviewsand tests are often conducted before selecting new employees. Medicalexaminations (at company expense) are often required for applicants. Training newpeople is also costly, and an inefficient worker wastes money. An employee whodoesn't make the grade and leaves the firm after a few months can cost a companyup to $75,000 in lost productivity, money spent on training, and employee morale.A poor employee who stays with the company can cost even more.2 The humanresource manager must ensure that potential employees have the necessaryqualifications for the job and that they either possess future skill needs or arecapable of learning them. Figure 19.5 shows the steps in the recruitment andselection process.

job analysis

Identification of jobcharacteristics andrequirements of personnel forthat particular job.

job descriptionDefines job objectives, workto be performed, responsibili-ties involved, skill require-ments, working conditions,and the relationship of the jobto other jobs.

job specificationWritten description of thequalifications required for a

particular job.


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RecruitmentAfter the job description and job specification are prepared, the next step in the

selection process is the recruitment of qualified employees. Human resourcedepartments use both internal and external sources to find candidates for specificjobs.

I nternal RecruitingMost firms have a policy of hiring from withinthat is, promoting from within

their own employees first for job openings. Since the human resource departmentmaintains a file describing the special skills and other qualifications of all employees,its records can be quickly screened to determine whether any employees are qualifiedfor a job opening.

The use of current employees to fill job vacancies is a relatively inexpensivemethod of recruitment that also contributes to employee morale. The railroadindustry has long been known for its policy of filling job vacancies with existingworkers whenever possible. As one railroad personnel manager summarized thispolicy, "When a president retires or dies, we hire a new office boy."

External Recrui tingAll firms must utilize external sources to some extent in filling vacancies or in

adding new employees for newly created jobs. A company may not have qualifiedemployees to fill a certain position, or better qualified people may be available fromoutside the firm. Sources for potential job applicants outside the company includecolleges, advertisements in newspapers and professional journals, public employmentagencies (such as state employment services), private employment agencies,vocational schools, labor unions, unsolicited applications, and recommendations bycurrent employees. To locate candidates to fill top management positions, a firm mayuse specialized executive recruiting agencies or advertise in The Wall Street Journalor the business section of such regional newspapers as the New York Times

Recruitment sources utilized in personnel selection typically vary depending uponthe type of job to be filled. Middle- and top-management vacancies are often filled bycandidates secured from such sources as executive search firms, colleges and

universities, former managerial employees, professional associations, and businessadvertisements. Executive search companies, the so-called corporate headhunters,such as Heidrick & Struggles, Korn/Ferry, and Spencer Stuart were responsible forfinding such CEOs as Harold E. Geneen for ITT, John Sculley for Apple Computer,and Barry F. Sullivan for First National Bank of Chicago. In 1989, Spencer StuartPresident Thomas J. Neff received a half-million-dollar fee for his efforts in locatinga new CEO for RJR Nabisco after the firm was acquired by Kohlberg Kravis Robertsin a leveraged buyout.3

Relatively unskilled workers may be recruited from such sources as publicemployment agencies, high schools, friends of present employees, and walk-ins.

hiring from within

Organizational policy offirst considering its ownemployees to fill jobvacancies.

Figure 19.2 Steps in the Human Resource Planning Process

Step 1Assess current human

rsources

Step 2Forecasted future human

resource needs

Step 3Develop Human resource

program for meetingforecasted needs

Evaluate and Revise Periodically


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Figure 19.3 Sample Job Description

Absolute Advantage Software4593 Orchid Dr.

Los Angeles, California 91437

JOB DESCRIPTION

Associate ProgrammerGeneral Statement of Duties

Perform coding, debugging, testing, and documentation of software under

the supervision of a technical superior. Involves some use of

independent judgment.

Supervision Received

Works under close supervision of a technical superior or departmental

manager.

Supervision Exercised

No supervisory duties required.

Examples of Duties

(Any one position may not include all the duties listed, nor do listed

examples include all duties that may be found in positions of thisclass.)

Confers with analysts, supervisors and/or representatives of the

departments to clarify software intent and programming requirements.

Performs coding, debugging, and testing of software when given program

specifications for a particular task or problem.

Writes program documentation.

Seeks advice and assistance from supervisor when problems outside of

realm of understanding arise. Communicates any program specification

deficiencies back to supervisor.

Reports design and development ideas to supervisor.

Assists in the implementation of the system and training of end users.

Provides some support and assistance to users.

Develops product knowledge and proficiency in system usage.

Assumes progressively complex and independent duties as experience

permits.

Performs all duties in accordance with corporate and departmental

standards.

Minimum Qualifications

Education: BA/BS degree in relevant field or equivalent experience/

knowledge in computer science, math, or other closely related field.

Experience: No prior computer programming work experience necessary.

Knowledge, skills, and abilities: Ability to exercise initiative and

sound judgment; knowledge of a structured language; working knowledge of

operating systems; ability to maintain open working relationship with

supervisor; logic and problem solving skills; develop system

flowcharting skills.

Desirable Qualifications

Exposure to BASIC, FORTRAN, or PASCAL. Some training in general

accounting practices and controls; effective written and oral

communication skills.


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Unions, vocational/technical institutes, recommendations from present employees, andnewspaper advertisements may be used in recruiting craftworkers and employees withtechnical skills. Clerical and other white-collar employees are recruited from suchsources as private employment agencies and temporary help agencies, presentemployees, friends of present employees, newspaper advertisements, walk-ins, andeducational institutes such as high schools and vocational/technical institutes.Community agencies are effective sources for locating and recruiting handicappedworkers.

SelectionMany job candidates submit rsums to prospective employers, and some firms

require them. A rsum is a one and no more than two page summary of thecandidate's background and qualifications; it includes a description of the type of jobthe applicant is seeking. A rsum may be sent to a firm to request consideration foravailable jobs, or it may be submitted along with an employment applicaton.

Once job applicants are located, the next step is screening them to determine whichcandidate is best suited for the job. First, candidates complete an application form thatis used to determine whether they meet the general qualifications for the position. Theform requests information such as name, address, type of work desired, education,

experience, and personal references.Federal law prohibits job application forms from including direct or indirectquestions that could be construed as discriminatory. Discriminatory questions includethose having to do with the applicant's ancestry, age, racial or ethnic background,religious affiliation, marital status, children, or gender. Although some of thesequestions may not be specifically unlawful by statue, they may provide evidence of anintention to discriminate unless the employer can prove that they are a legitimateoccupational qualification. Employers should ask applicants for only that informationdirectly related to their ability to perform the job.4

Federal law as aimed at employment discrimination is summarized in Table 19.1.Enactment of similar legislation in more than 20 states broadened the impact of manyof the federal laws. For example, even though the Vocational Rehabilitation Act andthe Vietnam Era Veterans Readjustment Assistance Act apply only to federalgovernment contractors and subcontractors, over 50 percent of U.S. employers arerequired to comply with the statutes as a result of the passage of similar laws at thestate level. Every year the number of states enacting similar requirements grows.

Failure to follow these requirements will result in penalties and adverse publicityfor wrongdoers. In 1996, Texaco Oil Company agreed to pay a record $176.1 millionto settle a 2 year-old race discrimination suite. Texaco agreed to pay $115 million to1,500 current and former black workers who sued, $26.1 million in pay raises over 5years for black employees, and $35 million for sensitivity and diversity trainaingprograms.5

Rejection of Unquali fi ed Applicants.Even though applicants may be eliminatedfrom further consideration at any stage in the selection process, a large percentage arerejected at the first stage. Frequently, a comparison of a completed application formwith the job description is enough to determine the applicant does not possess the

qualifications needed for the position. A letter or telephone call from the companyhuman resource department informs the applicant of this decision.

In most instances, the letter writer thanks the applicant for contacting the companyand seeks to maintain a positive image of the firm for the rejected job-seeker. But afew letters fail miserably. The students at an an Arizona state university assembled acollection of such letters. The following excerpts were extracted from these letters:

After most careful consideration of your qualifications and background, we are

unable to identify anything you can do for us....


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Unfortunately, we have to be selective.... We're certain you could be more useful

some place else....

. . . but we're sure you will find something you can do.

I am sorry, but because of the nature of our work, we have to be more careful

than others in our hiring....6

PERSONAL DATANAME LAST FIRST MIDDLE DATE

PRESENT ADDRESS (STREET, CITY, STATE, ZIP CODE)

PERMANENT ADDRESS (IF DIFFERENT FROM ABOVE)

HOME PHONE BUSINESS PHONE SOCIAL SECURITY NUMBER ARE YOU 16 OR OVERYES ____ NO ____

HAVE YOU EVER BEEN CONVICTED OF A CRIME? ARE YOU LEGALLY(A CONVICTION WILL NOT BE AN ABSOLUTE BAR TO AUTHORIZED OR IF UNDER 18, A WORK PERMITOFFER OF EMPLOYMENT.) YES __ NO ___ PERMITTED TO WORK IS REQUIRED (EXCEPT IN AZ,IF YES, EXPLAIN _____________________________ IN THE UNITED STATES? ID, SC, TN, TX, UT AND WY).___________________________________________ YES ___ NO___

PLACEMENT INFORMATION

POSITION OR TYPE OF WORK DESIRED ARE YOU INTERESTED IN____________________________________ ___ FULL TIME ___ PART TIME____________________________________ ___ REGLUAR ___ TEMPORARY

SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

HOURS AMAVAILABLE

TO WORK PM

SALARY OR WAGE DESIRED DATE AVAILABLE HOW REFERED TO MCN?

HAVE YOU EVER BEEN EMPLOYED BY MCN (OR ANY OPERATING COMPANY OF MCN.) BEFORE?YES ______ NO________ IF YES, WHEN & WHERE _______________________________

FOR OFFICE POSITION ONLY:

DO YOU TYPE: YES ______ NO _______ WPM ______TAKE DICTATION: YES ______ NO _______ WPM ______

OFFICE MACHINE YOU OPERATE _________________________________________________

EDUCATION RECORDLIST LAST HIGH SCHOOL AND ALL BUSINESS, TRADE SCHOOLS AND COLLEGES ATTENDED

MAJOR/ CUMULATIVENAME & LOCATION OF SCHOOL MINOR DEGREE AVERAGE

EXTRACURRICULAR ACTIVITIES (INCLUDE OFFICES HELD, SCHOLARSHIPS, AWARDS, HONORS, SPORTSETC.) YOU ARE NOT REQUIRED TO LIST ACTIVITIES WHICH MAY REVEAL YOUR RACE,RELIGION, SEX, ORNATIONAL ORIGIN.

M!

CN ENTERPRISES

APPLICATION FOR EMPLOYMENTAn Equal Opportunity Employer

Figure 19.4 Sample Employment Application Front page


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Employee TestingEmployee testing makes the selection process more efficient. Careful studies

determine the tests to be used in measuring the aptitude, skills, abilities, orknowledge relevant to the jobs that are to be performed. Some companies withtesting programs also administer general intelligence or personality tests.

Testing serves two main purposes. It helps eliminate those applicants who are notsuited for a particular job, and it helps predict which candidates are likely to be

EMPLOYMENT HISTORY

LIST ALL EMPLOYERS WITH CURRENT OR MOST RECENT EMPLOYMENT FIRST. LEAVE NO TIMEUNACCOUNTED FOR, INCLUDE MILITARY SERVICE. IF LIMITED PREVIOUS EMPLOYMENT, LISTTHREE PERSONS, NOT RELATED, WHO HAVE KNOWN YOU FOR SOME TIME.

PRESENT/LAST EMPLOYER TELEPHONE NUMBER SUPERVISORS NAME

( )

ADDRESS DATES EMPLOYED BASE SALARY OR WAGE

_____ TO ______ START _________

POSITION TITLE MO. YR. MO. YR. CURRENT OR END

SUMMARY OF DUTIES DATE OF LAST INCREASE

REASON FOR LEAVING OR SEEKING CHANGE OF POSITION

FIRST PREVIOUS EMPLOYER TELEPHONE NUMBER SUPERVISORS NAME( )

ADDRESS DATES EMPLOYED BASE SALARY OR WAGE____ TO ______ START _________

POSITION TITLE MO. YR. MO. YR. CURRENT OR END ___



NEXT PREVIOUS EMPLOYER TELEPHONE NUMBER SUPERVISORS NAME( )

ADDRESS DATES EMPLOYED BASE SALARY OR WAGE____ TO ______ START ________

POSITION TITLE MO. YR. MO. YR. CURRENT OR END _



MAY WE CONTACT YOUR CURRENT EMPLOYER YES ___ NO ____ PHONE ( ) _______________

OCCUPATIONAL REFERENCES(LIST PERSONAL REFERENCES ONLY IF YOU HAVE NO OCCUPATIONAL REFERENCES)

CHECK ONE NAME OCCUPTATION YEARS ACQUAINTED

_______ OCCUPATIONAL REF.

_______ PERSONAL REFERENCE

ADDRESS (STREET, CITY, STATE, ZIP CODE) TELEPHONE NUMBER( )

CHECK ONE NAME OCCUPTATION YEARS ACQUAINTED

_______ OCCUPATIONAL REF.

_______ PERSONAL REFERENCE

ADDRESS (STREET, CITY, STATE, ZIP CODE) TELEPHONE NUMBER( )

Figure 19.4 Sample Employment Application Back page


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productive employees. At Toyota's auto assembly plant in Kentucky, teams of fourapplicants spend 41 hours in a simulation of the actual job environment. Eachcandidate is given a series of assignments aimed at determining their ability to solveproblems, follow instructions, and work in a team. Over 90 percent of the applicantswho pass the tests turn out to be well qualified for the job.7

At one time, a number of companies were critcized for using tests that werealleged to be biased against members of certain minority groups--in particular,blacks. A number of courts ruled that some intelligence tests are culturally biasedand do not predict job success in that they are unrelated to job performance.Because the Civil Rights Act of 1964 prohibits the use of discriminatory tests inhiring workers, firms must be able to demonstrate that the results of any tests theyuse are valid predictors of on-the-job performance.

Banning L ie Detectors as Employee Screening Devices.Annually an estimated2 to 4 million U.S. workers take polygraph tests. In many instances, a lie detectortest was required of persons applying for work. In other cases, they were used byfirms investigating the possibility of theft or other employee misconduct. Thebanking industry was a particularly heavy user. One survey of 160 large banksrevealed that 78 percent used polygraph testing.

By 1989, the number of lie detector tests given annually had decreased by 80percent as a result of a federal law banning their use in almost all pre-hiringdecisions and in random testing of employees. Only federal, state, and county

Table 19.1Ensuring Equal Opportunity

Law Key Provisions

Title Vll of the Civil Rights Act of 1964 (as Prohibits discrimination in hiring,amended by the Equal Employment promotion, compensation, training,Opportunity Act of 1972) or dismissal on the basis of race,

color, religion, gender, or national origin.

Age Discrimination in Employment Act Prohibits discriminationof 1968 (as amended) in employment against anyone aged 40 or over

in hiring, promotion, compensation, training,or dismissal.

Equal Pay Act of 1963 Requires equal pay for men and women` who work at a firm and whose jobs

require equal skill, effort, and responsibility.

Vocational Rehabilitation Act of 1973 Requires government contractors andsubcontractors to take affirmative actionto employ and promote qualifiedhandicapped workers. Coverage now extendsto all federal employees. In addition, coveragehas been broadened by the passage of similarlaws in over 20 states. The act has alsobeen broadened through court rulings to

include persons with communicablediseases, including AIDS.

Vietnam Era Veterans Readjustment Requires government contractors AssistanceAct of 1974 and subcontractors to takeaffirmative action to employ and retaindisabled veterans. Coverage now extendsto all federal employees. In addition, coveragehas been broadened by the passage of similarlaws in over 20 states.

Pregnancy Discrimination Act of 1978 Requires employers to treat pregnant womenand new mothers the same as otheremployees for all employment relatedpurposes, including receipt of benefitsunder company benefit programs.


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Figure 19.5 Steps in the Recruitment and Selection Process

Initial Contact with Job Applications

Application Form

Employment Tests

Interviews by Human Resource Department andSupervisor

Background Checks

Medical Examination

Employment

RejectionMay Occur

at Anyof These

Steps

governments; firms doing sensitive work under contract to the Defense Department,FBI, and CIA; pharmaceutical companies handling controlled substances; andsecurity guard services are exempt from the new law.

The use of polygraph tests, which Senator Edward Kennedy once labeledtwentieth-century witchcraft, has been strongly criticized on two counts. First, thetests are widely recognized as inaccurate. Even the American Polygraph Associationconcedes the tests are incorrect or inconclusive about 10 percent of the time, andsome studies have come up with figures as high as 50 percent.

The second issue involves the potential of such devices to invade individualprivacy. Over the years, a number of companies have been accused of askingextremely personal questions during exams. Striking brewery workers oncecomplained that Coors polygraph examiners routinely asked questions about theirgender life, drug use, and political beliefs. The new law requires that any polygraphexamination be conducted under strict conditions, with no questions about personal

beliefs and genderual behavior, and the exam results alone cannot be used as a basisfor discipline or a refusal to hire.8

InterviewingThe job applicant's first formal contact with a company is usually an interview

with a company representative. This face-to-face contact is another step in thescreening of candidates for a job. Trained interviewers are able to obtain considerableinsight into the prospective employee's goals, attitudes, and motivations.

The line manager for whom the prospective employee is to work may also


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interview the candidate at this stage. Because the line manager will make theultimate hiring decision (or at least participate with the human resource departmentin making the decision), it is sound practice to involve that person in the screeningprocess.

The typical interviewer begins with some small talk to size up the candidate,followed by previously prepared questions. First impressions are frequently crucialin the hiring decision. A recent survey revealed that 62 percent of interviewers makea hiring decision in the first 15 minutes of a job candidate's interview. 9 Mostinterviewers used a structured interview approach in which a prepared set ofquestions is asked. Frequently used questions include:

Why should I hire you? What interests you most about this job?What kinds of decisions are most difficult for you? Why do you want to change jobs?What causes you to lose your temper?What are your greatest accomplishments?

Job applicants increase their chances of receiving an employment offer throughcareful preparations before the interview. Answers to anticipated questions shouldbe prepared in advance, and applicants should learn as much about the company andthe position as possible. As one experienced interviewer points out, "The glibbestperson on earth, even the most skilled debater, cannot answer questions off the cuffwithout damaging their chances of success.''10

The Smoking Issue.The interviewer can also secure information about the jobapplicant's smoking habits, either through personal observation at the interview orthrough questions raised. Less than one-third of the adult U.S. population currentlysmokes, and this group is being subjected to increasing social and legal pressures.Most of them will tell you they feel like outcasts at work and in many social settingsand that others look at them as lacking self-discipline, weak, unproductive, and evenless intelligent than nonsmokers.11

Employers are concerned about the direct costs of smoking to their organization.One study reported it costs a firm in excess of $4,600 per year to employ a smoker

Photo source:Insight magazine/ Jon A. Rembold.

When these governmentoffice workers want tosmoke, they must go to adesignated smoking area.An increasing number of

businesses, including largecorporations such asGeneral Motors, Heinz USA,and Texas Instruments, arecreating smoke-free workenvironments by banningsmoking. Employers saysmokers are expensive: theycost money in sick leave,insurance premiums, legalliability, and buildingmaintenance.


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over a nonsmoker. The increased costs result from the fact that smokers suffersubstantially greater rates of absenteeism, disability, industrial accidents, andworking-age mortality. In addition, smoke in a work area can cause damage tosensitive equipment and increase routine cleaning and maintenance costs.12

Over half of the managers surveyed in a recent study indicated they chosenonsmokers over smokers when faced with a choice between otherwise equally

qualified applicants. Missouri's Wentzville Community Hospital is one of the 3percent of all U.S. hospitals refusing to hire smokers. Chicago-based USGCorporation went even further, telling its 1,300 employees at nine plants that theyeither stop smoking or lose their jobs. This company ban applied both at home andon the job. Periodic lung tests are conducted to monitor employee health.13

Background ChecksEven though most job applicants are asked to furnish the names of references,

securing written letters of reference is done less frequently now, in part becauseapplicants select references most likely to make positive recommendations and alsobecause references are reluctant to include candid evaluations in writtencorrespondence. Consequently, verification of work histories and other relevantinformation is frequently conducted by telephone because of its speed and, possibly,

greater accuracy than the use of letters.Reference checks are required to effectively verify information, previous job

responsibilities, and the reason an applicant left a former job. A survey of 501executives revealed one recently hired employee in six had misrepresented jobqualifications.14Five percent of the 773 doctors who applied to Humana Inc. for jobsin outpatient clinics lied about their medical credentials.15 The most frequentmisrepresentations on job applications involve college degrees earned and grades.

The Physical ExaminationMost firms include a medical examination as part of the employee selection

process for certain jobs. The examination determines whether the applicant isphysically capable of performing the job; it also helps protect the company againstfuture claims for disabilities that were already present at the time of employment and,

therefore did not happen on the job. Moreover, the physicals often show whatemployees can and cannot do. For instance, after one physical turned up a weak back,doctors warned managers at J. V. Lowney & Associates, a Palo Alto, California-based environmental studies company, to keep the new employee from lifting heavyobjects.

Preventive Plus, a medical group that does physical examinations for manysmaller firms, charges $70 to $106 for most pre-employment physicals. The firm'smedical director says, "Small companies find their liability insurance and benefitspackages are getting so expensive that they are looking for any way to cut costs.''16Not only are health insurance premiums increasing at the rate of 20 percent or more ayear, but small concerns also have found that a single serious employee illness oneyear can make rates double the next year.

Drug Testing.The nationwide publicity resulting from a 1987 train wreck near

Baltimore, involving a Conrail engineer and brakeman who smoked marijuana beforea fatal collision with an Amtrak train, focused the eyes of the nation on the problemof drug use in the workplace. It also resulted in a Department of Transportation planto require random tests of 4 million railroad, trucking, and airline workers.

Sixty-nine percent of all major U.S. companies, including Phillip Morris, fmc,Maxwell House, John Deere, 3M, and Westinghouse, require pre-employmentphysicals and drug screens for some or all job applicants. Over 55 percent ofcompanies with fewer than 500 employees have similar requirements. Approximately10 million drug tests will be administered to current and prospective employees thisyear as employers attempt to provide a safe, healthy, and productive environment for


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their workers and to minimize potential problems.Although substance abuse is found at every level in the organization and among

all income groups, drug use is highest among men 18 to 35 years old withoutcollege degrees. Attorney Jerry Glassman, a partner in a New York Citymanagement-labor law firm, reports that a government agency in the Northeast,which he will not identify, recently gave drug tests to 1,000 applicants for security

guards; 980 failed.17

Primex Plastics management found that just requiring drugtests for all job applicants became a screening device. The 140-employee Garfeld,New Jersey, company discovered that nearly half of all would-be employeesdisqualified themselves by failing to appear for their drug test appointments.18

Other employers oppose drug testing. Some are concerned with statistics fromthe U.S. Centers for Disease Control that indicate two-thirds of the positive testresults from 13 randomly chosen private labs were false.19 Others worry aboutinvasion of individual privacy and the possibility of switching or tampering withurine samples. At least seven states have passed laws restricting drug tests.

AI DS and the Employment Decision.In Anchorage, Alaska, an employee of a20-person business carries the AIDS virus but has no symptoms. After learning ofthe worker's status, the company's health insurer raises premiums 400 percent."That's $10,000 per month, and it means the business will go under within one

quarter," says Morgan Christen, an attorney hired to fight the increase.

20

An estimated 1.5 million Americans have the disease or carry the virus.Insurance companies state that treating a person with AIDS can total well over$100,000, and this cost was a major factor in the 40 percent average increase inpremiums for small businesses. The employer faces a legal quagmire when theydecide to control insurance costs by deciding to disqualify an otherwise qualifiedjob candidate who carries the AIDS virus or dismiss a current employee with AIDS.The courts have ruled the employer must remain completely vulnerable toemployees with AIDS and hiring candidates with AIDS.

Section 504 of the Vocational Rehabilitation Act of 1973 states:

No otherwise qualified individual with handicaps . . . shall, solely by reason of

his handicap, be excluded from the participation in . . . or be subjected to

discrimination under any program or activity receiving Federal financial

assistance.

A number of recent court cases have resulted in rulings that persons with acontagious disease such as AIDS may be considered handicapped within themeaning of the act and, if so, may be employed or continue employment ifotherwise qualified.21 Since the courts believe that AIDS is not transmitted bycasual contact, employers covered by the Vocational Rehabilitation Act cannotdiscriminate against persons carrying the AIDS virus in hiring and otheremployment decisions. The intent of these rulings and others aimed at guaranteeingequal rights is to protect persons capable of doing their jobs from discrimination.

Employee OrientationOnce hired, the employee completes an orientation program, which is the joint

responsibility of the human resource department and the department in which theemployee will work. The human resource department provides the new worker witha copy of the employee manual, which discusses employee benefits and explainscompany policy on vacations, absenteeism, rest periods, lunch breaks, and so on.The supervisor is responsible for introducing the new employee to fellow workers,explaining the operations of the department, and detailing how the job fits into theseoperations.

A new employee in a large firm should be put at ease by the supervisor andshown that they are welcome. Feelings of loneliness and isolation that oftenaccompany the first days on a new job may lead to frustration, negative attitudes,


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and poor job performance. The orientation program is designed to convey a sense ofbelonging and a feeling of personal worth. Although the human resource departmentprovides information about company history, products, and benefits, the

responsibility for developing a new employee's sense of importance and involvementis primarily that of the immediate supervisor and the other employees in thedepartment.

Employee Training, Evaluation, and CounselingA second major function of the human resource department is the development

and maintenance of a well-trained, productive labor force. Employee training shouldbe viewed as an ongoing process throughout an employee's tenure with the company."A person entering the work force today can expect to be retrained five times in hiswork life," declares John Young, president of Hewlett-Packard Co. The computergiant spends about $250 million, or 5 percent of revenue, to train its 87,000 workerseach year.22

Training is a major factor in Motorola's plan to achieve competitive superiority inthe world semiconductor market and in other electronic products ranging fromcellular phones to modems. Rather than face the prospect of ridding the firm ofemployees with outmoded skills, about 2.4 percent of the firm's payroll is re-investedin teaching new skills to the Motorola work force.23

First-line supervisors in the typical firm with 50 or more employees will receive40 hours of training annually. By contrast, middle managers receive an average of 44hours a year.24Two types of training programs are common: on-the-job training andoff-the-job training. In addition, specialized management development programs arefrequently used to improve the skills and broaden the knowledge of present andpotential managers.

Photo Source:Courtesy Ethyl Corporation

Employees of First Colony

Life Insurance Companyand its general agencieslearn about the lifeinsurance business duringthree-day educationalsessions. The orientationprogram is topped off by agraduation ceremony thatgives employees a feelingof personal accomplishmentand a sense of belonging.


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On-the-Job TrainingFor relatively simple jobs, on-the-job training is most often used so workers

can learn by doing. In this kind of training, the new employee actually performs thework under the guidance of an experienced worker. The experienced worker,through advice and suggestions, teaches the new worker efficient methods forhandling the job. La-Z-Boy Chair Co. continually retrains its 6,000 furniture makers

on the company's machines.A variation of on-the-job training is apprenticeship training, which is used in

jobs requiring long periods of training and high levels of skill, such as carpentry,welding, or plumbing. In apprenticeship training programs, the new worker servesas an assistant to a trained worker for a relatively long period. Employers often useapprenticeship in cooperation with trade unions to ensure that skill standards aremaintained in these trades.

Off-the-Job Tr ainingIn more difficult jobs, some form of classroom training is used. In this kind of

training, employees can acquire the necessary skills at their own pace, without thepressures of the actual job environment. This prior training also minimizes thepossibility of wasting materials and time on the job.

Classroom training programs use classroom techniques to teach employeesdifficult jobs requiring high levels of skill. The training may involve lectures,conferences, films and other audiovisual aids, programmed instruction, or specialmachines.

Interactive video (IAV) is rapidly becoming one of the most popular methodsfor employee training. IAV, which lets the employee communicate with thecomputer display screen, is capable of decreasing learning time as much as 50percent while increasing retention by 80 percent. The $8,500 price of a basic systemhas limited IAV system use to only about one-fourth of the nation's 500 largestcorporations. However, firms such as Ford and Xerox are already replacingclassroom training programs with IAV systems. Chrysler managers estimate theysaved $1.3 million when 83,000 workers recently received hazardous substancetraining through IAV programs. IAV training costs are estimated at $6.67 per hour

as compared with $10 per hour for traditional classroom training.25

Some companies establish a vestibule school, where workers are instructed on

the operation of equipment similar to that used in their new jobs. Vestibule schoolsare the facsimiles of actual work areas: They duplicate the jobs and machineryfound in the plant. New employees are trained in the proper methods of performinga particular job and have an opportunity to become accustomed to the work beforeactually entering the department.

Management Development ProgramsWhile job training is at least as old as recorded history, most management

development programs have been established only within the last 40 years. Theseprograms are designed to improve the skills of present managers and to broadentheir knowledge; they also provide training for employees who have management

potential.A management development program, which usually includes formal courses

of study, is often conducted off the company premises. General Motors and HolidayInn, for example, have established college-like institutes that offer specificprograms for current and potential managers. Probably the largest program isXerox's Learning Center in Leesburg, Virginia. Restaurant management forMcDonald's Corporation is required to complete an intensive two-week program atHamburger University, the McDonald's training facility in a Chicago suburb. Thecurriculum covers a variety of subjects, with emphasis on equipment, controls,human relations skills, and management skills.

on-the-job training

Training employees for jobtasks by allowing them to

perform them under theguidance of an experienced

employee.

apprenticeship trainingProgram wherein anemployee learns job tasks byserving as an assistant to atrained worker for arelatively long time.

classroom training

Program that uses classroomtechniques to teachemployees difficult,high-skill jobs.

vestibule schoolFacsimiles of actual workareas where employees learn

jobs using equipmentsimilar to that on the job.

management development

program

Training designed toimprove skills and broadenthe knowledge of managersand potential managers.


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IBM and General Electric are acclaimed for developing outstanding managers.IBM's director of executive resources, is responsible for "having the right people atthe right place at the right time, properly prepared." New managers come to GE'sManagement Development Institute in Crotonville, New York, six months after theirpromotion. A special four-week program is designed to make GE managers more

action, risk, and people oriented. It is intended to develop leaders, not justmanagers.26Both of these companies:

Identify high-potential people. Give them challenging experiences on the job. Integrate job assignments and education. Fill top positions internally. Have formal development and succession plans. Have special management staff to oversee executive development.

Two other forms of management development programs are job rotation andmentoring. Job rotation, through temporary assignments in various departments,familiarizes junior executives with the various operations of the firm and thecontributions of each department.

Another approach to management development, called mentoring, combines theenergy and commitment of less experienced employees with the wisdom andexperience of senior members of the organization. A mentor is a senior employeewho coaches and counsels a less experienced employee for periods typically lastingbetween two and five years. The mentor serves as a friend, counselor, and source ofsupport for less-experienced employees. A mentor relationship benefits careerdevelopment; two-thirds of today's top executives had a mentor at some point in theircareers.27Jim Poure, owner of General Alum & Chemical Corp., a small producer ofchemicals used in water-treatment plants, gives most of the credit for his firm's salesgrowth from $350,000 in 1978 to $7 million a decade later to mentoring. Younger

job rotationFamiliarization of juniorexecutives with the variousoperations and contributions

of each department throughtemporary assignments inthose departments.

mentor

A senior employee who actsas a sponsor and teacher to ayounger, less-experiencedemployee.

Photo source: Courtesy of American Airlines, Inc.

Newly hired flightattendants receive vestibuleschool training at American

Airlines' Dallas/Fort WorthLearning Center. In anaircraft cabin mockup,trainees learn safetyprocedures and customerservice techniques. Theschool enables instructorsto give trainees a true-to-lifesetting for hands-onexperience.


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employees got the benefit of the mentors' experience, with the result that youngmanagers today are "two or three years ahead of their time."28 Mentoring has provenextremely successful in aiding promotion and advancement for women andminorities in the organization.

Assessment CentersOne method for training managers and identifying employees with management

potentialthe assessment centertraces its roots to the shadowy world of WorldWar II espionage. The U.S. Office of Strategic Services (OSS), a forerunner of theCentral Intelligence Agency, used this technique to screen and select undercoveragents. Assessment centers have since been used by business firms to identifyemployees with management potential.

The typical assessment center is actually a program, not a place. It uses a varietyof simulation techniques, leaderless discussions, and group problem solvingexercises to measure an individual's ability to perform job-related assignments. Onesuch technique, the "in-basket simulation," places management candidates in therole of manager and asks for responses to such scenarios as a customer complaintletter, a telephone call from a superior, or a problem facing the department. Trainedevaluators, or "assessors," observe the candidate's responses and judge the

candidate.Empirical research studies indicate assessment centers are highly effective in

predicting job performance. Firms currently using assessment centers includeAT&T (which pioneered their use in private industry in 1959), General Electric, J.C. Penney, Boise Cascade, American Airlines, Sears, and IBM. In addition toidentifying management candidates, assessment centers are used as recruiting toolsfor firms hiring sales personnel and by such brokerage firms as Merrill Lynch.

Performance AppraisalPerformance appraisalis the evaluation of an individual's job performance by

comparing actual performance against desired performance for the purpose ofmaking objective decisions about compensation, promotion, additional trainingneeds, transfers, or terminations. Such appraisals are not confined to business in

today's era of evaluation. State driver's license departments evaluate the written andphysical capabilities of potential drivers. Professors appraise student performancethrough homework assignments, quizzes, and examinations. Students, in turn,appraise instructors by completing written evaluations of instructional effectiveness.

In 1800, Robert Owen implemented a performance appraisal system in aScottish factory through the use of "character" books and "character" blocks. Dailyworker output was recorded in Owen's character books, and the following dayOwen placed different-colored wooden character blocks at each worker's station toinform fellow workers of performance. Different colors represented different levelsof performance, ranging from poor to excellent.

Performance appraisal serves three important purposes:

Information for employees.By providing employees with information about

their relative level of performance, appraisals enable them to learn about theirstrengths, weaknesses, and areas needing improvement.

Information for management. Managers use such information to make decisionsconcerning compensation, promotion, additional training needs, transfers, andterminations.

Employee motivation.Performance appraisals permit managers to identifysuperior employees and to reward them with promotions, praise, and payincreases.

It is important to devise objective systems to accomplish these objectives. While

assessment center

Method for trainingmanagers and identifyingemployees withmanagement potential.

performance appraisalDefining acceptableemployee performancelevels, evaluating them, thencomparing actual and

desired performance to aidin determining training,compensation, promotion,transfers, or terminations.


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POLAROID CORPORATION

INDIVIDUAL PROGRESS REPORT

PURPOSEThis progress report is issued three tim es during the member's first year of employment to allow you to give extensive thought to whether the individual isgoing to be the kind of member we want to continue employing at Polaroid.

PROCEDURE

1.Please judge this member on the characteristics listed below. Base your evaluation on your knowledge of the member's current performance on t his job.

2.Concentrate on only one characteristic at a time. place a check ( ) in the space provided which best expresses your judgment of each characteristic.

This is (3) (8) (11) Month Rating __ NAME ____________________________________

JOB CLASSIFICATION _________________________________________ DATE HIRED ______________________________

SUPERVISOR ________________________________________________ DATE OF THIS RATING _____________________

TIME UNDER YOUR SUPERVISION______________________________ DEPARTMENT _____________________________

Work is carelessly done ornot done correctly.Produces waste orrejected material

Does not produce work upto standards. Has to bechecked frequently to getrequired results. Workfrequently not accurate.

Does acceptable work.Results meet normalstandards. Workperformed is satisfactory.

Performs Work of highquality. Makes few errors.Work can be dependedupon.

Work is of highest quality.Very accurate. Does jobexactly as it should bedone. Never spoils a jobor creates waste.

Additional comments: ___________________________________________________________________________________________________

QUALITY OF WORK: (Do not consider amount of work). Is work done correctly and accurately? Does work meet the required standards of quality? Is therelittle waste or spoilage?

Unsafe; careless,.Disregards safety rules.Creates hazards.

Obeys safety rules whenrecommended. Takessome chances.

Works with reasonablecare. Usually and normallysafe.

Works carefully. Observesall safety rules. Aware ofsafety problem.

Very safety conscious.Considers safetypromotion part of job.Makes suggestions.


SAFETY HABITS AND ATTITUDES: Works carefully? Follows safety instructions and rules? Points out unsafe conditions?

Dull. Requires repeatedand constant instructions.Poor memory.

Needs detailedinstructions on everypoint. Must be remindedof original instructions.

Seems to understandinstructions. May requireoccasional follow-up.

Rarely has to haveinstructions repeated.Understands and followsinstructions as given.

Seems to anticipateinstructions. Catches onimmediately. Understandswith great ease andfollows through.


ABILITY TO UNDERSTAND AND FOLLOW INSTRUCTIONS: Understands Instructions? Remembers what to do? Completes task?

Slow worker. Lazy. Stallsaround. Low production.

Takes it easy. Requiressome pushing. Belownormal production. Clockwatcher.

Works steadily. Does jobin reasonable manner.Does normal amount ofwork.

Works hard. Alwayssteady at job. Does morethan others doing samejob.

Fast and hard worker.Outstanding for amount ofwork done. Highproduction. Keeps drivingthoughout the day.


WORK OUTPUT: (Do not consider quality of work). General work habits? Work habits compared to others in the group?

POLAROID STOCK NO. 27-094 96102601.wps

Performance Appraisal FormJudgmental appraisal methodsare used much more often thanobjective methods. Usingjudgmental methods requiresthe manager to estimate the

employees performance level,relative to some standard.(Source: Courtesy of PolaroidCorporation.)


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appraisals are the responsibility of the line supervisor, specialists from the humanresource department may be able to help in devising special forms and ratinginstruments and comparing appraisals in individual departments with overallorganizational scores.

Programs using the management by objectives technique include performanceappraisal as a critical component.29One of the chief advantages of such programs isthat they provide the employee with specific information about how performance will

be evaluated. Because the employee participates in goal setting, there is littleuncertainty about what constitutes satisfactory performance.

Employee Counsel ingEmployees with personal problems that may hurt job performance will often

discuss them with their immediate supervisor. But personnel departments are nowadding trained specialists to assist workers in solving certain problems, typicallyfamily or financial problems.

Tandem Computers uses an outside counseling firm for employee counseling,offering workers a toll-free number to call. A special counseling program operated byExxon Corporation's human resource department was used by 5 percent of the firm'semployees in a recent year. The most common problems cited by such programs arealcohol and drug abuse, followed by stress, family, and relationship woes.30

Commonwealth Edison reports 25 percent lower absenteeism after six years witha drug program for its employees. Georgia Power encourages workers to go to itsemployee assistance program if they have a drug problem. If they do not comeforward and managers suspect them of drug use, the company will order a drug testand dismiss them with no second chance if they fail. A company spokesman explainsthe reason for this unusual approach this way: "Since the price of detection is so high,it encourages employees to seek assistance before they're caught."31 The companyhas fired 75 to 100 employees who resisted the encouragement; 527 came forwardfor help. Sick days have fallen 23 percent, and serious accidents decreased 77percent.

Company programs also aid employees in their efforts to stop smoking. Over 50percent of U.S. firms have policies regulating smoking at work, and one firm inseven prohibits smoking in all areas.32

Promotions, Transfers, and SeparationsAlthough three out of every four employees in the U.S. Postal Service are still in

their entry positions, most business organizations experience greater employeemovement. This movement involves promotions, transfers, and separations.

A promotionis an upward movement in an organization to a position of greaterauthority, responsibility and a higher salary. While most promotions are based onemployee performance, some companies and many labor unions prefer to base themon senioritythe length of time an employee has worked at the company or in aparticular job or department. Managers generally agree, however, that seniorityshould be the basis for promotion only when two candidates possess equalqualifications.

A transferis a horizontal movement in an organization at about the same wage

and level. Transfers may involve shifting workers into new, more interesting jobs orinto departments where the workers' skills are required.

A separation can be due to resignation, retirement, layoff, or termination.Resignations result, for example, when employees find more attractive or betterpaying jobs or move to other cities.

A layoff differs from a termination in that it is considered only a temporaryseparation due to business slowdowns. Most employers lay off workers on a senioritybasis, releasing more recently hired employees first. When business conditionsimprove, workers are re-hired, also on a seniority basis. Those with the most

promotionIncrease in authority,responsibility, and salary.

seniority

Length of employment in aparticular job, department, orcompany.

transfer

Lateral change of positionwith about the sameauthority, responsibility, and

salary.

separationResignation, retirement,layoff, or termination of anemployee.

layoffTemporary separation due to

business decline.


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seniority are called back first.A termination, or discharge, is a permanent separation resulting from poor job

performance, repeated violations of work rules, excessive absenteeism, eliminationof jobs, or the closing of work facilities. Well-managed human resource departmentshave specific employee disciplinary policies that are explained to all workers. Theviolation of work rules typically results in an oral reprimand for a first offense.

Further violations lead to written reprimands and, ultimately, to discharge.

Job EvaluationsIn developing a compensation program, the human resource department conducts

a job evaluationa method of determining wage structure for different jobs bycomparing each job on the bases of skill requirements, education requirements,responsibilities, and physical requirements. A monetary scale is then determined foreach job. This process attempts to eliminate compensation inequalities among jobs.Although the human resource department does not set the specific compensation ofemployees, it does recommend wages and salaries paid by other firms in the area.

Employment at Wil lJob security in the United States is recognized as a fundamental human need. It

has been, and continues to be, a fundamental objective of labor unions. Laws enactedover the past half-century make it illegal to dismiss workers because of race, religion,gender, or age. Also forbidden is the dismissal of workers involved in unionorganizing, reporting unlawful behavior on the part of the company (whistle-blowing), or filing job safety complaints.

While most companies support these laws and strive to recruit and train qualifiedpersonnel, they also insist it is their right to fire employees who do not work out. Thecourts have long upheld the concept of employment at will, the right of an employerto retain or dismiss personnel as it wishes.

In recent years, however, this employer right has been weakened by court rulingsaimed at ensuring that fair treatment procedures have been created and applieduniformly. Corporations like IBM, Atlantic Richfield, American Airlines, andFederated Department Stores all learned that an unfair dismissal case can cost

hundreds of thousands of dollars in legal fees, back wages, and punitive damages.33

In general, the courts define this fairness standard in three basic ways:

A firing cannot override a corporation's responsibility to treat its workers "fairlyand in good faith." A Massachusetts court ruled, for example, that NCRCorporation was wrong in firing a salesperson just before signing a major salescontract in order to avoid paying his substantial commission.

A firing cannot go against promises made in the employee handbook or duringthe job interview. Some courts have said that any reference to the employee's"permanent" status following a probationary period implies a promise of somedegree of job security.

A firing cannot conflict with public policy. An employee who is fired forrefusing to lie to a grand jury, for example, is protected by the courts.

Even though dismissing an employee is one of the most unpleasant tasks mostmanagers encounter, the situation can be eased for both parties by following a fewguidelines. First, the manager must be convinced dismissal is in the best interest ofboth the employee and the company. Second, the setting is important. A meeting heldat the end of the day in the employee's work area provides control over the length ofthe meeting. The manager should get to the point and end the meeting as quickly asreasonable, encouraging the employee to leave the company quickly. The individualhandling the dismissal should take responsibility for the decision and, wheneverpossible, offer to serve as a reference to the employee's good qualities for futureemployers.34

termination

Permanent separationresulting from poor job

performance, repeated ruleviolations, excessiveabsenteeism, elimination of

job, or company closing.

job evaluationDetermination of wage levelfor a job based on skillrequirements, educationrequirements,responsibilities, and

physical requirements.

employment at willRight of employers to retainor dismiss personnel as theywish.


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Employee CompensationOne of the most difficult functions of human resource management is the

development and operation of an equitable compensation system. Because laborcosts represent a sizable percentage of total product costs, wages that are too highmay result in products that are too expensive to compete effectively in themarketplace. But inadequate wages lead to excessive employee turnover, poor

morale, and inefficient production. The worst possible compensation managementresults in a company that pays its employees just enough so they will not quit andthey work just enough so they won't get fired.

A satisfactory compensation program should attract well-qualified workers, keepthem satisfied in their jobs, and inspire them to produce. Consequently, wage andsalary administrationthe development and implementation of a system forcompensating employees for their workis a vital function of human resourcemanagement.

The terms wages and salary are often used interchangeably, but they do haveslightly different meanings. Wages are an employee compensation based on thenumber of hours worked or on the amount of output produced. They generally arepaid to production employees, retail salespeople, and maintenance workers. Salaryis employee compensation calculated on a weekly, monthly, or annual basis. It is

usually paid to white-collar workers such as office personnel, executives, andprofessional employees.

The compensation policy of most companies is based on five factors: (1) salariesand wages paid by other companies in the area that compete for the same personnel,(2) government legislation, (3) the cost of living, (4) the ability of the company topay, and (5) the workers' productivity.

Al ternati ve Compensation PlansEmployee compensation may be based on the amount of output produced by the

worker (a piece wage).Skilled craftsmen are often paid on a piece-rate basis for each unit of output

produced. Their wage may be based on individual output or on the production of anentire department. Some agricultural laborers are paid a piece rate for harvesting

and packing produce.The practice of compensating salespeople with commissionsbased on sales is

an example of the piece-wage form of compensation. This kind of payment plan notonly includes an incentive for increased output, but also encourages workers tosupervise their own activities. It operates well in departments where the work isstandardized and the output of each employee or department can be accuratelymeasured.

Pay for PerformanceFor most companies, the traditional approach to employee compensation was

predictable: wage earners were paid by the hour. Salary earners got paid by themonth or the year. And executivesonly executivesgot bonuses. But this simple,seemingly logical system has been largely overturned as company after company

searched for a better way to reward past performance and motivate employees toexcel. The American Productivity and Quality Center reports that 75 percent of U.S.employers now use at least one version of the incentive pay plan shown in Table19.2and roughly 80 percent of the plans have been adopted in the past fifteenyears.35

Incentive compensation is designed to reward salaried employees and wageearners for superior performance. A new pay system at Merrill Lynch has beenstructured so its 11,000 brokers will spend more time with larger, more activecustomers. The new pay system, which has cut commissions for most small trades,

wage and salary

administration

Development andimplementation of anemployee compensationsystem.

wagesEmployee compensation

based on hours worked or onproductivity.

salaryEmployee compensationcalculated weekly, monthly,or annually.

piece wage

Employee compensationbased on productivity.

commissionsEmployee compensation

based on volume of sales orsales value.

incentive compensation

An addition to a salary orwage given for exceptional

performance.


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was introduced because the previous plan did not adequately differentiate betweenlarge trades and less profitable ones. Major retailers such as Dayton Hudson, R H.Macy, The May Department Stores Co., Federated, and Carter Hawley Hale Storesare replacing their traditional hourly or weekly wage structure with a commissionsystem in which retail salespeople earn an average of 6 to 8 percent of sales.36

In some instances, incentives are added to a traditional base wage or salary. Inagricultural processing and packing plants pay production employees a base wageplus incentives for performance productivity. Aetna Life & Casualty's "Superior Payfor Superior Performance" program awards bonuses in varying amounts to 2,500 top-

performing employees. In other cases, such as the Lincoln Electric system describedearlier in the chapter, most of the employee's pay is at risk under compensationsystems linking pay directly to performance. The major types of incentive pay plansinclude profit sharing, gain sharing, lump-sum bonuses, and pay for knowledge.

Profit sharinga type of incentive compensation program in which a percentageof company profits is distributed to employees involved in producing those profitsis the most widely used form of incentive pay plans. More than 20 percent of U.S.companies currently use profit sharing to increase company loyalty by creating afeeling of belongingness for employees. Hewlett-Packard's program demonstratesthat this approach can prove a powerful incentive for middle managers and other

profit sharing

Percentage of companyprofits distributed toemployees involved in

producing those profits.

Table 19.2Pay for Performance Compensation Plans

What It Requires toPlan Type How It Works Be Effective Advantages Disadvantages

Profit sharing Employees receive a Participating employees The incentive formula Annual payments mayvarying annual bonus collectively must be is simple and easy to lead employees to ig-based on corporate able to influence prof- communicate. nore long-term perfor-

profits. Payments can its. The plan is guaranteed mance. Factors beyondbe made in cash or Owners must value to be affordable. It the employee's controldeferred into a retire- employees contribu- pays only when the can influence profits.ment fund. tions enough to be will- firm is sufficiently The plan forces private

ing to share profits. profitable. companies to openIt unites the financial their books.interests of owners andemployees.

Gain sharing When a unit beats pre- Objectives must be The plan enhances Plans that focus onlydetermined perfor- measurable. coordination and team- on productivity maymance targets, all Management must en- work. Iead employees to ig-members get bonuses courage employee in- Employees learn more nore other importantObjectives often include volvement. about the business and objectives, such asbetter productivity, Employees must have focus on objectives. quality.service a high degree of trust Employees work harder The company may

in management. and smarter have to pay bonuseseven when unprofitable.

Lump-sum bonus Instead of a wage or Employees must have The plan lets compa- Management some-salary increase, em- a sense that their pros- nies control fixed costs times awards bonusesployees get a one-time perity mirrors the com- by limiting pay raises subjectively, so em-cash payment based pany's. and attendant benefit ployees may resenton performance or a Management must increases. awards they considerunion contract. The have a good relation- unfair.bonus does not be- ship with employees.come part of base pay.

Pay for knowledge An employee's salary Skills must be identified By increasing flexibility, Most employees willor wage rises with the and assigned a pay the plan lets the com- learn all applicablenumber of tasks he can grade. pany operate with a skills, raising labordo, regardless of the The company must leaner staff. costs.job he performs. have well-developed The plan gives workers Training costs are high.

employee assessment a broader perspective,and training proce- making them morecures. adept at problem

solving.

Source: Reprinted from Nancy J. Perry, "Here Come Richer, Riskier Pay Plans," Fortune, December 19, 1988, p. 52. Copyright 1988 Time


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white-collar staff, as well as top management, to watch the bottom line. Almost

everyone at HP receives incentive compensation every year that profitability goalsare met. Dozens of major companies have adopted such plans recently, includingGeneral Motors, Ford, and USX Corporation. They expect profit sharing to buildteamwork among employees and help them see how their productivity relates tooverall company profitability.37

The primary problem with profit sharing is that factors beyond the control ofemployees may affect company profits. As one industry expert put it, "Many thingsthat affect profits, such as pricing policy, the market environment, and taxes, areunrelated to workers' performance. One financial decision, such as taking on a lot ofdebt or making an acquisition, can wipe out anything the workers can do." 38Theseproblems with profit sharing have led many firms to implement a compensationplan called gain sharing. This approach is aimed at linking employee pay toproductivity. Employees are rewarded for results they can directly influence: forinstance, producing more garments per hour, attracting more depositors, orcollecting more delinquent accounts. Productivity at Carrier's heating and airconditioning equipment plants in Syracuse, New York, increased by 24 percent in atwo-year period following installation of a gain sharing plan in 1986. The savings inlabor costs are split 50-50 between the company and its employees. Although gainsharing plans have been around for 50 years, 75 percent of them have been adoptedsince 1980.

A difficult aspect of most incentive pay programs involves deciding whodeserves the reward and in what amount. It is particularly difficult in many factoryand office settings to get a true picture of superior performance. Frequently,everyone is simply rated above average, resulting in inflated performanceevaluations. One widely reported performance appraisal system in the militaryresulted in 80 percent of all officers being ranked in the top 5 percent!

Gain-sharing systems are typically designed to reflect the contribution of groups

rather than individuals. Gains are shared by all unit members according to apredetermined formula. When designed correctly, such programs result in reducedlabor costs, absenteeism and turnover, and improved quality and service.39

A third type of incentive compensation, the bonus, is a one-time performance-based payment that does not get built into salaries or wages. Intended as anincentive for increased productivity, bonuses reward employees for exceptionalperformance. Steelworkers for Nucor Corp, a Charlotte, North Carolina, companythat is the nation's eighth-largest steel producer, earn weekly bonuses based on thenumber of tons of acceptable quality steel their production team produces. Whiletheir base wages are only about half those of workers at bigger mills, bonuses boost

Employees of Central FidelityBanks Inc. are eligible forcash bonuses at year-endbased on individual andcompany performance. Thecompensation policy rewardshigh-performing individualsthrough a "bottoms up" bonusprogram. The bonus pool is

funded from the bottom up,with the lowest-levelemployee pool funded first,then supervisors and middlemanagers, and finally seniormanagement. In this photo,bank employees demonstratetheir commitment to Virginia,a market in which CentralFidelity concentrates all of itsefforts and resources.

Photo source: Courtesy of Central Fidelity Banks, Inc.

gain sharingIncentive compensation

program in which

employee pay is based onpredetermined productivityincreases.

bonusAn addition to a salary orwage based on productivityor for exceptional

performance.


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their total pay to an average of $32,000 a year, with some workers getting as much as$40,000. (The industry average is about $27,000.) Bonuses are based on productionfor hourly workers and overall profitability for salaried employees. Workers who arelate lose their bonus for the day; workers who are more than 30 minutes late losetheir bonus for the week.

In 1988, General Motors Corporation set up a recognition award fund that is

given in lump sums to high performers. In addition, GM managers are encouraged togive spontaneous rewardssuch as theater tickets or tripsto employees for anoutstanding report or a money-saving suggestion. Publisher Marie Peterson ofClapper Publishing in Park Ridge, Illinois, supports this approach: "You can giveemployees cash, but they can't brag about it." Bonuses at Clapper Publishing haveincluded jewelry, paid shopping sprees, and a one-week vacation in Hawaii.WordPerfect Corporation took the approach one step further by offering every one ofits 607 employees a weeklong trip for two to Hawaii if the company grossed $100million in sales for the year. It worked.40

The final form of incentive compensation is pay for knowledge, a system inwhich employee salaries or wages increase with the number of tasks they are capableof performing, regardless of their current work assignment. The objective of thisapproach to employee pay is increased flexibility in operations as a result of a more

broadly trained work force. In addition, broadly trained employees may also beemployees with a broader perspective. In 1988, Northern Telecom eliminated itsautomatic annual pay increase and adopted a pay-for-knowledge system, whichawards raises to workers only when they learn new "skill blocks," such ascircuitboard preparation or system testing. Although both employee pay andcompany training costs typically increase under this system, the result is a team ofworkers who are expected to understand the whole manufacturing process. Says DickDauphinais, a compensation director at Northern Telecom, "To have flexiblemanufacturing, you must have flexible compensation."41

Compensation Var iationAlthough discrimination in compensation for men and women performing

comparable jobs violates federal and state laws, the 30 million women who work full

time earn, on average, less than men. The most recent Census Bureau survey reportedwomen earn about 77 cents for every $1 earned by male workers. The gap has beenshrinking a penny a year for the past decade. At this rate, pay equity for men andwomen won't be reached until 2020.

The reasons for the compensation gap are many. First, women still areconcentrated in relatively low-paying clerical jobs, even when they work full time.Overall, women do not have as many years of formal education as working men.Among college graduates, women are concentrated in teaching and nursingprofessions, while men were more frequently employed in higher-paying fields. Inaddition, women interrupt employment more often than men (for childbearing,among other things), undermining seniority and availability for promotion.

The movement of women into higher-paying occupations is expected to reducethe overall compensation inequity. Today, one attorney in five is a woman, as

compared with only one in 20 in 1970. Women comprise 28 percent of the nation'scomputer scientists today, double the percentage in 1970. In addition, the decision ofmany women to work without interruptions in building a career in high-compensation fields such as these will continue to close the pay gap during the1990s.

Comparable worth is a controversial issue facing human resource managers.The idea that jobs requiring equal amounts of skill and responsibility are of equalvalue to the employer and therefore should receive equal pay has both supporters anddetractors. Most businesses oppose this philosophy, pointing out the difficultyinvolved in calculating the worth of different jobs, the subjectivity of such attempts,

pay for knowledgeIncentive compensationsystem in which employeesalaries or wages increasewith the number of tasks

they are capable ofperforming.

comparable worthPhilosophy seekingcompensation equity formen and women in

positions requiring similarlevels of education,training, and skills.


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and the fact that such an approach ignores the realities of the marketplace.Advocates of comparable worth view it as a means of ensuring equitable pay fordifferent jobs requiring a similar degree of responsibility. Although comparable

worth has been implemented in a few states and local government agencies, such asthe city of Colorado Springs, its widest application to date is in Ontario, Canada. Allpublic-sector (government) organizations and private companies with ten or moreemployees in Ontario must restructure pay rates so women and men arecompensated equally for comparable work. The law has implications for Canada'sneighbor to the south because the large number of U.S. companies operating inOntario must comply with the regulations in their Canadian operations.

When Warner-Lambert's Canadian division of the Morris Plains, New Jersey,pharmaceutical company analyzed its compensation system to comply with the newlaw, it used the following weights: responsibility, 50 percent; skill, 28 percent;effort, 13 percent; and working conditions, 9 percent. Most salaries were within afew percentage points of those determined by the calculations. The majorbeneficiaries of this pay equity system appear to be nonunion clerical workers in

companies with a large number of highly paid union workers in plants anddistribution operations.42

Employee BenefitsThe typical organization furnishes many benefits to employees and their families

besides wages and salaries. Employee benefitsare rewards provided indirectly toemployees, consisting primarily of services (such as child care or insurance) paidfor by employers and reimbursement of employee expenses (such as tuition costs)by employers. Many large companies employ doctors and nurses to investigateworking conditions and treat minor illnesses and job-related accidents. Some

employee benefits

Employee rewards such aspension plans, insurance,sick-leave pay, and tuitionreimbursement given at allor part of the expense of thecompany.

Tandem ComputersIncorporated has a PublicService Sabbatical program thatenables employees to combine

public service with the regularsix week, fully paid leaveemployees earn every fouryears. Tandem extends thesabbatical and helps payexpenses. Martha Geldings, aproject leader in Tandem'sstrategic planning new venturesgroup, took a sabbatical inSenegal where she taught ruralwomen how to make moneyfrom projects such as cattleraising. Geldings developed aninterest in the role of women inThi

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Human Resource Management - 101