Twin Cities Human Resources Association · 2018-04-14 · 1. Minimizing legal risks • Discrimination laws • Labor standards • State and local laws • Avoiding lawsuits and

Twin Cities Human Resources Association SHRM Certification Preparation Course – Fall 2013

Business Management and Strategy Session 10

K. David Hirschey, MAIR, SPHR, GPHR Minneapolis, MN

2013 K. David Hirschey, Minneapolis, MN 2

Topics for Session 10

11% PHR (19 questions) 30% SPHR (53 questions)

• Measuring Human Resources Effectiveness • Forecasting Human Resource Requirements • Executing Human Resource Strategy • Human Resources and The Legislative Environment • Human Resource Information Systems (HRIS) • International Human Resource Management


MEASURING HUMAN RESOURCES EFFECTIVENESS THE HUMAN RESOURCE AUDIT Human Resource Audit – “an evaluation of the effectiveness of the Human Resource department.” Constant economic shifts, sluggish capital investment and slim gains in productivity have put greater pressure on maximizing the use of people resources. Accordingly, the Human Resource function has evolved into a complex profession with considerable power and influence that has a direct impact on organizational strategies and outcomes. The Human Resource audit should be considered a diagnostic tool for identification of strengths and weaknesses within an organization. An effective audit can benefit an organization by stimulating constructive thinking, identifying positive aspects, identifying organizational shortcomings, and providing recommendations for appropriate remedial measures. A good Human Resource audit will improve the effectiveness and efficiency, and thereby profitability, of an organization. Succinctly stated, the Human Resource audit is a catalytic tool that induces better overall Human Resource management at a faster pace. The specific purpose of the Human Resource audit usually has its genesis in one of four interests:

1. Minimizing legal risks • Discrimination laws • Labor standards • State and local laws • Avoiding lawsuits and claims • Identifying potential liabilities • Reporting and record keeping

2. Employee Relations

• Improving communications • Increasing employee satisfaction • Evaluating loyalty and dedication • Improving morale • Addressing organizing threats

3. Quality or Productivity focus

• Human Resource procedures • Consistent policies and practices • Training programs • Improving productivity • Modifying the status quo

4. Merger, Acquisition or Re-deployment of resources

• Mission, Vision, Purpose, Values ... Culture, Fit • Funding of Liabilities

Following a perspective on minimizing Human Resource practice’s liability, the curriculum turns its attention to the diagnostic aspects and strategic advantages of a comprehensive Human Resource audit. Several organizations already have many, if not most of the elements or the basis for these factors in place. Conscientious organizational leadership will normally recognize the importance and appreciate


the reasons for and value of updating existing policies and procedures to accommodate or incorporate the audit factors. Measurement Techniques To justify the cost of developing and implementing Human Resource programs, it is important that Human Resource activities be measured for effectiveness. A budgeting tool for measuring effectiveness is the cost/benefit analysis. This analysis provides information to determine which programs have the best cost/benefit ratio for enhancing the company’s productivity. The general cost/benefit analysis process includes the following four steps.

1. Identify each program in the Human Resource plan. 2. Differentiate between those programs that are legally required and those that are not

required by law. 3. Evaluate the effectiveness of each program based on:

• The relevance of the program to corporate objectives. • The willingness and ability of line managers to execute the program. • The cost versus the projected benefits of the program. • The economic risks of not executing the program.

4. Prioritize all programs accordingly and allocate staff resources. In conjunction with SHRM, Jac Fitz-Enz, founder, former president of the Saratoga Institute and a leader in the movement to measure Human Resources effectiveness, has developed several formulas for cost/benefit analysis of specific personnel functions. Fitz-Enz has derived the various formulas by identifying the activities and costs associated with a Human Resource program as well as the variables associated with those activities. The three approaches to measure the contributions of Human Resources are:

1. Return on Investment 2. Cost-benefit Analysis 3. Break-even Analysis

Trend and ratio analysis uses statistics to determine whether a relationship exists between two variables. A manager forecasting Human Resource needs must look for variables related to Human Resources that appear to change predictably over time. The ability to predict variables such as level of sales, production, or service within the workable limits or ranges most often becomes the foundation for making the Human Resource forecast. Therefore, in trend and ratio analysis, in which figures are projected into the future, the key determinant is whether the relationships will continue to hold. In this case, the clear identification of assumptions underlying the forecast is critical to interpretation and acceptance of the information.


Forecasting Human Resource Requirements After analyzing current requirements, the next step in Human Resource planning strategy is to estimate future staffing and other needs. Forecasting is a good planning method to use in obtaining the necessary information on Human Resource needs. Human Resources supply can be analyzed manually or through computerized models to forecast flows of employees in, up, across, and out of the organization. • Analyze career development plans for employees by job function, division, or other

classification. • Project availability of talent. • Obtain transfer and promotion estimates from each division. • Project future movement through statistical analysis.


Anticipated Skill/Labor Needs Trend and Ratio Analysis Projections

Turnover Analysis

An important part of Human Resource planning involves analyzing the corporate strategy to anticipate employee skill and labor needs. The Human Resource professional must look at where the organization is now as well as where the organization intends to be. Accurate forecasts account for movement into and inside the organization (new hires, promotions, and transfers) and out of the organization (resignations, layoffs, retirements, and firings). Internal supply projections seem to be a simple calculation. C - T - L = R

C= number of people in each job T = number of people who will transfer L = number of people who will leave the organization R = number of people who will be left

Reality, however, is not this simple. Too many variables are involved in forecasting. You might not know:

• Will the jobs remain the same? • Will some jobs be eliminated while others are added or

combined? • Can you count on historical data to hold true in the future? • Will new employees compare to former employees in terms

of productivity, punctuality, sick days, attitudes, and leadership abilities?

Trend and ratio analysis uses statistics to determine whether a relationship exists between two variables. A manager forecasting Human Resource needs must look for variables related to Human Resources that appear to change predictably over time. The ability to predict variables such as level of sales, production, or service within the workable limits or ranges most often becomes the foundation for making the Human Resource forecast. Therefore, in trend and ratio analysis, in which figures are projected into the future, the key determinant is whether the relationships will continue to hold. In this case, the clear identification of assumptions underlying the forecast is critical to interpretation and acceptance of the information. Projecting turnover is another essential technique to use in estimating Human Resource requirements. Employees may leave an organization for a variety of reasons, including:


1. Retirement 2. Resignation 3. Dismissal 4. Disability 5. Leave of Absence 6. Death

Turnover is normally expressed as a percentage and is calculated by determining the ratio of the number of separations during a specific period to the average number of employees during the period. Two of the most common methods used by Human Resource professionals to project turnover are:

• Examining previous turnover rates and adjusting them to reflect knowledge of changing conditions such as pay rates and the economy.

• Analyzing trends in turnover rates for particular geographic locations or occupational categories.

To examine employee flows in, up, down, across, and out of an organization and to project future movement, Human Resource planners must separate employees by levels, occupational groupings, or organizational units. The following methods can assist Human Resource planners in projecting internal turnover.

• Analyze the career development plans for employees on an aggregate basis by job function, division, or other organizational classification. Using the target positions for employees and their rating of readiness for position (immediately, one year, two years), managers can project the availability of talent for the positions.

• Obtain estimates from each division of transfers and promotions into, out of, and within the divisions. These estimates may be aggregate and may reflect subjective probability of movement based on historical data.

• Project future movement through statistical analysis. Models of employee flows project the number of employees who will remain in an organizational classification based on past transition rates or probabilities.

A word of caution: Past transition rates and probabilities may have limited value in predicting future trends. Why?


Capitalizing on Staff Competencies As a Human Resource professional, you should consult with line managers to examine skills and time utilization to determine ways the organization can use their Human Resource capabilities more fully. This way, you will be able to project the available supply of talent by analyzing whether:

• Employees are using their time appropriately. • Work should be relocated to provide more effective use of skills. • Jobs need to be redesigned. • Productivity rates are changing. • The organization’s current staff has the ability to achieve the desired outputs. • The growth of the staff is exceeding the expansion of outputs. • The organization is currently staffed with the right kinds of skills. • Skills are not being applied or are missing.

Once this information is collected, time and skills that are not being appropriately applied may be identified. Judgmental forecasts use information from the past and present to predict expected future conditions. These forecasts utilize information provided by individuals associated with the industry to project future industry needs.

• Managerial estimates consist of projections made by managers. This can work two ways; it can happen from the top down or the bottom up. The success of this method is entirely dependent upon the quality of information provided to managers to use in making estimates.

• The Delphi technique uses information provided by experts in the industry. The experts take turns

presenting forecast assumptions. They revise the forecast until a composite emerges that incorporates many of their assumptions. For this technique to be effective, the assumptions must be correct. In an effort to avoid “group think” and possibly a poor decision, the individuals never meet together.

• The Nominal Group technique uses a variety of individuals associated with the industry to list

forecast ideas and assumptions. A composite is compiled and then revised to reflect the group’s projections. Again, the assumptions must be correct for this type of forecast to be accurate.

For Judgmental Forecasting to be effective, Human Resources needs estimates of:

• New positions or skill sets needed. • Positions to be changed, eliminated, or left unfilled. • Double occupancies. • Job design needs or organizational structure changes. • Costs of changes. • Adjustments in overhead, contracted labor, and supervision.


Statistical forecasts generally fall into two categories: Regression Analysis and Simulations. Regression analysis can be further subdivided into simple linear regression and multiple linear regressions.

• Simple linear regression is a projection of future demand based on a past relationship between employment level and a single variable related to employment. For example, a statistical relationship between gross sales and number of employees at a discount hardware chain might be useful in forecasting the number of employees needed in the future if sales increase 25%.

• Multiple linear regressions operate the same as a simple linear regression except that several

variables are utilized to project future demand. In the example mentioned above, hours of operation might be added to gross sales to determine the number of employees needed.

Simulations are representations of real situations in abstract form. External factors examined often-included available economic models and labor market trends. An example might be the analysis of environmental impact cause by relocation of a manufacturing facility. Both judgmental and statistical forecasts are heavily based on past performance. It’s difficult to accurately project future performance based on what has happened historically. It may be more effective to project performance based on external factors rather than limiting assumptions and projections to internal factors and variables. Primary Research and the Scientific Method Scientific Research ensures that both qualitative and quantitative approaches are considered in the development of cost-effective and practical research designs. Five steps are included in the Scientific Method:

Step 1: Problem Analysis Step 2: Hypothesis Formulation Step 3: Experimental Design Step 4: Data Collection Step 5: Data Analysis

Step 1: Problem Analysis This involves a thorough definition of the problem being investigated, including situational or contextual factors that may be related to the problem or may impede its solution. The criteria for effective problem analysis include: • Stating the problem as a question that is answerable and testable. • Developing a statement that provides clear implications for observation and measurement. • Identifying the key factors that may be contributing to the problem or impeding a solution. Step 2: Hypothesis Formulation A hypothesis is a specific, testable prediction that is derived from a theory and describes a relationship between two variables. This step, which repeats the problem in operational terms, involves: • Restating the problem in the form of a declarative, testable hypothesis. • Deriving the expected relationship (the specific relationship being tested) from a current

understanding of the problem as related to existing theory and knowledge.


Step 3: Experimental Design An experiment is the use of tests to explore what is not directly observed. Many factors go into the development of an effective experiment. Two key factors to be considered in experimental design are Reliability and Validity. Reliability is the ability of an instrument to measure consistently and with relative absence of error. It can also be defined as the ability of independent researches to repeat an experiment and achieve similar results. Reliability can be measured by: • Parallel forms: Testing methodology that utilizes two tests that are identical in every aspect except

subject sample. Once the test is conducted, the results are correlated. • Test / Retest: The same test is administered to the similar audience on separate occasions over an

interval of time. Once the tests are completed, the results are correlated. • Internal consistency: An instrument or testing methodology is divided into two equivalent portions

and preformed by the test participant. Once the test is completed, the two halves are correlated. • Rater agreement: Inter-rater reliability is the degree to which different raters give consistent estimates

of the same behavior Validity is the ability of an instrument to measure what it is intended to measure. Validation answers two questions: • What does the instrument measure? • How well does the instrument measure the item? Design Types Selection of the most appropriate research method depends on the data that are available, how they are collect, and who is involved. Basically there are two design types you can use in experiments: Experimental Design and Quasi-experimental Designs. Experimental Design Often referred to as true experiments, experimental design are the most rigorous types of designs and include a random selection for the simultaneous testing of experimental and control groups for comparison. Randomization can occur by pulling names out of a hat or by taking every name at a preset interval. True Experiments

Ø Provide cause-and-effect knowledge of relationships. Ø Rule out as many alternative explanations or rival hypothesis as possible. Ø Provide treatment only to the experimental group. Ø Use statistical measurement to compare the experimental and control groups.

Problems associated with true experiments include: ∗ There are few pure situations where the testing requirements can be met. ∗ Other important variables may not be controlled well enough to permit the researcher to

attribute any resulting differences to the effectiveness of the treatment variable.


Quasi-experimental Designs Quasi-experimental experiments that include information collected at two or more points in time to study trends, cycles, and the stability of relevant data. The most frequently used quasi-experimental design is pre-testing, treatment, and post-testing. After the completion of these steps, statistical techniques are used to analyze, present, and interpret the data that has been collected. Step 4: Data Collection Data are commonly gathered using one or more of the following methods. • Individual or group interviews involve asking a carefully planned, structured series of questions in a

face-to-face setting. Interviews give researchers qualitative information (attitudes, opinions, intentions, reactions). The interviewer must be well trained to avoid biasing responses.

• Questionnaires and surveys involve asking a series of prepared questions in written form.

Questionnaires generally use one of four common approaches. Ø Rating scales. Ø "Yes," No," or "Don't Know" answers. Ø Open-ended essay questions. Ø Structured questions with multiple-choice answers.

• Observational or file studies include:

Ø Observational techniques in which the person being observed is not aware that his or her behavior or responses are being recorded.

Ø Archival information in organizational records, such as performance appraisals, turnover data, and personnel records.

Step 5: Data Analysis Collected data can be examined by applying inductive or deductive reasoning. Inductive reasoning involves looking at a set of observations and designing a rule that characterizes or explains a pattern underlying the observations. Deductive reasoning is the ability to apply a rule by determining what additional observations one can expect to find. Quantitative Analysis Quantitative analysis uses statistics to:

• Interpret the collected data • Accomplish the desired research objectives • Provide a cost/benefit analysis • Communicate the results of a project

Two types of quantitative analysis include descriptive statistics and inferential statistics.


Descriptive Statistics Descriptive statistics condense and summarize large quantities of data and interpret research results for rapid review and understanding. Examples include: • Charts and graphs: Visual representation of data. • Measures of central tendency: Summarize data obtained with interval or ratio scales.

Ø Mean: The average score or value within a range of data. Ø Mode: The value that occurs most frequently within the range of data. Ø Median: The point above or below which 50% of the data points lie.

Sample Data Set

10 8 8 Mean = Average = ___ 6 6 Median = Middle or point above / below which 50% of the scores rest = ___ 6 4 Mode = Most frequent or common data point = ___ 4 2 Range = Difference between highest and lowest points = ___

53 Measures of Variation: Provide an indicator of variation around central tendency values. Ø Range: The distance between the highest and the lowest scores within the data. Numerically, the

range of a set is the highest score minus the lowest score. Ø Percentile: A specific point in a distribution that is given as a representation of the number of cases

below the score. Ø Standard Deviation: Represents how scores are spread around the mean or average. A normal

distribution of data means that most of the examples are close to the average, with relatively few being at one extreme or the other.

Measures of Association: Measures of association depict the extent (magnitude) to which two or more factors (variables) are related and the nature (direction) of the relationship.

Ø Scatter Diagram: Illustrates the relationship between sample items using X and Y axes. Ø Correlation: A measure of the relationship between two variables. The correlation coefficient is

measured on a horizontal scale that ranges from -1 through 0 to +1. Either -1 or +1 expresses a complete correlation between two variables. For example, when one variable increases as the other variable also increases, the correlation is positive (+); when one decreases as the other increases, the correlation is negative (-). A complete absence of correlation is represented by 0 (zero).

Ø Regression: If two variables are related, when one changes by a certain amount, the other changes, on an average, by a certain amount.

Inferential Statistics Used to form a conclusion about a characteristic of a population by studying a sample taken from it. Representative concepts include:


• Population: Group about which you wish to draw conclusions. • Sample: Part of the population with equal likelihood of choice for inclusion. • Normal distribution: Expected distribution given a random sampling of the larger population.

Qualitative research is best used for depth, rather than breath, of information. Applications of qualitative research would include:

• Identifying a project or proposals strengths and weaknesses. • Exploring alternative communication messages. • Brainstorming and idea generation.

Secondary Research

• Informal communications. • Human Resources records. • Professional journals, books, and other media. • Performance Appraisal trends • Benchmarking

Strategic Management Systems Performance management requires a commitment to quality. Performance-conscious organizations institute strategic management systems to plan, measure, and record employee performance that improves quality. • Identify company values and goals. • Set and communicate performance standards. • Measure results and provide feedback. Total Quality Management The philosophy of total quality management varies somewhat between the three TQM gurus who popularized the concept and strategies for achieving total quality. Joseph M. Juran, Philip B. Crosby, and the late W. Edwards Deming are probably the three best-known names in the quality consulting business. Deming was the American pioneer who took his 14-point program for managing productivity and quality to Japan in 1950, where he had a receptive audience. Japan’s aware for excellence in quality, the Deming Prize, is named after him. Deming’s message to top managers was this: “If your company makes lousy products, it’s your fault, nobody else’s.” He was noted for becoming irate with managers who insisted that their quality problems were due to lazy or incompetent workers. Juran defines quality as “fitness to use,” which emphasizes the reliability of a product or service for its users. The Juran trilogy incorporates quality planning, quality control, and quality improvement. Juran also advocates an accounting system that measures the costs of poor quality through waste and defective products. According to Juran, quality improvement is a project-by-project, step-by-step process; every step affects the step that follows it.


Crosby’s methods are described by slogans like “Quality is Free,” which is the title of one of his books. Like Deming, Crosby has a 14-point program for quality management. To these points, he adds four quality absolutes: a definition of quality, a prevention system (rather than appraisal of quality), a performance standard (zero defects), and the measurement of quality (the cost of nonconformance). In the area of Total Quality Management the five items that all three of these noted authorities agree on are as follows:

1. Find and eliminate problems that interfere with established quality standards.

2. Identify the customer and satisfy their needs.

3. Relentlessly eliminate waste from the system.

4. Encourage pride and teamwork among all participants in the process.

5. Finally, for continuous quality improvement, it is necessary to create an environment that champions quality results.


Replacement Planning and Succession Planning Comparison of Replacement Planning and Succession Planning Variable Replacement Planning Succession Planning Time frame 0-12 months 12-36 months Readiness Best candidate available Candidate with the best development potential Commitment level Designated preferred Merely possibilities until replacement candidate vacancies occur Planning focus Vertical lines of succession A pool of talented candidates within units or functions with capabilities for several assignments Development planning Unusually informal, a Specific plans and goals set status report on strengths for the individual and weaknesses Flexibility Limited by plan structure; Flexible plans that are however, in practices has intended to promote a great deal of flexibility development and thinking about alternatives Plan basis Each manager’s best The result of input and judgment based on discussion among multiple observation and managers experience Evaluation Observation of Multiple evaluations by performance on the job different managers on over time; demonstrated different assignments; competence; progress testing and broadening early through the unit in career


HUMAN RESOURCES AND THE LEGISLATIVE ENVIRONMENT Fortunately, never before have the opportunities for HR professionals and their employers to shape legislation been so great. Technology is making communication with federal, state and local representatives virtually instantaneous as e-mail; online chat and participation in virtual forums allow employers to express their views to lawmakers. Consider the following:

• Monitor federal, state and local legislatures for new bills.

• Understand which issues are gaining traction with the public, the media and legislators.

• Establish relationships with lawmakers.

• Participate in grassroots lobbying efforts sponsored by professional organizations.

• Cite common, practical examples of the implications of a proposed law. Lawmaking 101: Passage of a Bill Step 1: Referral to a committee The official legislative process begins when a bill is numbered (H.R. signifies a House of Representatives bill and S. signifies a Senate bill), referred to a committee, and printed by the Government Printing Office. With few exceptions, bills are referred to standing committees in the House or Senate according to carefully delineated rules of procedure. Step 2: Committee action When a bill reaches a committee, it is placed on the committee’s calendar. A bill can be referred to a subcommittee or considered by the committee as a whole. It is at this point that a bill is examined carefully and its chances for passage are determined. If the committee does not act on a bill, it is the equivalent of killing the bill. Step 3: Subcommittee review Often, bills are referred to a subcommittee for study and hearings. Hearings provide the opportunity to put on the record the views of the executive branch, experts, other public officials, and supporters and opponents of the legislation. Testimony can be given in person or submitted as a written statement. Step 4: Mark-up When the hearings are completed, the subcommittee may meet to “mark up” the bill, that is, make changes and amendments prior to recommending the bill to the full committee. If a subcommittee votes not to report legislation to the full committee, the bill dies. Step 5: Committee action to report a bill After receiving a subcommittee’s report on a bill, the full committee can conduct further study and hearings, or it can vote on the subcommittee’s recommendations and any proposed amendments. The full committee than votes on its recommendation to the House or Senate. This procedure is called “ordering a bill reported.”


Step 6: Publication of a written report After a committee votes to have a bill reported, the committee chairman instructs staff to prepare a written report on the bill. This report describes the intent and scope of the legislation, the impact on existing laws and programs, the position of the executive branch, and the views of dissenting members of the committee. Step 7: Scheduling of floor action After a bill is reported back to the chamber where it originated, it is placed in chronological order on the calendar. In the House there are several different legislative calendars, the Speaker and the Majority Leader largely determine if, when, and in what order bills come up. In the Senate there is only one legislative calendar. Step 8: Debate When a bill reaches the floor of the House or Senate, there are rules or procedures governing the debate on it. These rules determine the conditions and amount of time allocated for general debate. Step 9: Voting After the debate and the approval of any amendments, the bill is passed or defeated by the members voting. Step 10: Referral to other chamber After the House or the Senate passes a bill, it is then referred to the other chamber, where it usually follows the same route through committee and floor action. This chamber may approve the bill as received, reject it, ignore it, or change it. Step 11: Conference committee action If only minor changes are made to a bill by the other chamber, it is common for the legislation to go back to the first chamber for concurrence. However, when the actions of the other chamber significantly alter the bill, a conference committee is formed to reconcile the differences between the House and Senate versions. If the conferees are unable to reach agreement, the legislation dies. If agreement is reached, a conference report is prepared, describing the committee members’ recommendations for changes. Both the House and the Senate must approve the conference report. Step 12: Final actions After both the House and Senate have approved a bill in identical form, it is sent to the President. If the President approves the legislation, he or she signs it and it becomes law. Or, the President can take no action for ten days, while Congress is in session, and it will automatically become law. If the President opposes the bill, he or she can veto it; or, if the President takes no action after Congress has adjourned its second session, it is a “pocket veto” and the legislation dies. Step 13: Override of veto If the President vetoes a bill, Congress may attempt to override the veto. This requires a two-thirds role-call vote of the members who are present in sufficient numbers for a quorum.


Important Legislative Terms Amendment: The modification of the Constitution or a law. Modification may be either formal (written) or informal (unwritten).

Bill: A proposal presented to a legislative body for possible enactment as a law.

Joint resolution: A legislative measure that must be passed by both houses and approved by the chief executive to become effective; similar to a bill, with the force of law, and often used for unusual or temporary purposes.

Lobbying: The activities of an agent (lobbyist) for a group, usually to influence public policy.

Quorum: The number of members of a legislature or of any organization that have to be present before official business can be conducted.

Regulation: A rule or order issued by a government agency; often has the force of law. Interpretive bulletins distributed by government agencies are helpful in deciphering regulatory developments.

Veto: The action of canceling or postponing a decision or bill. For example, the President of the United States may Veto a bill that has been passed by Congress.


Human Resource Information System (HRIS) Automated Human Resource Information Systems (HRIS) generally benefit organizations by:

1. Reducing the amount of paperwork and manual record keeping.

2. Allowing accurate information and records to be retrieved quickly. Allowing analysis of Human Resource issues to be performed quickly.

3. Turning data (unsynthesized facts) into meaningful information, including:

a.) Planning

b.) Recruiting

c.) Staffing

d.) Career pathing

e.) Compensation

f.) Benefits Administration

g.) Ensuring privacy

h.) Tracking:

1. Grievances 2. Disciplinary actions 3. Union information 4. Time and attendance records 5. Safety information 6. Employee turnover 7. Etc.


Setting-up an HRIS System 1. Identify all users and build a team 2. Analyze needs 3. Prepare a Request for Proposal (RFP) 4. Select a system 5. Implement the system 6. Review, Evaluate, and Update the system

Costs and Benefits of an HRIS Costs Benefits Direct Hardware ………………………………….. Elimination of redundancy in Human Resources function Software …………………………………... Reduction of human error Training (equipment and instruction) …….. Time savings from automation More effective presentations ……………… Improved and quicker decision making Indirect Training (employee time) ………………… Enhanced productivity Installation ………………………………... Improved productivity Maintenance ……………………………… Enhanced productivity


International Human Resource Management Considerations Global Economy – companies have opportunity to operate in all parts of the world. Human Resource needs to know how to manage in a global economy. Cultural differences – need to be aware of differences in other countries – local variations. CAUTION: Be sensitive and responsive to local governmental policies. Potentially Similar International Human Resource Practices The following may require little or no modification:

1. Employment Practices and Processes 2. Organizational Development 3. Training and Human Resource / Employee Development 4. Safety and environmental regulations 5. Personnel or Human Resource Management Research 6. Human Resource Information Systems (HRIS)

Potentially Different International Human Resource Practices The following practices may vary greatly from country to country or from region to region:

1. Compensation Practices 2. Termination or Separation of Employment 3. Employee and / or Labor Relations 4. Benefit Programs / Levels and Administration 5. Equal Employment Opportunity 6. Regulatory Compliance and Record keeping Requirements

Laws Impacting International Human Resource Management • International Law: Assorted international treaties, conventions, and customs. • Regional Law: Codified legal constraints and requirements dictated and established by regions or

nations / states (e.g., North American Free Trade Agreement (NAFTA), European Union, etc.). • Host Country Law: Laws of specific country or nation / states designed to govern the behavior of

constituents and commerce. • Home Country Law: Statutes or canons of location where employer of record is headquartered. Trade Agreements § North American Free Trade Agreement (NAFTA) – 1993 – Canada, Mexico & US § Human Resource issues in NAFTA:

1. Long-term coordination of workplace laws; enforcement of existing laws 2. Provisions for worker adjustments 3. Work-force mobility 4. Health care benefits 5. Role of unions


Legal / Immigration Aspects of International Human Resources Immigrant visas: § Extraordinary ability: E1-1 – arts, science, education, business, athletics § Outstanding professors and researchers: E1-2 § Certain multinational managers and executives: E1-3 § Priority workers: § Professionals with advanced degrees or aliens with exceptional ability: E2-1 and E2-2 § Professionals, skilled workers and other workers: E3-1, E3-2, and E3-3 § Commercial investor: E5

Non-immigrant visas: § Business visitor: B-1 – conduct business temporarily in the U.S. for an employer § Professional workers: H-1B – reserved for professionals – come to U.S. for a limited amount of

time – BA degree required – initially 3 years, may be extended to 6 years – annual cap § Intracompany transferee: L-1 – work for foreign employer, transferred to U.S. § Treaty Investors and Traders: E-1 and E-2 § Students: F-1 – full-time students. No employment except on-campus § Exchange visitors: J-1 – maximum of 18 months § North American Free Trade Agreement (NAFTA): TN – Professionals – work for 1 year, can be

extended § Q visas – cultural exchange visitors

Permanent residence visa – “Green card” Issues of Multinational Corporations § Communication problems and societal impact – language, non-verbal communications, local customs. Expatriation and Repatriation § Staffing – four approaches (Dowling and Schuler):

1. Geocentric approach – ability over nationality – worldwide, integrated business. 2. Polycentric approach – multinational, but treat each subsidiary as distinct national entity. 3. Ethnocentric approach – subsidiaries have no autonomy – strategic decisions from

headquarters. 4. Regiocentric approach – degree of operating freedom within a region of the world; staff

regionally. § Training, preparation and adjustment – include spouse and family – learn language and customs. § Failure and problems of expatriates – common reasons: career blockage, culture shock, lack of pre-

departure cross-cultural training, overemphasis on technical qualifications, dismissal of a troublesome employee, family problems.

§ Challenges in repatriation: lack of respect for acquired skills, loss of status, poor planning for return position, reverse culture shock.


Definitions of International Employees • Local Nationals or Host Country Nationals (HCNs): Employees who are citizens of a country in

which a branch or plant is located, but the organization is headquartered in another country (a Local National may also be referred to as a HCN or Host Country National).

• Expatriates or Parent Country Nationals (PCNs): Employees working in a country other than their country of origin (an Expatriate may also be referred to as a PCN or Parent Country National).

• Third-country Nationals (TCNs): Employees who are not citizens of the home or host countries. International Staffing Approaches • Geocentric approach: An international staffing method that ignores nationality in favor of ability and

seeks the best people for key jobs. • Ethnocentric approach: An international staffing approach by which headquarters management

personnel hold key jobs at both domestic and foreign operations, and expatriates from the home company manage subsidiaries.

• Regiocentric approach: An international staffing method in which organizations utilize a wider pool

of managers spread over regional areas and provide them with a degree of regional autonomy. • Polycentric approach: An international staffing method in which multinational corporations treat

each subsidiary as a distinct national entity with some decision-making autonomy and appoint host country nationals as managers.

Compensation Approaches

1. Balance sheet or home-country approach – compare and adjust employee’s comp by calculating the difference between cost in the employee’s home location and costs in the host location

2. Modified balance sheet approach – like balance sheet approach – but modify so that the country of residence becomes the standard of comparison, rather than country of origin

3. Headquarters-based approach – compare costs in host country to country of headquarters country, regardless of what country the employee is from

4. Host-country approach – treat all expatriates as if they were nationals of the host location 5. Better of home-or-host-country approach – employee allowed better of net comp of home of

host country. International Tax Considerations

1. Tax Protection 2. Tax Equalization

Role of Human Resource in International Business § Requires a much broader perspective § Encompasses a greater scope of activities § Is subject to much greater risks than domestic HRM

Documents

Twin Cities Human Resources Association · 2018-04-14 · 1. Minimizing legal risks • Discrimination laws • Labor standards • State and local laws • Avoiding lawsuits and