13091 2 Pages 6 Hrs

CHAPTER 2 Functions and Strategy

No doubt about it, Billy Beane transformed baseball with a shift in strategy. It started in the 1990s when he was Assistant General Manager of the Oakland Athletics. The team was losing, and there was very little money available for good players that could turn around the team's losing streak. Although baseball is a sport that thrives on statistics, Beane found that most of the stats used to scout players were out of date. Players with attractive statistics for stolen bases, runs batted in (RBIs), and batting average were considered more valuable and commanded salaries he couldn't afford. He found that statistics such as on‐base percentage were better indicators of success. He began to fill the roster with these undervalued players, assembling a competitive team with combined salaries that totaled less than 25 percent of the salaries paid by the New York Yankees, yet won the same number of games.

Beane's goal for the Oakland A's was to win the World Series. He had limited financial resources for salaries, so he analyzed data to understand the strengths and weaknesses of people and used that knowledge to lower labor costs and increase productivity. That's exactly what strategic human resource management (HRM) does. Understand the organizational goal, determine what jobs must be done, what traits make the best employees, and what to measure to determine effectiveness. Does this sound similar to the control function you've studied in management classes? Good for you. Strategic planning and control measures go hand in hand in creating an effective team.1

Looking Ahead

Are there statistics that can help HRM determine what to look for in a successful employee such as a baseball player? How can HRM measure effectiveness of hiring and other HR practices?

LEARNING OUTCOMES

After reading this chapter, you will be able to:

Identify advances in management leading to modern human resource management practices.

Describe the functions of management.

Explain how HRM aligns human resource management processes and practices with organizational strategy.

Outline the components and the goals of the staffing, training and development, motivation, and maintenance functions of human resource management.

Explain the structure of a typical human resource management department.

Discuss talent management and how it benefits organizations.

Outline current trends and opportunities in human resource management.

Explain how human resource management practices differ in international settings.

Introduction

HR is a subset of management. It's the part of management that works with people to get things done. No matter how large or small the organization is, if there is even one employee, HR plays an important role. In this chapter, we'll learn the role of HR in management, the functions HR performs, and how HR empowers people to accomplish the objectives of the organization.

Evolution of Management

Thank your lucky stars you weren't born 100 years earlier. Prior to the twentieth century, management wasn't much of a science, and employees had very few rights. The workplace was a harsh place to be and the few employment laws that existed were largely ignored. Child labor was plentiful; long hours, 6‐day‐work weeks, and low wages were expected; workplace injuries were commonplace; and discrimination was the norm. Unions were not legal.

In the early 1900s, people were horrified by the inhumane working conditions in the meat packing industry as described by Upton Sinclair in The Jungle. Difficult working conditions in the garment industry were exposed when the upper floors of the Triangle Shirtwaist Factory in Manhattan caught fire in 1911. A total of 146 young women and children were killed because management had locked exit doors to prevent theft. Fire escapes collapsed, and young women fell to their death in the streets below while attempting to flee the flames. Opinions about worker safety began to change.

Working conditions improved slowly as laws were enacted to support workers' rights and management science evolved. Let's look at four of the early management theorists who developed some of the foundations of HRM: Frederick Taylor, Hugo Munsterberg, Mary Parker Follett, and Elton Mayo.

Frederick Taylor, often regarded as the father of scientific management, published The Principles of Scientific Management in 1911 introducing a set of principles to enhance worker productivity. By systematically studying each job and detailing methods to attain higher productivity levels, Taylor's work offered the first sense of today's HR practices. For instance, Taylor advocated that workers needed appropriate job training and should be screened according to their ability to do the job (a forerunner of skill‐based hiring). Technology has expanded applications of scientific management by providing new ways to track the productivity of workers, for example, by using GPS technology to track the routes of delivery drivers, tracking the number of patients visited each day by doctors, or tracking the billable hours recorded by lawyers.2

scientific management

A set of principles designed to enhance worker productivity.

Hugo Munsterberg and his associates recognized that if employers matched the personalities and abilities of workers to jobs that best suited those traits, they would be more motivated and efficient. He also suggested improved methods of employment testing, training, performance evaluations, and job efficiency.

Mary Parker Follett, a social philosopher, advocated people‐oriented organizations. Her writings focused on groups, as opposed to individuals, in the organization. Follett's beliefs helped create today's workplace emphasis on teamwork and group cohesiveness. She believed that organizations were communities that should be a cooperative effort between managers and workers. She was also an early advocate of employee ownership as a way of creating a feeling of responsibility. (Verhulst, 2018-10-08, pp. 31-33)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Starbucks made a strategic decision to provide health insurance to all staff, even part‐time employees, and recently added free college tuition at Arizona State University to their benefits package. Starbucks boasts an annual employee turnover rate of 45 percent compared with over 100 percent annual turnover in the industry. What does Starbucks gain from lower employee turnover? Do those gains justify the cost of the benefits?3

One of the greatest advances toward modern human resource management (HRM) practices came when a group of researchers studied young women working at the Western Electric Hawthorne Plant just outside of Chicago to determine if better lighting helped them to manufacture telephone relays more quickly. The Hawthorne Studies began in 1924, but the results were confusing. Increased productivity seemed to have little relationship to the increase in lighting. Elton Mayo of Harvard University was called in to make sense of the results. Mayo suspected that productivity was influenced by the relationship of the work group and the style of supervision more than by the working conditions. Extensive interviews with the workers at the Hawthorne plant proved that informal work groups had a significant effect on worker performance. Results of the Hawthorne studies led managers to recognize the benefit of work groups and examine how workers were supervised.

Hawthorne studies

A series of studies that provided new insights into group behavior and motivation.

Later, Frederick Herzberg and Abraham Maslow introduced employee motivation theories and W. Edwards Deming introduced continuous improvement programs to enhance productivity. Writers such as Tom Peters and Peter Drucker have emphasized giving employees a say in what affects their work, teams, and work process engineering. Today's HRM practices incorporate many findings from these important management researchers and scientists.

“Great vision without great people is irrelevant.”

JIM COLLINS, AUTHOR GOOD TO GREAT

Functions of Management

Management is the process of efficiently achieving the objectives of the organization with and through people. The major responsibilities of managers are grouped into four major functions. These management functions have roots in the work of Henri Fayol, who published Administration Industrielle et Géneralé in 1916. Fayol's five rules of management (foresight, organization, command, coordination, and control) have been combined to create the four functions commonly recognized today. These four simple functions summarize the responsibilities of effective management. They include the following:

management

The process of efficiently completing activities with and through people.

Planning

Planning involves establishing the organizational objectives and deciding what actions need to be taken to achieve them. Many organizations state their objectives in the form of a mission statement or vision statement and use it as a foundation for all planning. Strategic planning is part of the planning function.

planning

A management function focusing on setting organizational goals and objectives.

Organizing

Determining what activities need to be completed to accomplish those goals is the main focus of the Organizing function. Activities need to be organized into work groups and jobs must be developed within those work groups. Managers must acquire and implement equipment, financial resources, technology, inventory, and services necessary to support workers so they can do their jobs well and support organizational objectives.

organizing

A management function that deals with determining what jobs are to be done and by whom, where decisions are to be made, and how to group employees.

Leading

The Leading function is responsible for inspiring effort and establishing a culture of support and productivity. Leaders ensure that the right people with appropriate skills are on the job and motivate them to levels of high productivity. There are many theories of leadership. Most agree that the correct leadership style in any situation depends on the leader's personality, organizational culture, the jobs being done, and the abilities of the workers.

leading

A management function concerned with directing the work of others. (Verhulst, 2018-10-08, pp. 33-34)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

What effect does the informal work group have on these workers' productivity? According to the Hawthorne studies, a significant amount. In fact, this classic research, which paved the way for the human relations movement, showed management that group standards and employee sentiments were the most important determinants of employee productivity—even more so than pay!

Controlling

Monitoring activities to ensure that goals are met is the focus of the control function. Some goals such as profitability or productivity are easy to define and measure. Others such as employee engagement require a little more skill. Controlling involves determining what to measure, monitoring performance, and comparing results to goals. If performance falls short of goals, processes are examined to determine how to improve.

controlling

A management function concerned with monitoring activities to ensure that goals are met.

Every level of management from the supervisor to CEO has responsibility for understanding how the four management functions apply to his or her job. The emphasis and responsibilities will differ depending upon the position. For example, a CEO will spend a larger percent of time on the planning and leading functions and supervisors may spend more time on the organizing and controlling functions.

Where does HRM fit in here? In this chapter, we examine the role of HR in strategic planning, organizing HR activities to support strategic goals, leading through establishing an organizational culture that reinforces behaviors that support goals and measuring results with the use of HR metrics.

In summary, all managers' work with and through people, allocating resources to organizational achieve goals. They perform their tasks through four critical activities—planning, organizing, leading, and controlling.

The Role of HR in the Strategic Management Process

The planning function of management is focused on the future. Determining goals and developing plans for action are important because the complex external environment changes constantly and competitors react quickly. The ability to think strategically means anticipating environmental changes and the actions of competitors, much like a race car driver and team study the weather, track, and competition to increase the odds of winning the race. Racing teams plan for the best utilization of equipment and fuel before and during the race and skilled professionals are selected and trained for the crew, all with the goal of creating a competitive advantage that the competitors cannot imitate.

competitive advantage

Something unique to the organization that competitors can't imitate.

HR activities support organizational strategy by building, developing, and maintaining a productive and talented workforce that has the skills necessary to accomplish organizational goals.4 Research has shown that companies that link strategy with HRs show increased profitability and shareholder value. Not only that, but the more an organization focuses on human capital, the more profitable they seem to be. Attention to HR practices, including hiring the right people to support company strategy, seems to support productivity and profitability.5

How does HRM get involved in the strategic management process? Just like the racing team mentioned earlier, skilled professionals need to be in place to create a competitive advantage and win the race. A typical HR department has responsibility for three major areas:

Transactional work that involves payroll and administers employee benefits such as insurance and retirement plans. Many transactional tasks can be automated.

Tactical work that involves developing solutions that benefit employee work groups, such as resolving employee performance issues or work‐group conflicts.

Strategic work that benefits the entire organization by aligning hiring, training, compensation, and benefits to support long‐term goals.

As part of the strategic HR responsibility, HR assists decision makers in evaluating where the organization currently stands, deciding where the organization wants to be in the future, developing a plan to achieve those goals, implementing the plan, and checking progress toward those goals. With a specific goal and a clear plan, the organization and the HR department can make better decisions regarding how to focus efforts on achieving the goal daily, resulting in less wasted efforts and resources.

Strategic management seeks to establish long‐term goals and direction for organizations. The strategic management process analyzes the environment, creates strategies necessary to accomplish the goals, and puts those strategies into action. The role of HR in this process is to determine the best way to align the people in the organization so they are best able to assist the organization to achieve those goals. We will revisit many of these concepts in Chapter 3 as they relate to employment planning.

strategic management

Establishes long‐term goals and provides direction for an organization.

strategic management process

Analyzes the environment and creates strategies to achieve organizational goals. (Verhulst, 2018-10-08, pp. 34-36)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

EXHIBIT 2‐1 Strategic Management Process. Setting goals and determining the best way to accomplish them is at the heart of the strategic management process. (Verhulst, 2018-10-08, p. 36)

Strategic Analysis

Southwest Airlines may have begun as scribbles on a cocktail napkin in a bar, but from the beginning, the mission was clear: create a low‐fare airline with a simple structure. As Southwest has grown, their strategy has faced significant environmental challenges, yet their original mission remains intact. Strategic analysis starts with a mission and goes on to establish core values and culture and analyze the external environment.

Mission

Strategy is driven by the organizational mission, which describes the reason it exists and what it is trying to accomplish. It forms the basis for the organization's strategic goals for the future, planning, structure, and decisions about how goals will be met. Mission statements communicate that purpose to customers, the community, investors, employees, and suppliers. The mission statement is important because it's the foundation on which every decision in the organization should be made.

mission

Reason an organization exists.

mission statement

Brief statement explaining an organization's purpose.

Google's mission statement: “Organize the world's information and make it universally accessible and useful” clarifies exactly what the company is about for all organizational members. A few years ago, producing self‐driving cars would have seemed very inconsistent with Google's mission, yet that's exactly what Google is working to develop. Technology and the way we use it has made it necessary for Google to change to fulfill its mission.

Core Values and Culture Have you ever sworn that you would never return to an establishment after you encountered a rude salesperson or customer service representative who was distracted, uninformed, and uncaring? If you look up the mission statement and core values of that same organization, you will probably find that they include words such as “customer focused” and “service oriented.” So, what happened? Where was the failure?

Core values are organizational beliefs about acceptable behavior. Culture is the way organizational members demonstrate core values daily by the way they treat each other and the public. It includes examples of acceptable and unacceptable behavior, rewards and discipline, work ethic, dress, speech, humor, punctuality, and respect. Core values and culture are the personality of the organization. They are based on the mission statement and are usually communicated to employees during the hiring and training process. Problems arise when employees do not see them practiced in the workplace daily and begin to feel that they are not important. HR holds the responsibility to communicate the core values and create a culture that demonstrates those values on every level of the organization. Values and culture need to be obvious in the way employees and managers treat each other and interact with customers and the community. (Verhulst, 2018-10-08, pp. 36-37)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Analyze the Environment

The starting point of any strategy is an objective analysis of the current situation. Using this class as an example, what is the current situation for you? How are your study skills? Are you diligent about taking notes in class and reading the textbook? Could your attendance use improvement? Is HR a subject you're really interested in? How well do you know the course policies and expectations? Is the teacher well qualified? How will you be evaluated? How tough are the assignments and tests? Will you be required to do group projects? If so, are there any classmates who would make strong partners? These questions might be asked if we were using a common environmental analysis tool called a SWOT analysis (strengths, weaknesses, opportunities, and threats). It includes an internal analysis of the internal strengths and weaknesses of an organization and the external opportunities and threats. A thorough SWOT analysis exposes potential problems within an organization such as what skills, knowledge, and abilities are available internally and where shortages in terms of people skills or equipment may exist.

SWOT analysis

A process for determining an organization's strengths, weaknesses, opportunities, and threats.

Environmental analysis requires management to recognize that every organization, no matter how large and powerful, is constrained in some way by the resources and skills it has available. For example, although Walmart seems large enough to provide nearly any product or service, they are unlikely to produce or sell cars any time soon. Their expertise and strength is efficiently providing smaller consumer goods at a low cost. Cars would require different distribution channels and considerable investment in product development. Their business model is much better suited to providing automotive service, not the actual car itself.

The SWOT analysis should lead to a clear assessment of the organization's internal resources—such as capital, worker skills, and patented technology. It should also evaluate organizational departmental abilities, such as training and development, marketing, accounting, HRs, research and development, and management information systems. An organization's best attributes and abilities are called its strengths. And any of those strengths that represent unique skills or resources that can determine the organization's competitive edge forms its core competency. On the other hand, if a firm lacks resources in a certain area or if there are some activities it performs poorly, these are considered weaknesses.

core competency

Organizational strengths that represent unique skills or resources.

After examining the internal strengths and weaknesses, it's time for the organization to look outward at the opportunities and threats in the external environment. Opportunities are factors outside the organization that can be exploited including emerging technologies, surplus of qualified applicants, weak competitors, and a strong economy. Threats in the external environment present challenges if not handled well, including a weak economy, government regulation, changes in employment laws, and new competitors.

Our Mission

To continually provide our members with quality goods and services at the lowest possible prices.

In order to achieve our mission, we will conduct our business with the following Code of Ethics in mind:

Our Code of Ethics

Obey the law.

Take care of our members.

Take care of our employees.

Respect our suppliers.

If we do these four things throughout our organization, then we will achieve our ultimate goal, which is to:

Reward our shareholders.6

EXHIBIT 2-2 Costco Mission Statement. Customers, employees, suppliers, owners, quality, prices, and ethics are all addressed in Costco's short mission statement.

Source: Costco.com

Strategy Formulation

Each level of the organization must develop a strategy that supports the mission and strategic goals. The CEO and other top executives develop corporate‐level strategy. If there are different business units, they must each create strategies that support the overall corporate strategy. Functional areas such as finance, marketing, production, and HR also find a way to support the overall strategy and goals.

Corporate‐level strategy

Corporate strategy is the “big picture” for the organization. Some organizations that have relatively stable environments such as a college may be able to stick with a strategy for many years. Others may find their environments changing in increasingly dramatic ways such as airlines or the auto industry, necessitating frequent strategic changes. Two major directions for strategy include growth or restructuring. Both present challenges for HRM.

Growth strategies focus on increasing the size of the organization. Organizations commonly grow by expanding operations in the same general type of business. This strategy, called concentration, requires HR to find increasing numbers of new employees necessary to support growth. This can be difficult if the skills needed are scarce such as computer software engineers, or if the pay is low such as fast‐food workers. Organizational growth by expanding in new directions is called diversification. Organizations may diversify by branching out into a business in a similar industry (related diversification) or a completely different industry (unrelated diversification). This can be done by starting a new operation or by buying or merging with another organization. Mergers require HRM to find ways to combine organizational cultures, move some staff, and possibly reduce staff in areas where there may be overlapping jobs.

Restructuring strategies are ways that troubled organizations try to survive. This can happen because of a bad economy, bad management decisions, failures of previous strategy, or a variety of other reasons. Restructuring often involves reducing the size of the organization by selling off part of the company (divestiture), downsizing the workforce, or in extreme situations, bankruptcy or liquidation. Restructuring strategies require HRM to reduce staff and perform all the unpleasant tasks that go along with staff reductions such as determining who needs to be retained and who needs to be let go, delivering the bad news, and assisting workers in finding new employment. (Verhulst, 2018-10-08, pp. 37-39)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Nordstrom employees are encouraged to develop a strong personal connection with customers.

Business‐level strategies

Nordstrom is an apparel retailer with a history of superior customer service that borders on legendary status. Employees make extraordinary efforts to please customers including sending thank you notes, delivering merchandise, making reminder calls about sales, and cheerfully locating hard‐to‐find items. How do the HR people at Nordstrom find these talented salespeople? It starts with an understanding of business‐level strategy.

Nordstrom has strategically chosen to create competitive advantage by establishing relationships between the customer and employee. HR has policies and procedures in place to support that strategy. Applicants are screened for their attitude and understanding of customer service. Once hired, training supports and reinforces the emphasis on creating relationships. There are many different types of business‐level strategies, but most center around creating a competitive advantage that competitors find difficult to imitate.

Functional strategies Organizational structures often group people with similar responsibilities in functional groups. These may include finance and accounting‐related positions; marketing, manufacturing, and production; and HRs. All establish functional strategies that support the corporate‐level strategy. Examples of functional unit strategic decisions that support organizational strategy include the following7:

Marketing: Aligning products, prices, promotion, and distribution to meet customer needs.

Finance: Managing capital efficiently.

Human Resource: Recruit, hire, train, develop, and compensate employees.

Operations: Designing production processes and inventory systems.

Strategy Implementation

At the implementation level, HR designs jobs so that employees understand the relevance of their positions to the organizational strategy and the knowledge, skills, and abilities (KSAs) necessary to be successful. HR also needs to consider the amount of autonomy, skill variety, and work pace the position needs. Hiring and recruitment policies must be examined to make sure that the proper sources are being contacted and people with the right skills are being selected. Changes in strategy will require HR professionals to adapt recruiting efforts to find individuals with skills matching the new strategic direction. For example, an organization seeking a cost differentiation strategy may need to seek employees who are flexible and have a variety of skills in addition to their specific job description. It is these jobs that HRM must be prepared to fill.8

Performance management also needs to support the organizational structure. HR needs to decide what the relevant job standards are and how to evaluate performance. Compensation needs to reward progress toward organizational goals. In short, strategic human resource management creates a clear connection between the goals of the organization and the activities of the people who work there. Recruitment, hiring, onboarding, training, performance management, career planning, compensation, and benefits all need to be developed and implemented so they support the organization's strategic objectives.

Strategy Type

What it Looks Like

Implications for HR

Cost differentiation: Provide great value and low cost.

Emphasize acquiring low‐cost materials, streamlining processes, reducing waste, maximizing efficiencies (e.g., Walmart, IKEA, McDonald’s).

Structure jobs, departments to maximize cross training, knowledge sharing. Design compensation programs to reward efficiency, cost savings. Select employees with versatile skill sets.

Product differentiation: Deliver product/service that is like that of competitors but incorporates a feature(s) that differentiates it.

Emphasize creativity and innovation. Consumers faced with multiple choices; identify those features that make the product/service stand out (e.g., Apple, Netflix, Whole Foods).

Design compensation systems to reward creativity, innovation.Educate employees about product/service differentiating features. Create marketing campaigns to promote special product features.

Customer intimacy: Strong personal relationship between provider of product or service and customers.

Emphasize relationship between consumers and point person. Personalized service differentiates the product/service from competitors (e.g., local hair salon, Nordstrom, Hulu, Pandora).

Recruit and select job candidates with strong customer service and customer relations skills to help fortify the provider–consumer relationship. Focus reward strategies on customer attraction, satisfaction, and retention.

Customer/Market focus: Unique target market characteristics

Emphasize the needs of a specific target market, like generational or lifestyle (e.g., Warby Parker, Harley‐Davidson, Urban Outfitters).

Use strong market research to drive recruitment and selection so employees have a strong understanding of the target market. Emphasize versatility and adaptability as products and services are subject to rapid changes.9

EXHIBIT 2-3 Strategic HR Aligns with Organizational Strategy. Different organizational strategies call for tailor‐made HR strategies. Staffing, training and development, motivation, and maintenance all must emphasize factors that support the strategy.

strategic human resource management

Aligning HR policies and decisions with the organizational strategy and mission. (Verhulst, 2018-10-08, pp. 39-40)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Evaluating Results

Once HRM has developed plans to align practices with strategy, it's important to measure how well the strategic efforts of HRM and other business units are achieving the organizational mission. Metrics are quantitative assessments used to measure the effectiveness of business practices. Let's take, for example, a retailer with an aggressive growth strategy of doubling the number of stores in the next 2 years, requiring hiring and training 300 new employees and managers. As HR begins to quickly hire and train the necessary people, it would be helpful to examine some relevant HR metrics such as the current rate of employee turnover, time required to fill a position, and cost per hire. The huge task of hiring 300 people would be accomplished faster if employee turnover were reduced and time required to fill positions were shortened. If cost per hire were also reduced, the HR budget would go further.

metrics

Quantitative assessments used to measure the effectiveness of business practices.

By themselves, these metrics mean little, so they are compared to previous time frames or against a benchmark to determine effectiveness.10 For example, a current annual retail employee turnover of 55 percent sounds high, but if the average annual turnover is 67 percent for retail workers, the employer is doing a slightly better job of retaining employees than the rest of the industry on average. Even so, an employee turnover rate of over 50 percent each year puts additional pressure on recruiters to bring in a large number of qualified applicants and HRM needs to look at shortening the time required to fill positions. Comparing HR metrics to industry benchmarks provides a perspective for evaluating HR practices and making decisions about the future. Benchmarks are metrics from other businesses or industry averages used to compare performance. Benchmark data are available from industry organizations, consulting firms, and the Society of Human Resource Management (SHRM).

benchmarks

Metrics from other businesses or industry averages used to compare performance.

A variety of workforce analytics software packages are available to track workforce metrics, allowing HRM to determine if current practices are accomplishing strategic objectives. Workforce analytics software not only computes relevant metrics but it also puts them in easy‐to‐interpret formats such as dashboards. Dashboards are visual displays of HR metrics based on the way we use the dashboard gauges on a car. They can be quickly accessed and interpreted on a computer or tablet. The charts and graphs on the display can be provided by HRIS software or derived from spreadsheets.

dashboards

Visual displays of HR metrics that can be quickly accessed and interpreted on a computer or tablet.

Examples of HR metrics:

EXHIBIT 2‐4 Key HR Metrics. Metrics are compared to benchmarks and historical data to determine progress toward HR strategic goals.

EXHIBIT 2‐5 HR Dashboard. Dashboards are visual displays of HR metrics like this example from SAP.

© SAP SE. All rights reserved.

DIVERSITY TOPICS

Politics, Profits, and Diversity

Shortly after the 2016 presidential election, Marriott President and CEO Arne Sorenson wrote an open letter to President‐elect Donald Trump to voice his concern that divisiveness was the enemy of inclusiveness. The letter he published on LinkedIn included these comments:

“…Everyone, no matter their sexual orientation or identity, gender, race, religion disability or ethnicity should have an equal opportunity to get a job, start a business or be served by a business,” … “Use your leadership to minimize divisiveness around these areas by letting people live their lives and by ensuring that they are treated equally in the public square.”11

IKEA also addressed employee concerns about politics and attitudes toward diversity. Nabeela Ixtabalan, IKEA's Human Resources Manager for the United States, assured employees that diversity was still an organizational priority. She explained that although they may feel “an elevated level of anxiety, stress and emotion associated with the election and the outcome, …Let's focus on leading by example. Together, let us demonstrate how tolerance, care and respect for others and their opinions makes us stronger.”12

Regardless of political views of diversity as an important value of society or a necessary evil to comply with legal requirements, research consistently shows that companies with diverse workforces are more productive and profitable. For example, Fortune found that the 50 companies on their “Best Places to Work for Diversity” list average nearly 25 percent higher annual revenue growth than companies that did not make the list.13

Things to think about

Why did Marriott and IKEA feel that it was necessary to reassure employees that they still hold diversity as a priority? In addition to press releases, how can employers show that they value diversity? What benefits do diverse organizations achieve?

The HRM Functions

HRM can be viewed in one of two ways. First, HRM is a staff or support function in the organization, providing strategic, tactical, and transactional HR services to everyone in the organization. Second, HRM is every manager's job, whether you work in the HR department or you supervise a crew of young part‐timers. All managers have HRM responsibilities.

HRM has four basic functions: (1) staffing, (2) training and development, (3) motivation, and (4) maintenance. In other words, we might say that HRM is made up of four activities: (1) hiring people, (2) preparing them, (3) encouraging them, and (4) keeping them.

Even the smallest entrepreneurial organization with one or two employees must recognize responsibility for all four HR functions. In organizations that are too small for a formal HRM department, these functions will be the responsibility of each line manager, although line managers will always have many of these responsibilities whether a formal HRs department exists or not. HR departments are generally responsible for assisting the line manager in these activities. Organizational strategy, structure, or culture may dictate that these activities will be more effective if centralized in the HR department. (Verhulst, 2018-10-08, pp. 41-43)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

EXHIBIT 2‐6 Human Resource Management: Primary Activities. HRM goals are accomplished through the functions of staffing, training and development, motivation, and maintenance.

Staffing Function

After the organization's mission and strategy have been fully developed, HR managers begin the staffing function to determine HR needs necessary to support the strategic plan.14 The search begins to find individuals who possess specific skills, knowledge, and abilities directly linked to specific jobs.

staffing function

Activities in HRM concerned with seeking and hiring qualified employees.

Many organizations enhance recruiting efforts by developing and promoting an employment “branding” strategy much the same way that consumer products have a distinct brand image. The image needs to fit the organizational strategy, mission, and values. Google, for example, has an effective and well‐known employment brand that promotes its culture of creativity and innovation plus employee perks such as free food, games, and lots of social interaction.15

You may never have met a Google employee, but you've probably met a Starbucks barista. Starbucks cultivates their employment brand by communicating benefits, ethics, and socially responsible initiatives to potential employees and customers via Starbucks's Facebook, LinkedIn, Twitter, YouTube, and Instagram presence. In addition to Starbuck's own social media messages, they depend on their employees to spread the message that they are a great employer and place to buy coffee because employees spread the message more credibly than the company can itself. This type of branding creates an image of the workplace and assists candidates in selecting an employer that they perceive to be a good fit with their values, personality, and work ethic. Branding also allows candidates who do not feel that they would be a good fit with the organization to decide not to pursue employment. (Verhulst, 2018-10-08, pp. 43-44)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Google employees enjoy a variety of perks designed to promote work–life balance.

The job analysis process is an important foundation of the staffing function that identifies specific skills, knowledge, and abilities that the job applicant must possess to succeed in the position. Through this process, HRM identifies the essential qualifications for a specific job and includes them in the job description, accomplishing two objectives. First, prospective employees can see a clear connection between the job and the mission or strategy of the company. Second, it assures that the candidate is selected according to objective criteria and not politics or personal bias, hopefully reducing the chance that illegal discrimination may influence hiring.

Almost all activities involved in HRM depend upon an accurate description of the job. Knowledge of the critical skills required, performance standards, and pay rates all stem from an accurate job analysis. Once these critical competencies have been identified, the recruiting process begins. Recruiters reach out to find qualified applicants in a variety of ways from personal contacts to extensive use of online recruiting, including social media.

Once applications have come in, it is time to begin the selection phase. The selection process screens applicants and develops a pool of qualified candidates who move on to an interview process and possible testing. At the end of the process, job offers are extended to the best qualified candidates. Additionally, HRM must communicate a variety of information to the applicant, such as the organization culture, what is expected of employees, and any other information that is relevant to the candidate's decision‐making process. When the job offer has been accepted, HRM focuses on the employee's training and development. We will cover these topics in depth in Chapters 6 and 7.

Training and Development Function

Although HRM professionals are quite good at finding the most qualified candidates, few, if any, new employees can truly come into an organization and immediately become fully functioning, 100 percent performers. New employees need to adapt to their new surroundings.

Adjusting to a new position or organization may take months. The onboarding process (explained in depth in Chapter 8) speeds the process by helping employees learn the culture of the organization, how information is communicated, and how their position fits the organization's structure and strategy. HRM plays an important role in the onboarding process so employees can become fully productive members of the organization. To accomplish this, HRM typically embarks on four areas in the training and development phase: employee training, employee development, organization development, and career development.

It is important to understand the difference between employee development, career development, and employee training. Employee development and career development are focused on the employee's personal development. Employee training is more focused on the skills and competencies necessary for the position. Organization development mostly focuses on helping employees handle change in the workplace. While each area has a unique focus, all four are critical to the success of the training and development phase. We have summarized these four in Exhibit 2‐7.

Employee Training

Assists employees in acquiring better skills for their current job. The focus of employee training is on current job–skill requirements.

Employee Development

Helps the organization ensure that it has the necessary talent internally for meeting future human resource needs. Employee development focuses on a future position within the organization requiring additional competencies.

Career Development

Designed to assist employees in advancing their work lives. Focus is on the necessary information and assessment in helping employees realize their career goals. Ultimately, career development is the responsibility of the individual, not the organization.

Organization Development

Facilitates system‐wide changes in the organization. Focus is on changing the attitudes and values of employees according to new organizational strategic directions.

EXHIBIT 2-7 Training and Development Activities. Training and development activities are a continuing process beginning with the first day on the job, building skills for high performance and high morale.

Once the training and development function has created competent, adapted employees who possess the up‐to‐date skills, knowledge, and abilities needed to perform their jobs, HRM starts the process of keeping employees motivated.

training and development function

Activities in HRM concerned with assisting employees to develop up‐to‐date skills, knowledge, and abilities.

Motivation Function

The motivation function requires HRM to understand and utilize leadership skills to inspire employees to greater effort. Human behavior is complex and trying to figure out what motivates various employees has long been a concern of behavioral scientists. Research does provide some important insights into employee motivation.

motivation function

Activities in HRM concerned with helping employees exert themselves at high energy levels.

Motivation is not just a measure of how hard the employee works, but a collection of environmental issues surrounding the job. From a performance perspective, employees need the appropriate skills and abilities to adequately do the job. HRM accomplishes this by correctly defining the requirements of the job, matching applicants to those requirements, and training the new employee in how to do the job. But another concern is the job design itself. If jobs are poorly designed, inadequately laid out, or improperly described, or if there does not seem to be a connection to the goals of the organization, employees will be more likely to perform below their capabilities.

Employees like to know that their job has a point or purpose and to be recognized for their contribution. Well‐designed jobs help create motivation because the employee seeks intrinsic rewards that come from feeling appreciated and having a sense of responsibility. Extrinsic rewards such as pay and benefits provide motivation too, but have limited ability to encourage loyalty, creativity, and innovation.16

Many organizations recognize that motivating employees also requires a level of respect between management and workers. This respect is cultivated by involving employees in decisions that affect them, listening to employees, and implementing their suggestions where appropriate.

The next step in the motivation process is to set performance standards for each employee. The performance evaluation system provides feedback to employees regarding their past performance and addresses any performance weaknesses the employee may have. The process should provide a link between employee compensation and performance. The compensation and benefit activity in the organization may be adapted to and coordinated with a pay‐for‐performance plan. Performance management systems are covered in Chapter 10. (Verhulst, 2018-10-08, pp. 44-46)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

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Maintenance Function

The maintenance function facilitates activities that retain productive employees. Providing a safe and healthy working environment and assisting employees in achieving a healthy work–life balance are among the most important of these activities as we discussed in Chapter 1. Many organizations do this by creating a package of family‐friendly benefits and work practices such as limiting overtime work, providing family health benefits, onsite daycare, flexible scheduling, wellness programs, and counseling. Employees appreciate these programs, reducing stress, job dissatisfaction, and employee turnover.

maintenance function

Activities in HRM concerned with maintaining employees' commitment and loyalty to the organization.

Family‐friendly benefits and a strong organizational culture built around core values sound great, but unless employees know about them, they're useless. HRM must develop effective communications programs in the organization. Employee relations programs should keep employees well informed—by using the company's e‐mail, voicemail, website, videoconferencing, meetings, and social media or any other convenient media. A recent survey by staffing service, Accountemps, found 38 percent of HR managers surveyed said that improved communication is the best way to counter low employee morale. Other causes of low morale included micromanaging employees, failure to recognize employee achievements, fear of job loss, and excessive workloads.17

communications programs

HRM programs designed to provide information to employees.

Structure of the HR Department

Responsibility for the four HRM functions of staffing, training and development, motivation, and maintenance can be distributed in many ways in organizations. Company size, strategy, and structure are variables that help determine how HRM functions will be handled. The proper fit can be unique to the organization, so describing all possible structures would be difficult in this textbook.

The typical nonunion HRM department usually includes four distinct areas: (1) employment, (2) training and development, (3) compensation/benefits, and (4) employee relations. Managers in these four areas typically report to a vice president of HRs or possibly a Chief HR Officer (CHRO).

Employment

Entry‐level positions in companies with large HR departments frequently involve representing the company at job fairs and college campuses. Other entry‐level positions include employment specialists who sort through resumes or applications and reject applicants who do not meet the job's requirements. The remaining applications or resumes are then often forwarded to the line managers for review. The line manager may then instruct the employment specialist to interview the selected candidates. Applicants who appear to fit the necessary qualities necessary for the line area's needs are typically scheduled to meet with the line manager for another interview. The recruiting and selection processes will be covered in detail in Chapters 6 and 7.

It is important to understand that the employment specialist's role is not to make hiring decisions but to coordinate efforts with line management. Once the line manager has selected a candidate, the employment specialist usually makes the job offer and handles the routine paperwork associated with hiring an employee.

Training and Development

The training and development section of an organization helps employees maximize their potential and create greater organizational productivity. Training and development specialists often assume the role of the organization's internal change agents, helping employees cope with change resulting from government regulations; mergers; economic factors, such as the price of oil or gas; or a change in strategy by a major competitor.

A change in the organization's strategy or structure can result in layoffs, new job assignments, team involvement, or a change in culture that would require orientation for new members. Employees may need to be informed of changes in policies or procedures and trained on how to handle them. For example, ethical behavior has come under scrutiny in many industries and organizations. Training and education is often the best way to prevent ethical problems, so HRM may need to develop ethics education programs and train employees on how to recognize and report ethics violations. Training and development may also include career development activities and employee counseling to help people make better choices about their careers and to achieve their desired goals.

Compensation and Benefits

Work in compensation and benefits is concerned with paying employees and administering their benefits package. Deciding on fair compensation packages, often called “total rewards,” that provide motivation is a complex process. Compensation decisions involve analysis of jobs, state and federal laws, local pay trends, competitors' pay, available labor supply, the economy and organizational strategy among other factors.

compensation and benefits

HRM function concerned with paying employees and administering the benefits package.

Job analysis is central to all compensation decisions and is used to create job ratings. These job ratings are statistically compared to determine the job's relative worth to the company. External factors such as market conditions and limited supply of potential workers may affect the overall range of job worth. Organizational strategy may also dictate that the compensation system reward an important organizational goal such as efficiency, creativity, or customer service focus, encouraging employees to direct efforts to achieve those strategic goals.18

Benefits have become one of the more dynamic areas of HRM. Changes in health care laws, strategic application of benefits, and creative benefit packages create challenges for HR managers working with benefits. As benefit offerings to employees have become significantly costlier, the benefits administrator has the responsibility of piecing together a benefits package that meets employee needs and is cost‐effective to the organization. But benefits should not be viewed only from a cost‐containment perspective. Benefits assist strategy by helping attract and retain high‐quality employees.19 (Verhulst, 2018-10-08, pp. 46-48)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Onsite wellness centers are a popular employee benefit and an important recruiting tool.

The benefits administrator also serves as the resource information officer to employees regarding their benefits. This information may be provided through a company's HRIS. We will discuss this in greater detail in Chapter 12.

Employee Relations

The employee relations function has several major responsibilities. Employee relations specialists are responsible for effective communication throughout the organization and reinforcing the organizational culture. Activities involve a variety of everyday HR activities such as employee recognition, resolving conflicts, enforcing policies and procedures, investigating complaints, handling disciplinary issues, maintaining the employee handbook, and many others. Communication is a particularly important responsibility. As mentioned earlier, effective communication helps increase employee loyalty and commitment by providing accurate information, building trust, and reinforcing the organizational culture and core values.

employee relations function

Activities in HRM concerned with effective communications among organizational members.

If employees belong to a union, many management practices are restricted by the labor agreement or the National Labor Relations Board. Employee relations specialists still assume most of the responsibilities mentioned above, but must follow the union contract closely when handling discipline and communication problems. Nonunion employers have fewer restrictions when handling issues such as resolving conflicts and disciplining employees. (Verhulst, 2018-10-08, p. 48)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

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Talent Management

Now that we've taken a quick look at the HRM functions in a typical organization, we need to revisit strategic HR to discuss an important aspect of HR called Talent Management.

Talent Management has been described as “a deliberate and ongoing process that systematically identifies, assesses, develops and retains talent to meet current and future business needs and objectives.”20 If you're thinking that sentence pretty much sums up Chapter 2, you'd be correct. The HR processes involved aren't new, but the term “Talent Management” represents an understanding that truly talented employees are hard to find, and once they are identified, organizations need to do everything in their power to hire them, develop their potential, and keep them. Most companies that use a talent management strategy view it as an integrated approach to get and keep the best talent by using HRM best practices and using technology to support those practices and track effectiveness. Some of the key management processes include the following:21

Workforce planning: Revisit organizational strategy and make sure that all HR practices support long‐term goals. This includes identifying the number of people and skills necessary to support business plans, evaluating the skills and strengths of current staff. A database that compiles all employee information, along with HRIS systems that identify recruiting needs, and analytics that measure progress toward accomplishing objectives are all important parts of keeping HR practices focused on achieving goals. This also allows HR to identify characteristics of top performing employees that would help identify good external candidates.

Recruiting: Examine qualified internal talent using the database, identify and contact external talent through social media tracking, and develop an employment brand that attracts candidates with desired characteristics. Focus hiring on business goals, for example, if improved customer service is the goal, candidates from companies with a reputation for excellent customer service would receive attention.

Applicant Tracking: Hiring processes including applications, screening, interviews, assessments, and background checks are monitored for legal compliance and timeliness.

Onboarding: Design onboarding processes to emphasize culture, core values, and key behaviors that support strategy.

Performance Management: Job responsibilities and performance expectations are aligned with strategic goals. Evaluation of performance is designed to provide motivation, determine areas of future development, and align with strategy.

Compensation: Pay can be aligned with performance and competencies that support organizational strategy. Equity and fairness can be monitored.

Workforce Development: Personalized training is delivered based on the performance process, personal goals of the employee, and goals of the business unit and organizations.

Career and Succession Planning: High‐potential employees are identified and career paths are recommended. Future openings are predicted and possible internal candidates are suggested. Mentoring relationships can be established.

talent management

Using HRM best practices to recruit and retain talented employees to achieve organizational objectives.

Organizations that utilize an integrated talent management strategy can track the effectiveness of HR practices in pursuit of strategic goals. There is strong evidence that the ability to recruit, identify, hire, develop, and retain the best talent helps companies to be more profitable. It also helps employers recruit by becoming an employer of choice. Most of the companies that show up on the “Best Companies to Work For” and “Most Admired” lists utilize talent management processes.

TIPS FOR SUCCESS

HRM Certification

Many colleges and universities are helping prepare HRM professionals by offering concentrations and majors in the discipline. There are currently two different groups that provide testing and certification in for HR professionals.

The original HR professional certification is sponsored by the Human Resource Certification Institute (HRCI). The HRCI offers these certification areas for HR professionals:22

aPHRTM

Associate Professional in Human Resources

PHR®

Professional in Human Resources

PHRca®

PHR or SPHR with state certification in California

SPHR®

Senior Professional in Human Resources

GPHR®

Global Professional in Human Resources

PHRiTM

Professional in Human Resources—International

SPHRiTM

Senior Professional in Human Resources—International

The Society for Human Resource Management (SHRM) is the leading professional organization for HR professionals. In 2015, SHRM established two new HR credentials designed to encourage HR professionals to acquire HR knowledge and behaviors necessary for effective performance:

SHRM‐CP

SHRM Certified Professional

SHRM‐SCP

SHRM Senior Certified Professional

The Association for Talent Development (ATD), formerly the American Society of Training and Development (ASTD), also offers certification for those wanting to specialize in training and development.

Things to think about:

Is there an SHRM or ATD chapter in your area? Locate the closest chapter and register to attend the next meeting as a guest.

Is a Career in HR for Me?

Are you considering a career in HRM? It's a good idea, considering that the Bureau of Labor Statistics estimates that the need for HR professionals will grow faster than most career areas through 2024.23 Exhibit 2‐8 provides median annual salaries for several different HR positions in areas of the United States.

Average Salary for Select HR Positions

HR Executive (Vice President)

$135,997

HR Director

$85,283

Employee Relations Manager

$70,347

HR Information Systems

$63,598

HR Generalist

$51,368

HR Recruiter

$47,408

HR Assistant

$36,495 (Verhulst, 2018-10-08, pp. 48-50)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

EXHIBIT 2-8 Selected HR Salaries. HR salaries vary widely depending on the position, location, industry, and size of the employer.

Source: Payscale.com, June 2017.

Positions include the following:

Assistant: provides support to other HR professionals.

Generalist: provides service to an organization in all four of the HR functions.

Specialist: is typically concerned with only one of the four functions.

Executive: reports directly to the organization's top management with responsibility for all HR functions and linking HR with organizational strategy.

As in most business careers, HR professionals can expect to work their way up. An HR professional will frequently start as an HR generalist or as a recruiter. HR generalists may start with a company of any size and have a variety of opportunities for employee contact including recruiting, hiring, training, evaluating, communication, administering benefits, disciplining, and, yes, possibly even firing employees. HR professionals know that much employee contact can be awkward and difficult, but proper training and skills can help.

HRM is a function of every manager's job, not just those who work in human resources.

HR generalist

Position responsible for all or a large number of HR functions in an organization.

Recruiters represent either one employer or work with a recruiting firm that represents many employers. In a recent interview, Libby Sartain, former head of HR for Yahoo! and Southwest Airlines, stated “I started as a recruiter. It's a good way to learn about the organization, its jobs, pay and structure.”24 She went on to explain that understanding the structure and strategy of the organization is important to advance. Some of the skills that can pave your way to success in HR include strong interpersonal communication skills, drive and ambition, critical thinking skills, and a good background of business knowledge outside of HR.25 It also helps to be flexible about your location.

HR Trends and Opportunities

We have observed that HR is a partner in developing structures and practices that fit strategy. This sometimes involves changing the structure of the HR department as well. Let's look at some of the ways HRM is evolving to meet strategic needs.

People Analytics

Earlier, we discussed how Frederick Taylor introduced the concept of Scientific Management, which suggested that employees be screened for attributes that contributed to their ability to do the job. We also discussed how Billy Beane took this a step further with the assistance of data analysis to find relevant statistics that could better predict the success of baseball players. HR has grown this idea to use data analysis software to develop algorithms that identify applicants who are most likely to succeed, or to identify talented employees who have potential for promotion. On the flip side, it can also identify employees who are at risk of leaving the organization, allowing HR to intervene with training, promotions, or improved compensation. All of this is accomplished by analyzing a variety of factors including personality traits, cultural values, productivity, and experience. The profiles of successful employees are used to develop profiles of applicants and narrow the field to a few that are most likely to succeed.

This process is called people analytics. Its use is growing exponentially, mostly due to the wide variety of uses and the number of companies reporting great success in improving productivity, turnover, retention, and even reducing accidents and fraud. Not surprisingly, Google was one of the first companies to utilize people analytics to identify high‐potential applicants. JetBlue used an assessment program and predictive analytics to improve the quality of hires for reservation agents and flight attendants, resulting in a significant drop in consumer complaints.26

people analytics

Using data to improve HR decisions. (Verhulst, 2018-10-08, pp. 50-51)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

How else can data be used?

High‐tech companies identify why engineers quit and adapt compensation and work environments to get them to stay.

Financial services companies analyze which people commit fraud.

Health care organizations analyze why certain hospitals or clinics have higher infection rates and identify people and training issues that contribute to the problem.

Sales organizations analyze educational, demographic, and experience factors that assist in hiring better sales people.27

Outsourcing HR Functions

HRM is not immune to the trend of outsourcing noncore business operations with the goal of saving money. In some organizations, top management has decided to outsource some, if not all, of the work HRM professionals once handled. Human resource outsourcing (HRO) organizations have seen a dramatic growth. A recent survey found that 85 percent of companies outsource some portion of their HR functions.28

Outsourcing may be as simple as hiring a contractor to take responsibility for one HR function, such as benefit and pension administration. It's also possible to contract with a private staffing agency to perform the recruiting and selection activities, several consulting firms to provide training programs, and yet another financial organization to handle most of a company's benefits administration. American Airlines outsourced nearly all HR functions—including recruitment, staffing, training, and development—to IBM in partnership with Mercer, a company that handles administration of all benefits. American Airlines received improved employee access to and information about benefits and substantial cost savings from this $217 million, 7‐year contract.29 Other large companies that provide HR services include Accenture and ADP.

Professional Employer Organization

A professional employer organization (PEO) assumes all HR functions of a client company by hiring all of its employees and leasing them back to the company. This is also called employee leasing. The PEO gains economies of scale by negotiating for benefits for the employees of several organizations. This can be a very cost‐efficient way for small‐ to medium‐sized organizations to provide benefits equal to those of larger organizations. The company pays the PEO a percentage of the gross wages. Much of the attractiveness of using a PEO for a small‐ or medium‐size business comes from the ability to attract stronger candidates with the benefits they could not have afforded without the bargaining power of the PEO. Another advantage is having the expertise of the PEO to handle confusing government regulation requirements.

professional employer organization

Assumes all HR functions of a client company by hiring all of its employees and leasing them back to the company.

Shared Services

In the strategic planning process, it may be necessary to restructure the HR department to better align organizational resources to achieve strategic objectives. Organizations, needing to cut costs or restructure, may move to a shared services model. This model restructures the HR department into three components that each report to HR executives at the company headquarters. The goal is to achieve cost savings by combining some HR functions, achieving economies of scale, eliminating duplicated services, and standardizing how some services are delivered. In a recent survey by the SHRM, 75 percent of HR managers reported using shared services to provide HR support within the organization.30

shared services

Sharing HRM activities among geographically dispersed divisions.

The format of shared services models varies depending on the needs of the organization. They may include the following:31

Centers of excellence that handle a wide range of activities including staffing, training, benefits administration, employee relations, and diversity programs.

Service centers that handle transactional HR duties such as payroll.

Business partners who work directly with business unit managers in strategic roles such as developing succession plans and compensation programs.

Depending on the organization's strategy and needs, some or all HR roles and responsibilities may be outsourced. Common HR activities that may be outsourced include those that are mostly transactional in nature and involve little contact with employees, such as benefit and flexible spending account administration, criminal background checks, and retirement planning. Organizations are less likely to outsource performance management, policy development, and compensation plan administration.

HRM in a Small Business

In a small business, the owner‐manager may be responsible for all HR activities. In other situations, small‐business HR departments are staffed with one HR generalist and possibly a full‐time HR assistant. Regardless of the unit's size, the same activities are required in small businesses, but on a smaller scale. These small‐business HRM professionals must properly perform the four HRM functions and achieve the same goals that a larger department achieves. The main difference is that they are doing the work themselves without the benefit of a specialized staff.

Many small businesses use outside consultants to assist in or perform all HRM activities. For instance, in a small company, some benefits such as health insurance may be prohibitively expensive and benefit administration may be beyond the capability of the small‐business person. In that case, a PEO may be able to provide more cost‐effective insurance benefits and benefit administration. HRM in a small business requires that individuals keep current in the field and associated legal issues. For example, the Family and Medical Leave Act of 1993 is applicable to those organizations that have 50 or more employees. Accordingly, the small business may be exempt from some laws affecting employment practices. Businesses with fewer than 15 employees, for example, are not obligated to comply with the Americans with Disabilities Act, although some states may have lower requirements. Being aware of this information can save small businesses time, money, and keep them compliant with the law.32

HRM in a Global Environment

As a business grows from regional to national to international in size, the HRM function must take on a new and broader perspective. As a national company expands overseas, first with a sales operation, then to production facilities and fully expanded operations, or to international joint ventures, or possibly a merger, the HR function must adapt to a changing and far more complex environment.

All basic functions of domestic HRM become more complex when the organization's employees are located around the world, and additional HRM activities that would be considered invasions of employee privacy in domestic operations become necessary. This occurs partially because of the increased vulnerability and risk of terrorism or kidnapping that American executives sometimes experience abroad.

When a corporation sends employees overseas, that corporation takes on additional responsibilities. Not only are organizations concerned about selecting the best employee for the job, they must also be aware of the entire family's needs. Many international assignments fail because the spouse or family can't adjust to the new environment. Furthermore, the relocation and orientation process before departure may take months of foreign language training and should may involve the employee's entire family. Details must be provided for work visas, travel, safety, household‐moving arrangements, taxes, and family issues such as children's schooling, medical care, and housing. Administrative services for expatriate employees must also be available once they are placed in their overseas posts. All these additional functions make international HRM a very costly undertaking. We will examine many more aspects of how HR functions in a global environment in the following chapters. (Verhulst, 2018-10-08, pp. 52-54)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

Summary (This summary relates to the Learning Outcomes identified on page 31.) After having read this chapter, you can

Identify advances in management leading to modern human resource management practices. Frederick Taylor's research led to scientific management principles to increase workers' efficiency and productivity. Mary Parker Follett advocated that organizations are communities and management should cooperate with workers. Hugo Munsterberg proposed matching employees' personalities and abilities to jobs. The Hawthorne Studies and Elton Mayo found that employees respond more positively to the work group and style of supervision than to working conditions. Frederick Herzberg and Abraham Maslow introduced theories of employee motivation.

Describe the functions of management. Planning involves establishing the organizational objectives and deciding what actions need to be taken to achieve them. Organizing is the process of determining what resources and activities need to be completed to achieve objectives. The leading function is responsible for inspiring efforts and establishing a culture of support and productivity. Controlling is monitoring activities to ensure that goals are met.

Explain how HRM aligns human resource management processes and practices with organizational strategy. HR assists decision makers in evaluating where the organization currently stands, deciding where the organization wants to be in the future, developing a plan to achieve those goals, implementing the plan, and checking progress toward those goals. Strategic human resource activities support organizational strategy through human capital‐related areas such as building, developing, and maintaining a productive and talented workforce that has the skills necessary to accomplish organizational goals.

Outline the components and the goals of the staffing, training and development, motivation, and maintenance functions of human resource management. The staffing function includes strategic human resource planning, recruiting, and selection. The goal of the staffing function is to locate and secure competent employees. The training and development function includes orientation, employee training, employee development, organization development, and career development. The goal of the development function is to adapt competent workers to the organization and help them obtain up‐to‐date skills, knowledge, and abilities for their job responsibilities. The components of the motivation function include motivation theories, appropriate job designs, reward and incentive systems, compensation, and benefits. The goal of the motivation function is to provide competent, adapted employees who have up‐to‐date skills, knowledge, and abilities with an environment that encourages them to exert high‐energy levels. The components of the maintenance function include safety and health issues and employee communications. The goal of the maintenance function is to help these employees maintain their commitment and loyalty to the organization.

Explain the structure of a typical HRM department. A typical nonunion HRM department usually includes four distinct areas: (1) employment, (2) training and development, (3) compensation/benefits, and (4) employee relations. The components of the staffing, training and development, motivation, and maintenance functions are divided between the four areas.

Discuss talent management and how it benefits organizations. Talent management is an integrated approach to get and keep the best talent by using HRM best practices and using technology to support those practices and track effectiveness.

Outline current trends and opportunities in human resource management. Outsourcing HR functions as a cost‐saving measure is increasing. Professional Employee Organizations that take over the workforce and HR functions by leasing employees back to employers are gaining popularity in small‐ to medium‐sized businesses. Shared services that create centers of excellence, service centers, and business partners are a way to restructure HR to cut costs.

Explain how human resource management practices differ in small businesses and in an international setting. In large HRM operations, individuals perform functions according to their specialization. Small‐business HRM practitioners may instead be the only individuals in the operation and must operate as HRM generalists. In an international setting, HRM functions become more complex and typically require additional activities associated with staffing and training and development.

Key Terms

benchmarks

communications programs

compensation and benefits

competitive advantage

controlling

core competency

dashboards

employee relations function

Hawthorne studies

HR generalist

leading

maintenance function

management

metrics

mission

mission statement

motivation function

organizing

outsourcing

people analytics

planning

professional employer organization

scientific management

shared services

staffing function

strategic human resource management

strategic management

strategic management process

SWOT analysis

talent management

training and development function (Verhulst, 2018-10-08, pp. 54-55)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

*****Always check citation for accuracy before use.

HRM Workshop

Reviewing Important Concepts

Explain which of the advances in management seem most and least important in the evolution of HRM. (LO 1)

How is the role of HR demonstrated in each of the four management functions? (LO 2, 3)

Explain the purpose of HRM in an organization. (LO 3, 4, 5, 6)

What role does HRM play in the strategic management process? (LO 3)

Explain ways that a talent management strategy improves an organization's ability to attract and keep talented employees. (LO 6)

Which of the HR functions seem to be most important and why? (LO 4)

Evaluating Alternatives

Aiden, founder of a growing company that creates software to help small businesses manage their money, sees no reason to create a mission statement or undergo a strategic planning process. He states “It's my company. The mission is whatever I say it is. We work hard, play hard, and don't have time to sit around answering a lot of questions about where we want to be in 5 years. We want to be the ‘go‐to’ for start‐ups that want to grow. Period!” Evaluate Aiden's point of view. What should a strategic plan for his company include? How should HR support this strategy? (LO 3)

You have been offered two positions in HRM. One is a generalist position in a smaller business and one is a recruiting position in a large corporation. Explain which of the two jobs you would prefer and why. Which will provide a better foundation for an HR career? Opportunities for advancement? Defend your answers. (LO 4, 5)

Research and Communication Skills

Visit an HRM department, either on or off campus. During your meeting, ask an HRM representative what he or she does on the job. Focus specifically on the person's job title, key job responsibilities, and why he or she has chosen to be in HRM. After your appointment, provide a summary of the interview, highlighting how the information will help you better understand HRM practices. (LO 4, 5, 6, 7)

Discuss how you believe the Hawthorne studies have influenced HRM. Find three examples of HRM practices in specific organizations that can be linked to these studies and illustrate them with presentation slides. Explain the benefits these practices provide to the organizations in a short class presentation. (LO 1)

Go to the SHRM's website at www.shrm.org. Research the services they provide to their membership and the different options for student membership. Find a contact for the SHRM chapter closest to you and ask if you can attend a meeting as a guest. Report your findings back to the class. (LO 7)

Go to the website of the Human Resource Certification Institute at www.hrci.org, SHRM at www.shrm.org, or ATD's website at www.astd.org. Research the types of certifications they offer and the process one must follow to prepare for the human resource certification exams. What are the benefits to those who achieve certification? Present your findings to your class with presentation slides. (LO 7)

Making a Difference

SERVICE LEARNING PROJECTS

A good way to experience the strategic process is to develop and execute an activity of your own that is tailored to the needs of an existing nonprofit organization.

Research local nonprofits that may need assistance with fundraising and develop an event that helps them achieve their goal. Activities may include planning and hosting a fund‐raising dinner or auction.

Your college may welcome an event that raises money for scholarships or textbooks for needy students. Resist the opportunity to sponsor a bake sale. It's one of those one‐time activities that doesn't translate well to your resume.

As you put your service learning experience together, keep a journal of your activities, the time you spend, contact information for people you work with, and your thoughts about the process. When you're finished, make a presentation to your class about the experience and what you learned. What concepts from Chapter 2 were you able to apply?

Case Application 2‐A

SEEDS OF CHANGE AT GROWER'S CHOICE

Following an incident that involved a manager making unauthorized accommodations for a disabled employee (for details, see Case Application 1‐A: Grower's Choice), Alonzo Nguyen, HR Director at Grower's Choice, a growing regional food store chain, realized that his views of the role of HR were stuck firmly in the 1980s and were causing problems.

Alonzo had considered taking legal action against the manager and disabled employee, but the lawyer advised Alonzo and Harold Parker, the CEO, that not only should they drop their legal threats but they were also probably in violation of the Americans with Disabilities Act for not accommodating the employee's disability in the first place. The lawyer explained that Grower's Choice had outgrown their HR policies and procedures and needed to get their act together quickly. He also said that failure to modernize would cause continued problems complying with legal requirements and a host of other difficulties. He advised them to get help in aligning HR policies and practices with organizational strategy immediately. This was a problem because Grower's Choice had no formal strategy, depending instead on the practices and values of the family that started the company 40 years earlier.

Working with consultants, Alonzo, Harold, and a committee of company officers and employees hammered out a statement of values and mission statement designed to guide their organizational strategy and update of the HR department.

GROWER'S CHOICE MISSION

We are committed to the sustainable growth of our organization, employees, and communities by providing our customers with fresh, healthy food and becoming everyone's market of choice.

GROWER'S CHOICE VALUES

Grower's Choice strives to be a valued part of the community by:

Selling only fresh, high‐quality produce, meat, and groceries from sustainable sources.

Valuing and developing our friendly and dedicated employees.

Providing customers with fair prices, clean stores, efficient service, and the highest ethical standards.

Giving back to the community with our time and resources.

Using all resources wisely and providing a fair return to our investors.

The consultants congratulated Alonzo and Harold on completing the mission and values, but explained that the real work was just beginning.

Questions

If Grower's Choice strategic mission includes rapidly increasing the number of stores, explain the implications this has for the HR department. (LO 3)

How should Grower's Choice mission and values statements influence Alonzo as he restructures the HR department? (LO 3, 4, 5)

Explain ways each of the four HRM functions can contribute to supporting the mission and values. (LO 4)

Describe the ways that a talent management strategy can benefit Grower's Choice. (LO 6)

Evaluate the possibility of outsourcing the HR function for Grower's Choice. (LO 7)

Research: Compare the mission and values of Grower's Choice with another food store chain such as Wegman's, Publix, Meijer, Albertsons, or your favorite local supermarket. What evidence do you see on the website that HR practices reflect their organizational strategy? (LO 3, 4, 5)

Case Application 2‐B

HR AT MATTRESS FIRM SPRINGS INTO ACTION

Mattress Firm had an ambitious growth strategy that would give most HR executives sleepless nights, no matter how comfortable the mattress is. The goal was to more than double the size of the company within a few years, while becoming a publicly traded company at the same time, yet maintaining their culture. Abby Ludens, Vice President of Talent Management at Mattress Firm in Houston, Texas knew that her team needed to make smart hiring decisions and make them quickly. She decided to use the people analytics software provided by Infor Talent Science to evaluate applicants based on data from online assessments. They first evaluated behavioral, cognitive, and cultural traits of Mattress Firm's strongest employees then created assessments that analyzed applicants to predict their potential for success in those positions. Mattress Firm also used the process to identify current employees for their potential for promotion.

The task wasn't without challenges. Experienced hiring managers still wanted to rely on their experience and impressions of the applicants, but the large number of hires in such a short time frame required that they stick to the data. According to Ludens, it was important to have the science behind it. “We didn't want to put our company brand at risk, and we wanted to hire people who were a good fit.” She went on to explain that is was necessary to “Make sure the hiring managers are all in. You have to launch the assessment and use it to make hiring decisions. It's a waste of money if you don't.”33

The results were impressive. Sales people that the people analytics system had recommended sold 11 percent more than workers who were not recommended by the system and were 80 percent less likely to leave the company. The company realized $5.6 million in savings from reduced turnover as a result of better hiring practices and retention of current employees who were identified to be promoted from within.34

Questions

In what ways is the way Mattress Firm uses people analytics similar to Frederick Taylor's scientific management? (LO 1)

How are the management functions demonstrated by HR in this case? (LO 2)

What HR functions and practices at Mattress Firm were focused to achieve their growth strategy? (LO 3)

What challenges did the goals of aggressive growth and maintaining culture while going public present for HR at Mattress Firm? (LO 3)

In what way are the HR functions utilized in the case? (LO 4)

Discuss how the elements of talent management are demonstrated using people analytics. (LO 6)

Research: Explore the careers and community pages of Mattress Firm's website. What evidence do you find of their culture and values? What impression do you get of them as an employer? What could they do better to communicate their employment brand? (LO 4, 5) (Verhulst, 2018-10-08, pp. 56-58)

Verhulst, S. L., DeCenzo, D. A. (2018-10-08). Fundamentals of Human Resource Management, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119495239

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