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ROBERT N. LUSSIER Springfield College

JOHN R. HENDON University of Arkansas at Little Rock

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Library of Congress Cataloging-in-Publication Data

Names: Lussier, Robert N., author. | Hendon, John R., author. Title: Human resource management : functions, applications, and skill development / Robert N. Lussier, Springfield College, USA, John Hendon. Description: Third Edition. | Thousand Oaks : SAGE Publications, [2018] | Revised edition of the authors’ Human resource management, [2016] | Includes bibliographical references and index. Identifiers: LCCN 2017038956 | ISBN 9781506360348 (pbk. : alk. paper) Subjects: LCSH: Personnel management. Classification: LCC HF5549 .L825 2018 | DDC 658.3—dc23 LC record available at https://lccn.loc.gov/2017038956

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Brief Contents Preface xix Acknowledgments xxvii About the Authors xxviii

PART I • 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES 1

1. The New Human Resource Management Process 2

2. Strategy-Driven Human Resource Management 38

3. The Legal Environment and Diversity Management 74

PART II • STAFFING 113 4. Workforce Planning: Job Analysis, Design, and Employment Forecasting 114

5. Recruiting Job Candidates 154

6. Selecting New Employees 184

PART III • DEVELOPING AND MANAGING 223 7. Learning and Development 224

8. Performance Management and Appraisal 262

9. Rights and Employee Management 302

10. Employee and Labor Relations 342

PART IV • COMPENSATING 385 11. Compensation Management 386

12. Incentive Pay 424

13. Employee Benefits 462

PART V • PROTECTING AND EXPANDING ORGANIZATIONAL REACH 507 14. Workplace Safety, Health, and Security 508

15. Organizational Ethics, Sustainability, and Social Responsibility 540

16. Global Issues for Human Resource Managers 572

Appendix: SHRM 2016 Curriculum Guidebook 605 Glossary 615 Notes 621 Name Index 649 Company Index 651 Subject Index 655

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Detailed Contents Preface xix Acknowledgments xxvii About the Authors xxviii

PART I • 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

1. The New Human Resource Management Process 2

Practitioner’s Perspective 3

Why Study Human Resource Management (HRM)? 4

HRM Past and Present 6 HRM in the Past 6 Present View of HRM 7 Technology’s Effect on Efficiency 8

The Changing World of HRM 9 New HRM Challenges 9 Labor Demographics 9 Knowledge Workers and the Pace of Change 10

Understanding HR’s Critical Factors 11 Critical Dependent Variables 11 The Importance of Strategic HRM 12 The Influence of Social Media 13

HRM Skills 14 Technical Skills 14 Interpersonal Skills 14 Conceptual and Design Skills 15 Business Skills 15

Line Managers’ HRM Responsibilities 16 Line Versus Staff Management 16 Major HR Responsibilities of Line Management 16

HR Managers’ Responsibilities: Disciplines Within HRM 17 The Legal Environment: EEO and Diversity

Management 18 Staffing 18 Training and Development 19 Employee Relations 19 Labor and Industrial Relations 19

Compensation and Benefits 19 Safety and Security 21 Ethics and Sustainability 22

Resources for HRM Careers 23 Society for Human Resource Management

(SHRM) 23 Other HR Organizations 24 Professional Liability 24

Practitioner’s Model for HRM 25 The Model 25 Sections of the Model 26

Trends and Issues in HRM 28 Employee Engagement Improves Productivity 28 HRM and Organizational Agility 28

Chapter Summary 30 Key Terms 32 Key Terms Review 32 Communication Skills 33 Case 1-1 Ba-Zynga! Zynga Faces Trouble

in FarmVille 33 Case 1-2 Fracturing the Labor Market—Employment

in the Oil Services Industry 34 Skill Builder 1-1 Getting to Know You 35 Skill Builder 1-2 Comparing HR Management

Skills and HR Responsibilities 35

2. Strategy-Driven Human Resource Management 38

Practitioner’s Perspective 39

Strategy and Strategic Planning: The Organization and the Environment 40 The External Environment 41

Strategic Vision and Mission 44 What Is Strategy? 45 Visions and Missions 46

Strategy Types and Analysis 47 Types of Strategies 47 How Strategy Affects HRM 48 Strategic Analysis 49 Designing a Strategy 51 How HR Promotes Strategy 53

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Structure 53 Basics of Organizational Structure 54 How Does Structure Affect Employee Behavior? 56 How Does Structure Affect HRM? 56

Organizational Culture 56 What Is Organizational Culture? 56 How Culture Controls Employee Behavior in

Organizations 58 Social Media and Culture Management 58

An Introduction to Data Analytics and HR Technology 59 A Brief on Data Analytics 60 HR Technology 60 Desired Outcomes 61

Human Resource Management Systems (HRMS) 61 What Are HRMS? 61 How Do HRMS Assist in Making Decisions? 62

Measurement Tools for Strategic HRM 62 Economic Value Added (EVA) 62 Return on Investment (ROI) 62 Balanced Scorecard (BSC) 63 HR Scorecard 63

Trends and Issues in HRM 64 Structure, Culture, and Technology

Are Misaligned 64 Continuing Globalization Increases the Need for

Strategic HRM Planning 64 Chapter Summary 66 Key Terms 67 Key Terms Review 67 Communication Skills 68 Case 2-1 Catalya Hats: Pulling a Rabbit out of the

Hat or Coming up Empty Handed? 68 Case 2-2 Strategy-Driven HR Management:

Netflix, A Behind-the-Scenes Look at Delivering Entertainment 69

Skill Builder 2-1 Writing Objectives 70 Skill Builder 2-2 Strategic Planning at Your College 71

3. The Legal Environment and Diversity Management 74

Practitioner’s Perspective 75

The Legal Environment for HRM and a User’s Guide to Managing People 76 Protecting Your Organization 76 The OUCH Test 77 Objective 77 Uniform in Application 77

Consistent in Effect 78 Has Job Relatedness 79

Major Employment Laws 79 Equal Pay Act of 1963 (EPA) 79 Title VII of the Civil Rights Act of

1964 (CRA) 80 Age Discrimination in Employment Act of 1967

(ADEA) 84 Vietnam Era Veterans Readjustment Assistance

Act of 1974 (VEVRAA) 84 Pregnancy Discrimination Act

of 1978 (PDA) 84 Americans with Disabilities Act of 1990 (ADA), as

Amended in 2008 85 Civil Rights Act of 1991 87 Uniformed Services Employment and Reemployment

Rights Act of 1994 (USERRA) 88 Veterans Benefits Improvement

Act of 2004 (VBIA) 88 Title II of the Genetic Information Nondiscrimination

Act of 2008 (GINA) 89 Lilly Ledbetter Fair Pay Act of 2009 (LLFPA) 89 Immigration Laws Relating to Employment and

Equal Opportunity 89 Reminder: State and Local EEO Laws May Be

Different 91

Equal Employment Opportunity Commission (EEOC) 91 What Does the EEOC Do? 91 Employee Rights Under the EEOC 92 Employer Rights and Prohibitions 92

EEO, Affirmative Action, and Diversity: What’s the Difference? 93 Affirmative Action (AA) 94 The Office of Federal Contract Compliance

Programs (OFCCP) 95 Diversity in the Workforce 95

Sexual Harassment: A Special Type of Discrimination 99 Types of Sexual Harassment 99 What Constitutes Sexual Harassment? 99 Reducing Organizational Risk From Sexual

Harassment Lawsuits 100

Religious Discrimination 102

Trends and Issues in HRM 102 Technology May Create New Dangers in Equal

Opportunity and Diversity Management 103 Sexual Orientation and Gender Identity

Discrimination 103 Chapter Summary 105 Key Terms 106 Key Terms Review 106 Communication Skills 107 Case 3-1 You Can’t Get There From Here:

Uber Slow on Diversity 108 Case 3-2 When Religion Is on the Agenda 109 Skill Builder 3-1 The Four-Fifths Rule 110 Skill Builder 3-2 Diversity Training 110

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PART II • STAFFING

4. Workforce Planning: Job Analysis, Design, and Employment Forecasting 114

Practitioner’s Perspective 115

Workforce Planning: Workflow Analysis 116 Organizational Output 117 Tasks and Inputs 117

Job Analysis 118 Why Do We Need to Analyze Jobs? 118 Databases 119 Job Analysis Methods 120 Do We Really Have “Jobs” Anymore? 123 Task or Competency Based? 124 Outcomes: Job Description and

Job Specification 124

Job Design/Redesign 126 Organizational Structure and Job Design 126 Approaches to Job Design and Redesign 126 The Job Characteristics Model (JCM) 128 Applying the Job Characteristics

Model (JCM) 130

Designing Motivational Jobs 131 Job Simplification 131 Job Expansion 131 Work Teams 132 Flexible Job Design 133 Job Design Is Country Specific 134

HR Forecasting 135 Forecasting Methods 135 Measuring Absenteeism and Turnover 138 Succession Planning 138

Reconciling Internal Labor Supply and Demand 139 Options for a Labor Surplus 139 Options for a Labor Shortage 142

Trends and Issues in HRM 145 Gig Work and the Agile Workforce 145 Automation at Work 146

Chapter Summary 147 Key Terms 149 Key Terms Review 149 Communication Skills 149 Case 4-1 Walmart’s Everyday Hiring Strategy:

Fueling Future Consumer Demand With Passion and Talent 150

Case 4-2 Gauging Employment at Honeywell 151

Skill Builder 4-1 Job Analysis 152 Skill Builder 4-2 Job Characteristics Model (JCM) 152 Skill Builder 4-3 O*Net 153

5. Recruiting Job Candidates 154

Practitioner’s Perspective 155

The Recruiting Process 155 Defining the Process 156 External Forces Acting on Recruiting Efforts 157

Organizational Recruiting Considerations 158 What Policies to Set 159 When to Recruit 159 Alternatives to Recruitment 159 Reach of the Recruiting Effort 160 Social Media and the Technology Recruiting

Revolution 160

Internal or External Recruiting? 162 Internal Recruiting 162 External Recruiting 164

Challenges and Constraints in Recruiting 168 Budgetary Constraints 169 Policy Constraints and Organizational

Image 169 The Recruiter–Candidate Interaction 170 Job Characteristics and the Realistic

Job Preview (RJP) 171

Evaluation of Recruiting Programs 172 Yield Ratio 172 Cost per Hire 173 Time Required to Hire 173 New Hire Turnover 173 New Hire Performance 173

Trends and Issues in HRM 174 Millennial Versus Generation Z: Aren’t

They All the Same? 174 Look for Grit, Not Just Talent 175

Chapter Summary 177 Key Terms 178 Key Terms Review 178 Communication Skills 178 Case 5-1 Here a GM, There a GM, Everywhere a

GM (or So They Thought!) 178 Case 5-2 Trying to Build When Nobody Wants to

Work 179 Skill Builder 5-1 Online Job Search 181 Skill Builder 5-2 Résumé 181

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6. Selecting New Employees 184

Practitioner’s Perspective 185

The Selection Process 186 The Importance of the Selection Process 186 Steps in the Selection Process 187

Looking for “Fit” 189 Personality-Job Fit 189 Ability-Job Fit 189 Person-Organization Fit 190

Uniform Guidelines on Employee Selection Procedures 190 What Qualifies as an Employment Test? 190 Valid and Reliable Measures 191

Applications and Preliminary Screening 192 Applications and Résumés 193 Pre-Employment Inquiries 194 State and Local Laws Vary! 195

Testing and Legal Issues 195 The EEOC and Employment Testing 195 Polygraph Testing 196 Genetic Testing 197 Written Testing 197 Physical Testing 199 To Test or Not to Test 202

Selection Interviews 203 Interviewing 204 Types of Interviews and Questions 204 Preparing for the Interview 206 Conducting the Interview 207

Background Checks 208 Credit Checks 208 Criminal Background Checks 210 Reference Checks 210 Social Media and Web Searches 211

Selecting the Candidate and Offering the Job 213 Problems to Avoid During the Selection Process 213 Hiring 213

Trends and Issues in HRM 214 Federal Regulation Limits Selection

Testing 214 The Global Workforce and Immigration 215

Chapter Summary 216 Key Terms 217 Key Terms Review 218 Communication Skills 218 Case 6-1 A Kink in Links of London’s Selection

Process 218

Case 6-2 Not Getting Face Time at Facebook—and Getting the Last Laugh! 220

Skill Builder 6-1 Interview Questions for Use When Hiring a Professor to Teach This Course 221

Skill Builder 6-2 Interviewing 221

PART III • DEVELOPING AND MANAGING

7. Learning and Development 224

Practitioner’s Perspective 225

The Need for Training and Development 226 Training and Development 226 When Is Training Needed? 227

The Training Process and Needs Assessment 229 Steps in the Training Process 229 Needs Assessment 230 Challenges to the Training Process 231 Employee Readiness 232

Learning and Shaping Behavior 233 Learning 233 Learning Theories 233 Shaping Behavior 235 Learning Styles 237

Design and Delivery of Training 239 On-the-Job Training (OJT) 239 Classroom Training 241 Distance or E-Learning 242 Simulations 243

Assessing Training 243 Assessment Methods 244 Choosing Assessment Methods 245 Measuring Training Success 246

Talent Management and Development 247 Careers 247 Why Career Development? 248 Common Methods of Employee Development 249 A Model of Career Development

Consequences 251

Trends and Issues in HRM 254 Gamification—A Phoenix Rising? 254 The Corporate Learning Imperative 254

Chapter Summary 256 Key Terms 257 Key Terms Review 257 Communication Skills 257

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Case 7-1 Doing Crunches at Nestlé: Continuous Improvement of Human Assets 258

Case 7-2 Google Search: Building the Program That Writes the Code to Find Female Talent 259

Skill Builder 7-1 The Training Process 260 Skill Builder 7-2 Career Development 261

8. Performance Management and Appraisal 262

Practitioner’s Perspective 263

Performance Management Systems 263 Performance Management Versus Performance

Appraisal 264 Is It Time to Delete the Annual Appraisal

Process? 265 Performance Appraisals 266 Accurate Performance Measures 267

Why Do We Conduct Performance Appraisals? 269 Communication (Informing) 269 Decision Making (Evaluating) 270 Motivation (Engaging) 270 Evaluating and Motivating = Development 270

What Do We Assess? 272 Trait Appraisals 272 Behavioral Appraisals 273 Results Appraisals 274 Which Option Is Best? 275

How Do We Use Appraisal Methods and Forms? 276 Critical Incidents Method 276 Management by Objectives (MBO) Method 277 Narrative Method or Form 278 Graphic Rating Scale Form 278 Behaviorally Anchored Rating Scale

(BARS) Form 279 Ranking Method 280 Which Option Is Best? 281

Who Should Assess Performance? 281 Supervisor 282 Peers 282 Subordinates 283 Self 284 Customers 284 360-Degree Evaluations 285 Whom Do We Choose? 285

Performance Appraisal Problems 286 Common Problems Within the Performance

Appraisal Process 286 Avoiding Performance Appraisal Problems 288

Debriefing the Appraisal 290 The Evaluative Performance Appraisal Interview 290 The Developmental Performance Appraisal

Interview 291

Trends and Issues in HRM 292 Building Engagement Through Performance

Management 292 Technology: Electronic Performance Monitoring 293

Chapter Summary 295 Key Terms 296 Key Terms Review 296 Communication Skills 296 Case 8-1 Not Spilling the Beans at Jelly Belly:

Developing a More Accurate Performance Appraisal System 297

Case 8-2 Amazon.com: Selling Employee Performance With Organization and Leadership Review 298

Self-Assessment and Skill Builder 8-1 Peer and Self-Assessments 299

Skill Builder 8-2 Debriefing the Appraisal 300

9. Rights and Employee Management 302

Practitioner’s Perspective 303

Commonly Accepted Employee Rights 304 Rights and Privileges 304 Right of Free Consent 305 Right to Due Process 306 Right to Life and Safety 306 Right of Freedom of Conscience (Limited) 306 Right to Privacy (Limited) 307 Right to Free Speech (Limited) 307

Management Rights 307 Codes of Conduct 308 Data and Device Policies 309 Workplace Monitoring 310 Employment-at-Will 310 Orientation (Probationary) Periods 311 Drug Testing 311

Coaching, Counseling, and Discipline 311 Coaching 312 Counseling 313 Disciplining 315 Terminating 320 Coaching, Counseling, and Discipline

May Differ Globally 322

Leadership and Management 323 Leadership 323

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Situational Management 324

Teams and Organizational Change 329 Building Effective Work Teams 330 Managing the Change Process 330 Overcoming Resistance to Change 331

Trends and Issues in HRM 333 Good Feedback Makes a Good Manager 333 Social Media and the Web Continue

to Create Managerial Nightmares 334 Chapter Summary 335 Key Terms 336 Key Terms Review 337 Communication Skills 337 Case 9-1 Balancing Rights and Privileges 337 Case 9-2 Off-Duty Misconduct 338 Skill Builder 9-1 Coaching 339 Skill Builder 9-2 Disciplining 340 Skill Builder 9-3 Situational Management 340 Skill Builder 9-4 Developing a Habit 341

10. Employee and Labor Relations 342

Practitioner’s Perspective 343

Labor Relations: A Function of Trust and Communication 344 Trust and Communication 344 Sending Messages 345 Receiving Messages 346

Job Satisfaction 350 Job Satisfaction/Dissatisfaction and Performance 350 Measuring Job Satisfaction 350 Determinants of Job Satisfaction 352

Legal Issues in Labor Relations 353 The Railway Labor Act (RLA) of 1926 354 The National Labor Relations Act (NLRA) of 1935

(Wagner Act) 355 The Labor Management Relations Act (LMRA)

of 1947 (Taft-Hartley Act) 356 The Labor Management Reporting and

Disclosure Act of 1959 (Landrum-Griffin Act or LMRDA) 356

The Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) 357

Labor Laws Vary Significantly From Country to Country 357

Other Legal Issues in Labor Relations 358

Unions and Labor Rights 361 Union Organizing 361

Labor Relations and Collective Bargaining 364 Grievances 364

Management Rights and Decertification Elections 365 Limiting Union Organizing Efforts 365 Lockouts and Replacement Workers 365 Decertification Elections 366

Managing Conflict 366 Conflict 367 Conflict Management Styles 367 Initiating Conflict Resolution 369

Negotiations 371 The Negotiation Process 371 Planning the Negotiation 371 Negotiate 373 Alternative Dispute Resolution: Mediation and

Arbitration 374

Trends and Issues in HRM 375 The NLRB Is Redefining the Employer/Employee

Relationship 375 Are Union Avoidance or Suppression Policies

Ethical? 376 Chapter Summary 377 Key Terms 379 Key Terms Review 379 Communication Skills 379 Case 10-1 Willful Violation, or a Problem That

Can Be Corrected? 380 Case 10-2 Constructive Discharge and

Reinstatement of Strikers 380 Skill Builder 10-1 Conflict Resolution 381 Skill Builder 10-2 Negotiating 382

PART IV • COMPENSATING

11. Compensation Management 386

Practitioner’s Perspective 387

Compensation Management 388 The Compensation System 388 Motivation and Compensation Planning 390

Compensation Strategy 393 Ability to Pay 393 What Types of Compensation? 394 Pay for Performance or Pay for Longevity? 394 Skill-Based or Competency-Based Pay? 395 At, Above, or Below the Market? 396

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Wage Compression 396 Pay Secrecy 397

Legal and Fairness Issues in Compensation 398 Fair Labor Standards Act of 1938

(Amended) 398

Pay Equity, Comparable Worth, and Other Legal Issues 404 Comparable Worth 404 Other Legal Issues 405

Job Evaluation 405 Job-Ranking Method 406 Point-Factor Method 406 Factor Comparison Method 406

Developing a Pay System 407 Job Structure and Pay Levels 407

Pay Structure 411 Stacking Pay Levels and Evaluating 411 Delayering and Broadbanding 412

Trends and Issues in HRM 413 Designation of Independent Contractors

Continues to Be an Issue 413 The Stubborn Gender–Wage Gap:

Can It Be Fixed? 416 Chapter Summary 417 Key Terms 419 Key Terms Review 419 Communication Skills 419 CASE 11-1 Discounting Everything but

Compensation at Costco 420 Case 11-2 Employee Red-Lining at CVS:

The Have and the Have Not 421 Skill Builder 11-1 Job Evaluation 422 Skill Builder 11-2 Product Market Competition

Limits 423

12. Incentive Pay 424

Practitioner’s Perspective 425

Incentive Compensation 425 Why Do We Use Incentive Pay? 426

Individual or Group-Based Incentives? 427 Individual Incentives 427 Group Incentives 429

Options for Individual Incentives 431 Bonus 432 Commissions 433 Merit Pay 433 Piecework Plans 435

Standard Hour Plans 435 Giving Praise and Other Nonmonetary Incentives 437

Options for Group Incentives 439 Profit-Sharing Plans 439 Gainsharing Plans 440 Employee Stock Ownership Plan (ESOP) 441 Stock Options and Stock Purchasing Plans 442

Failures and Challenges in Creating Incentive Pay Systems 443 Why Do Incentive Pay Systems Fail? 443 Challenges to Incentive Pay Systems 444

Guidelines for Creating Motivational Incentive Systems 445

Executive Compensation 449 Too Much or Just Enough? 450 The Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010 451 Executive Incentives 452 Short-Term Versus Long-Term 452 The Goal of Executive Compensation 453

Trends and Issues in HRM 453 Does Incentive Pay Actually Improve Performance? 453 Comprehensive Pay and Incentive Programs

Aren’t Just for Highly Skilled Employees 454 Chapter Summary 455 Key Terms 457 Key Terms Review 457 Communication Skills 457 Case 12-1 Best Buy or Best Scam? Trying to

Get Commission Results on So-Called Noncommission Pay 457

Case 12-2 Barclays Bonus Bank: Robbing Peter to Pay Paul 459

Skill Builder 12-1 Calculating Individual Incentives 460 Skill Builder 12-2 Developing a Compensation

Plan With an Incentive 460 Skill Builder 12-3 Giving Praise 461

13. Employee Benefits 462

Practitioner’s Perspective 463

The Strategic Value of Benefits Programs 464 Why Are Benefits Continuing to Grow as a

Portion of Overall Compensation? 465 Considerations in Providing Benefits Programs 467

Old Age, Survivors, and Disability Insurance (OASDI) 468 Social Security and Medicare 468

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Other Statutory Benefits 471 Workers’ Compensation 471 Unemployment Insurance 473 Family and Medical Leave Act of

1993 (FMLA) 474 The Patient Protection and Affordable

Care Act of 2010 (ACA) 476 Statutory Requirements When Providing Certain

Voluntary Benefits 478

Voluntary Benefits 482 Group Health Insurance 482 Retirement Benefits 487 Paid Time Off 490 Other Employee Insurance Coverage 491 Employee Services 492

Administration and Communication of Benefits 493 Flexible Benefit (Cafeteria) Plans 493 Communicate Value to Employees 495

Trends and Issues in HRM 496 Benefits for “Domestic Partners” 496 Personalization of Health Care 497

Chapter Summary 498 Key Terms 500 Key Terms Review 500 Communication Skills 500 Case 13-1 It Is Not Just About the Bling Anymore:

Benefits and Perks—the Competitive Edge in Employee Recruitment 501

Case 13-2 Google Searches SAS for the Business Solution to How to Create an Award-Winning Culture 503

Skill Builder 13-1 Developing Flexible Employee Benefit Plans 504

Skill Builder 13-2 Selecting Flexible Employee Benefit Plans 504

PART V • PROTECTING AND EXPANDING ORGANIZATIONAL REACH

14. Workplace Safety, Health, and Security 508

Practitioner’s Perspective 509

Workplace Safety and OSHA 510 The Occupational Safety and Health

Act (OSH Act) 510 The Occupational Safety and Health

Administration (OSHA) 511

National Institute of Occupational Safety and Health (NIOSH) 515

Federal Notice Posting Requirements 516

Employee Health 516 Work–Life Balance 516 Employee Assistance Programs (EAPs) and

Employee Wellness Programs (EWPs) 519 Ergonomics and Musculoskeletal Disorders

(MSDs) 520 Safety and Health Management and Training 521

Stress 521 Functional and Dysfunctional Stress 521 Causes of Job Stress 522 Stress Management 523 The Stress Tug-of-War 526

Workplace Security 527 Cyber Security 527 Workplace Violence 528 Social Media for Workplace Safety and Security 531 Employee Selection and Screening 532 General Security Policies, Including Business

Continuity and Recovery 532

Trends and Issues in HRM 533 OSHA Limits Postaccident Drug Testing 533 eDocAmerica: Health and Wellness Online 534

Chapter Summary 535 Key Terms 536 Key Terms Review 536 Communication Skills 537 Case 14-1 Handling the Unhealthy Employee 537 Case 14-2 You Are Not Hurt?

Good—You’re Fired! 538 Skill Builder 14-1 Developing a Stress

Management Plan 539 Skill Builder 14-2 Safety, Health, and Security 539

15. Organizational Ethics, Sustainability, and Social Responsibility 540

Practitioner’s Perspective 541

Ethical Organizations 541 Ethics in Business 542 Ethics Defined 543 Contributing Factors to Unethical Behavior 543 Justification of Unethical Behavior 545

Ethical Approaches 546 General Guides to Ethical Decision Making 546 Codes of Ethics 548

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Creating and Maintaining Ethical Organizations 549 Authority 549 Responsibility 549 Accountability 550

Just Because It’s Legal Doesn’t Mean It’s Ethical! 551 Facing Ethical Questions 551

Corporate Social Responsibility (CSR) 553 CSR Defined 553 Stakeholders and CSR 555

Levels of Corporate Social Responsibility 557 Where You Stand Depends on

Where You Sit 558

Sustainability 558 HR and Organizational Sustainability 559 Sustainability Training 560 The Sustainable Organization 561

Trends and Issues in HRM 562 Sustainability-Based Benefits 562 Does Diversity Training Work? 564

Chapter Summary 565 Key Terms 566 Key Terms Review 567 Communication Skills 567 Case 15-1 CEO Compensation: Do They Deserve

Rock Star Pay? 567 Case 15-2 Microsoft, Nokia, and the Finnish

Government: A Promise Made, a Promise Broken? 569

Skill Builder 15-1 Ethics and Whistle-Blowing 570 Skill Builder 15-2 Code of Ethics and Corporate

Social Responsibility 570

16. Global Issues for Human Resource Managers 572

Practitioner’s Perspective 573

Globalization of Business and HRM 573 Reasons for Business Globalization 575 Ethnocentrism Is Out and “Made in

America” Is Blurred 577

Stages of Corporate Globalization 578 Is HRM Different in Global Firms? 579

Legal, Ethical, and Cultural Issues 580 International Laws 581 US Law 581 International Ethics 582 National Culture 582

Global Staffing 585 Skills and Traits for Global Managers 586 Staffing Choice: Home-, Host-, or Third-Country

Employees 588 Outsourcing as an Alternative to International

Expansion 589

Developing and Managing Global Human Resources 589 Recruiting and Selection 590 Expatriate Training and Preparation 590 Repatriation After Foreign Assignments 593

Compensating Your Global Workforce 593 Pay 594 Incentives in Global Firms 595 Benefit Programs Around the World 596

Trends and Issues in HRM 597 Globalization of Business Continues as a Trend! 597

Chapter Summary 598 Key Terms 600 Key Terms Review 600 Communication Skills 600 Case 16-1 Sand by Saya: The Challenges of a

Small Business Going Global 600 Case 16-2 The Great Singapore Sale at Jurong Point:

Finding and Retaining Bargain Employees 602 Skill Builder 16-1 The Global HRM Environment 603 Skill Builder 16-2 Cultural Diversity Awareness 604 Skill Builder 16-3 The Most Important Things I

Got From This Course 604

Appendix: SHRM 2016 Curriculum Guidebook 605

Glossary 615

Notes 621

Name Index 649

Company Index 651

Subject Index 655

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xix

Preface In his book Power Tools, John Nirenberg asks, “Why are so many well-intended students learning so much and yet able to apply so little in their personal and professional lives?” The world of business and human resource management (HRM) has changed, and so should how it is taught. Increasing numbers of students want more than lectures to gain an understanding of the concepts of HRM. They want their courses to be relevant and to show them how to apply what they learn, and they want to develop skills they can use in their everyday life and at work. It’s not enough to learn about HRM; they want to learn how to be HR managers. This is why we wrote the book. After reviewing and using a vari- ety of HRM books for more than a decade, we didn’t find any that (1) could be easily read and understood by students and (2) effectively taught students how to be HR managers. We wrote this text out of our desire to prepare students to be successful HR managers. As the subtitle states, this book not only presents the important HRM concepts and functions but also takes students to the next level by actually teaching them to apply the concepts through critical thinking and to develop HRM skills they can use in their personal and professional lives.

MARKET AND COURSE This book is for undergraduate and graduate-level courses in human resource manage- ment (HRM) including personnel management. It is appropriate for a first course in an HRM major, as well as required and elective courses found in business schools. This text- book is also appropriate for HRM courses taught in other disciplines such as education and psychology, particularly industrial psychology and organizational psychology. The level of the text assumes no prior background in business or HRM. This book is an excel- lent choice for online and hybrid courses in HRM (and earlier editions have been used in online HRM courses for nearly a decade).

LEARNING BY DOING: A PRACTICAL APPROACH I (Lussier) started writing management textbooks in 1988—prior to the calls by the Asso- ciation to Advance Collegiate Schools of Business (AACSB) for skill development—to help professors teach their students how to apply concepts and develop management skills. Pfeffer and Sutton (The Knowledge Doing Gap, 2000) concluded that the most important insight from their research is that knowledge that is actually implemented is much more likely to be acquired from learning by doing, than from learning by reading, listening, or thinking. We designed this book to give students the opportunity to “learn by doing” with the following approaches:

• A practical “how-to-manage” approach that is strategy driven. • The only HR text where every primary content area identified as required for

undergraduate students listed in the Society of Human Resource Management (SHRM) 2016 Curriculum Guidebook is specifically identified in the text where the material is covered (over 210 items). In addition, many of the secondary and graduate students only items are also identified as they occur in the text.

• Six types of high-quality application materials use the concepts to develop critical-thinking skills.

• Four types of high-quality, skill-builder exercises help to actually develop HR man- agement skills that can be utilized in students’ professional and personal lives.

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xx HUMAN RESOURCE MANAGEMENT

• A comprehensive video package reinforces HRM-related abilities and skills. • An approach that meets the preferred learning styles of today’s students.

A NEW GENERATION OF LEARNERS Today’s students, “Millennials” and the early students of the next generation or “Gen Z,” succeed when they are fully engaged in learning on multiple levels; traditional methods of teaching do not always meet their needs. They are used to, and in fact demand, instant opportunities to learn and interact with material that they are interested in. Our text is flexible enough to accompany lecture-based teaching, and it also offers a wide range of engaging activities that accommodate a variety of contemporary learning styles. Many of the specific learning preferences of today’s students have been addressed in the book’s overall approach, organization, and distinctive features:

• Active Learning

A desire for active learning is addressed with a large variety of activities and skill-building tools.

• Practical Approaches

A desire for application and skills in personal and professional realms is addressed by a variety of features throughout the text. Immediate application and ongoing self-assessment are found in the Work Application prompts and self-assessment tools. Organization tools such as checklists, summaries, and “how to” instructions are integrated throughout, for example, the marginal references to SHRM curricu- lum guidelines.

• Accessible Content

Chunking of content into easily digested segments helps students to organize study time. Visual learning preferences are accommodated in colorful exhibits, mod- els, and figures throughout the text, along with an ancillary package that includes visual learning options. Internet learning preferences are recognized in a robust Web-based package that includes video and interactive features for students.

A THREE-PRONGED APPROACH We have created a comprehensive textbook intended to develop the full range of HRM competencies. As the title of this book implies, we provide a balanced, three-pronged approach to the curriculum.

Concepts/Functions The following features are provided to support the first step in the three-pronged approach.

HRM functions. Chapter 1 presents eight major HRM functions identified by SHRM with questions that need to be answered. The book is structured around the eight functions in five parts; see the table of contents for details. These functions are empha- sized in order to show students the depth of knowledge that is required of an HR man- ager today.

Pedagogical aids. Each chapter includes Learning Objectives, a Chapter Summary, Key Terms, and Key Terms Review Questions.

SHRM’s Required Content, as well as many Secondary and Graduate-Only HR Content Areas from the most recent SHRM Human Resource Curriculum: Guidebook and Templates for Undergraduate and Graduate Programs (SHRM, 2016), are anno- tated for easy reference where they appear in each chapter of the text. A margin note identifies the Curriculum Guide topic being covered, and a reference number links to an

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Preface xxi

appendix covering all “Required Content” for undergraduate HR programs in the SHRM Curriculum Guide. Every primary Content Area and Subtopic identified in the SHRM Curriculum Guidebook is at least introduced within the text, and most are cov- ered in significant depth.

Applications The following features are provided to support the second step in the three-pronged approach.

Opening Vignettes, titled Practitioner’s Perspective, illustrate how a real-life Human Resources manager currently employed by the state of Arkansas works within the various HRM functions in her daily activities.

Organizational examples of HRM concepts and functions appear throughout the book.

Work Applications incorporate open-ended questions that require students to explain how the HRM concepts apply to their own work experience. Student experience can be present, past, summer, full-time, part-time employment, or volunteer work.

Applying the Concept features ask the student to determine the most appropriate HRM concept to be used in a specific short example.

Cases: at the end of each chapter are two cases illustrating how specific organizations use the HRM functions. Critical-thinking questions challenge the students to identify and apply the chapter concepts that are illustrated in each case. Several longer and more comprehensive cases are also available to the instructor on the website, either for testing material or to allow students to apply what they have learned over a significant part of the course.

Skill Development The following features are provided to support the third step in the three-pronged approach.

Self-Assessments help students gain personal knowledge of how they will complete the HRM functions in the real world. All information for completing and scoring is contained within the text.

Communication Skills at the end of each chapter include questions for class discus- sion, presentations, and/or written assignments to develop critical-thinking communica- tion skills; they are based on HR Content Areas.

Behavior Modeling showing step-by-step actions to follow when implementing HRM functions, such as how to conduct a job interview, performance appraisals, and coaching and disciplining, are presented throughout the text.

Skill Development Exercises teach skills that can be used in students’ personal and professional lives. Many of the competitor exercises tend to be discussion-oriented exer- cises that don’t actually develop a skill that can be used immediately on the job.

NEW TO THE THIRD EDITION General Updates

• The chapters have been completely updated with nearly 80% new references in this edition to strengthen the text.

• All chapters in this third edition have been updated according to the SHRM 2016 Curriculum Guidebook. As in the second edition, all required undergrad- uate guidelines are included in the text as well as many secondary and graduate guidelines.

• There is one new end-of-chapter case in each of the 16 chapters. The retained cases have been updated.

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xxii HUMAN RESOURCE MANAGEMENT

• There are changes to all of the Applying the Concept box questions and answers in this edition.

• Several examples using today’s best companies are introduced in this new edition of the text.

• Premium Ethical Dilemma videos located in the interactive eBook challenge students to practice their managerial reasoning and HR decision-making skills.

Chapter 1 • There are two new Applying the Concept boxes, each with five questions, making a

total of 4 Application boxes with 30 examples to apply the text concepts.

• There are two new Work Application Questions, for a total of 11. • New cases studies.

Chapter 2 • Data analytics has been added as a new key term, and outsourcing and sustainability

have been removed.

• A new section on data analytics for HRM and desired outcomes has been added. • The section on HRIS has been moved to earlier in the chapter. • Two new trends and issues in HRM have been added on managing data for HRM

decision-making and increased strategic use of social media for HRM planning.

• A second case has been added on strategy-driven HR management at Netflix.

Chapter 3 • Information on the ADA and the ADAAA Amendment has been included. • The discussion on the EEOC has been expanded. • Updated information on recent Affirmative Action rulings in federal courts has

been added.

• A new trend in HRM has been added on federal agencies becoming more activist in pursuing discrimination claims.

Chapter 4 • An additional major option available for the job analysis process has been added:

subject matter expert panels.

• The mnemonic tool to help remember resource inputs has been updated to include machines, added to material, manpower, and money.

• There are now examples of job analysis questionnaires included in this chapter as well.

• There is also more information about job specifications, as well as independent contractors.

• The discussion on labor surplus as it pertains to early retirement has been expanded.

• Three new trends in HRM have been added, on O*Net as a job analysis tool, com- petency models in job analysis, and sustainability.

• A second case has been added on company culture at Honeywell.

Chapter 5 • Updated information on external forces acting on recruiting efforts, including the

Affordable Care Act, has been added.

• There is a new section on social media recruiting.

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Preface xxiii

• New issues in HRM have been added on talent wars and on-demand workforces. • A second case has been added on recruiting and LinkedIn.

Chapter 6 • Fitness for duty test has been added as a new key term. • There is now information about state laws as they pertain to job applications and

preliminary screenings in this chapter.

• A new section on social media’s role in job selection and Web searches has been added as well.

• Exhibit 6-2 features an updated list of pre-employment inquiries. • There is now more information on medical marijuana as it pertains to employee

drug testing.

• A new discussion on fitness-for-duty testing as an alternative to drug testing has been added.

• There is a new section on behavior-based interview questions. • A new trend in HRM has been added on perceived cultural fit and selection. • A second case has been added on selecting new employees.

Chapter 7 • A greater emphasis on the need for job training and development has been incorpo-

rated into this chapter.

• Training design and delivery have been combined into a single section. • There is a new section on measuring training success. • New trends and issues in HRM have been added on the gamification of training

and development, and social media for learning.

• A second case on Google and their Made with Code project has been added.

Chapter 8 • The chapter introduction has been revised. • Information on the American National Standards Institute has been added. • The section discussing the value of peer reviews has been expanded. • There are new sections on frame-of-reference training and continuous appraisals. • New information on Electronic Performance Monitoring (EPM) has been added

as well.

• A new case on performance appraisal at Amazon has been added.

Chapter 9 • This chapter’s title has been changed from Rights and Employee Development to

Rights and Employee Management.

• A new learning object has been introduced: Briefly discuss the stages of the change process.

• New sections on data and device policies; coaching, counseling, and discipline; and leadership, management, and change have been added.

• A new issue in HRM has been added on Google Glass and other privacy issues. • A second case on off-duty misconduct has been added to this chapter as well.

Chapter 10 • New research on job satisfaction has been incorporated into this chapter. • There is new data on union membership and new information on union bargaining.

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xxiv HUMAN RESOURCE MANAGEMENT

• A new trend in HRM has been added on non-union worker protection and the NLRB.

• A second case on constructive discharge and the reinstatement of strikers has been added to this chapter as well.

Chapter 11 • New research about compensation as it pertains to job satisfaction has been

included in this chapter.

• New information on pay secrecy has been incorporated as well. • There is a new discussion about Seattle’s minimum wage hike. • Exhibit 11-3 has been updated with a new list of FLSA exemptions. • Exhibit 11-4 has been updated with new duties tests for general employee

exemptions.

• A new trend in HRM on independent contractors has been added as well. • A second case on compensation management at CVS has been added.

Chapter 12 • The section on recognition has been updated in this chapter. • There is also new information on motivational incentives. • A new issue for HRM has been added on the ethics of executive compensation. • A second case on incentive pay at Barclays has been added as well.

Chapter 13 • The chapter-opening section on the strategic value of benefits programs has been

updated for this edition.

• New data about the Patient Protection and Affordable Care Act has been added. • There is a new section on the general provisions of ERISA. • New trends and issues for HRM have been added on new information about

domestic partnership and benefits, and a new section on the personalization of health care.

• A second case on employee benefits at SAS has been added as well.

Chapter 14 • New information about OSHA, including employer and employee rights and

responsibilities under the act, has been added.

• The Department of Labor posting requirements have been updated. • There is a new section on social media for workplace safety and security. • New trends and issues in HRM have been added on employee wellness and bully-

ing in the workplace.

• The key term Material Safety Data Sheets is now Safety Data Sheets. • A second case on workplace safety at Nike has been added to this chapter.

Chapter 15 • The importance of ethics in business and the cost of unethical behavior is

highlighted.

• New information on how incentives can contribute to unethical behavior is provided.

• New coverage warning against the slippery slope that is escalating unethical behav- ior is included.

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Preface xxv

• There is expanded coverage on general guides to ethical decision making. • Updated examples include Volkswagen, Wells Fargo, Walmart, Costco, American

Express, Patagonia, and Southwest Airlines.

• The importance of authority, responsibility, and accountability in creating and maintaining ethical organizations is expanded upon.

• Social entrepreneurs, hybrid organizations, B Corps, and CSR reporting are newly covered.

• Coverage of sustainability-based benefits has been updated. • A new case on the ethics of CEO compensation has been added.

Chapter 16 • The global mindset and the importance of understanding cultural values and beliefs

are expanded upon.

• Brexit and the Trans-Pacific Partnership are newly discussed. • New, expanded coverage of expatriates is included. • The local-plus approach to compensating a global workforce is introduced. • Significantly revised coverage of the continuing effects of globalization on the field

of HR is provided.

• A new case is presented on Sand by Saya, a small business based in New York that has international manufactures and customers.

ANCILLARIES

SAGE edge offers a robust online environment featuring an impressive array of tools and resources for review, study, and further exploration, keeping both instructors and stu- dents on the cutting edge of teaching and learning.

SAGE edge for Students provides a personalized approach to help students accomplish their coursework goals in an easy-to-use learning environment.

• Mobile-friendly eFlashcards strengthen understanding of key terms and concepts • Mobile-friendly practice quizzes allow for independent assessment by students of

their mastery of course material

• Learning objectives reinforce the most important material • Multimedia resources facilitate further exploration of topics

SAGE coursepacks for Instructors makes it easy to import our quality content into your school’s LMS.

Don’t use an LMS platform? No problem, you can still access many of the online resources for your text via SAGE edge at edge.sagepub.com/lussierhrm3e.

SAGE coursepacks include:

• Our content delivered directly into your LMS • Intuitive, simple format that makes it easy to integrate the material into your course

with minimal effort

• Pedagogically robust assessment tools that foster review, practice, and criti- cal thinking, and offer a more complete way to measure student engagement, including:

c Diagnostic chapter pretests and posttests that identify opportunities for improve- ment, track student progress, and ensure mastery of key learning objectives

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xxvi HUMAN RESOURCE MANAGEMENT

c Test banks built on Bloom’s Taxonomy that provide a diverse range of test items with ExamView test generation

c Activity and quiz options that allow you to choose only the assignments and tests you want

c Instructions on how to use and integrate the comprehensive assessments and resources provided

• Chapter-specific discussion questions to help launch engaging classroom interac- tion while reinforcing important content

• Assignable SAGE Premium Video (available via the free interactive eBook version, linked through SAGE coursepacks) that is tied to learning objectives, curated, and produced exclusively for this text to bring concepts to life and appeal to different learning styles, featuring:

c Corresponding multimedia assessment options that automatically feed to your gradebook

c Comprehensive, downloadable, easy-to-use Media Guide in the Coursepack for every video resource, listing the chapter to which the video content is tied, matching learning objective(s), a helpful description of the video content, and assessment questions

c Management in Action videos illuminate how key concepts function in work settings.

• Video resources that bring concepts to life, are tied to learning objectives, and make learning easier

• Editable, chapter-specific PowerPoint® slides that offer flexibility when creating multimedia lectures so you don’t have to start from scratch but can customize to your exact needs

• Sample course syllabi with suggested models for customizing your course in a way that is perfect for you

• Integrated links to the FREE interactive eBook that make it easy for your students to maximize their study time with this anywhere, anytime mobile-friendly version of the text. It also offers access to more digital tools and resources, including SAGE Premium Video

• All tables and figures from the textbook

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xxvii

Acknowledgments We would like to thank our team at SAGE Publications, which helped bring this book to fruition. Our first executive editor, Lisa Cuevas Shaw, who brought us to SAGE, and edi- tor Patricia Quinlin have shepherded the development of Human Resource Management from its inception. Our current editor, Maggie Stanley, as well as Neda Dallal, Katie Ancheta, and Alissa Nance, provided additional assistance and support. We are grateful to Gail Buschman for a cover and interior design that sets this book apart. During the pro- duction process, Tracy Buyan provided professionalism and valuable support. Amy Lam- mers lent her marketing experience and skills to promoting the book.

We would like to acknowledge our colleagues at SHRM who provided organizational resources to ensure that Human Resource Management—in particular the 2016 SHRM Human Resource Curriculum—is the textbook of choice for future HR practitioners. We would also like to recognize Cindy Wright of the Department of Human Services for Arkansas for her vital contribution of chapter-opening vignettes, which feature her per- sonal insight and experience as an HR professional. Excellent case material has been pro- vided by Can Guler, Komal Thakker, and Herbert Sherman of the Department of Management Sciences, School of Business Brooklyn Campus, Long Island University; and by Robert Wayland, University of Arkansas at Little Rock.

Thanks to the following reviewers who participated throughout all stages of the book’s development:

Pamela J. Acuff, Creighton University

Jacqueline H. Bull, Immaculata University

Marie Halvorsen-Ganepola, University of Notre Dame

Kevin J. Hurt, Columbus State University

Richard H. Jonsen, Eastern University

Zsuzsanna Kispál-Vitai, University of Pécs

George G. Klemic, Lewis University

Erin E. Makarius, University of Akron

Lisa J. O’Hara, Pennsylvania State University

Christopher R. Pels, Marist College

Teresa Helmlinger Ratcliff, North Carolina State University

C. Justice Tillman, Baruch College— City University of New York

Thomas R. Tudor, University of Arkansas at Little Rock

Christina Ziogas, University of Huddersfield

We are also grateful to the instructors who have developed digital resources to accom- pany this book:

Carl Blencke, University of Central Florida

Gundars Kaupins, Boise State University

Suzanne Kitchen, West Virginia University

Loren Kuzuhara, University of Wisconsin

Cadence Madreperl

Eva Mika, Loyola University Chicago Christopher R. Pels, Marist College Molly Pepper, Gonzaga University Lou Sabina, Stetson University

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xxviii

About the Authors Robert N. Lussier is a professor of management at Springfield College. Through teaching management courses for more than 25 years, he has developed innovative and widely adopted methods for applying concepts and developing skills that can be used both per- sonally and professionally. A prolific writer, Dr. Lussier has more than 444 publications to his credit, including Management 7e (SAGE), Human Relations 11e (McGraw-Hill), and Leadership 6e (Cengage), and has published in top tier academic journals. Over 1 million people globally have used his textbooks, earning him an unsurpassed national and international reputation as an author and keynote speaker. Dr. Lussier is the founder of Publish Don’t Perish (www.publishdonotperish) and through contact, his Publish Don’t Perish: The Top Secrets to Get Published book, and keynote presenta- tions/workshops have helped hundreds of institutions and individuals in 80 countries get published. His presentations inspire comments like: “Bob explains complex business topics in an easy-to-understand language while keeping his audience engaged and spell- bound” (Dr. Raj V. Mahto, professor, University of New Mexico). He holds a bachelor of science in business administration from Salem State College, master’s degrees in edu- cation and business from Suffolk University, and a doctorate in management from the University of New Haven. He served as founding director of Israel Programs and has taught courses in Israel.

John R. Hendon is a seven-time entrepreneur and former director of operations for a $60 million company. He brought his experience and interests to the classroom full time in 1994 and has been a Management Department faculty member at the University of Arkansas at Little Rock for over 20 years. A nationally recognized HRM subject matter expert and an active member of the Society for Human Resource Management, he teaches in the areas of human resources management, strategy, family business, and orga- nizational management, and researches in a number of areas in the management field, specializing in entrepreneurial research. John is the president of “The VMP Group,” an Arkansas-based business consulting firm. John’s company consults with a variety of busi- nesses on human resources, family business, strategic planning, organizational design, and leadership. He has provided professional assistance in the start-up and operation of dozens of Arkansas- and California-based businesses and non-profits, government agen- cies, and utilities. John holds an MBA degree from San Diego State University and a B.S. in Education from the University of Central Arkansas. You can reach him any time at jrhendon@gmail.com.

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©iStockphoto.com/Rawpixel

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Part I 21st Century Human Resource Management Strategic Planning and Legal Issues

The New Human Resource Management Process

Strategy-Driven Human Resource Management

The Legal Environment and Diversity Management

PR AC

TIT IO

NE R’

S M OD

PART I: 21st Century Human Resource Management Strategic Planning and Legal Issues What HRM issues are CRITICAL to your organization’s long-term sustainability?

Chapter 1 The New Human Resource

Management Process

Chapter 2 Strategy-Driven Human Resource Management

Chapter 3 The Legal Environment and

Diversity Management

PART III: Developing and Managing How do you MANAGE your Human Resources?

Chapter 7 Learning and Development

Chapter 8 Performance Management

and Appraisal

Chapter 9 Rights and Employee

Management

Chapter 10 Employee and Labor

Relations

PART II: Staffing What HRM Functions do you NEED for sustainability?

Chapter 4 Workforce Planning: Job Analysis,

Design, and Employment Forecasting

Chapter 5 Recruiting Job Candidates

Chapter 6 Selecting New

Employees

PART IV: Compensating How do you REWARD and MAINTAIN your Human Resources?

Chapter 11 Compensation Management

Chapter 12 Incentive Pay

Chapter 13 Employee Benefits

PART V: Protecting and Expanding Organizational Reach How do you PROTECT and EXPAND your Human Resources?

Chapter 14 Workplace Safety,

Health, and Security

Chapter 16 Global Issues for Human

Resource Managers

Chapter 15 Organizational Ethics,

Sustainability, and Social Responsibility

Productivity Satisfaction Absenteeism Turnover

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LEARNING OBJECTIVES After studying this chapter, you should be able to do the following:

1-1 Identify the difference between the traditional view of human resource management (HRM) and the present view. PAGE 6

1-2 Identify the major challenges that HR managers face in a modern organization; note especially where we are not doing well. PAGE 9

1-3 Identify and briefly describe the four critical dependent variables that managers must control in order to compete in a 21st century organization. PAGE 11

1-4 Describe the four major HRM skill sets. PAGE 14

1-5 Discuss the line manager’s six HRM responsibilities. PAGE 16

1-6 Identify and briefly describe the eight major HRM discipline areas. PAGE 17

1-7 List some of the major resources for HRM careers. PAGE 23

1-8 Explain the five parts of the practitioner’s model for HRM and how the model applies to this book. PAGE 25

1-9 Describe how employee engagement affects productivity. PAGE 28

1 The New Human Resource Management Process JONATHAN NACKSTRAND/AFP/Getty Images

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Chapter 1: The New Human Resource Management Process 3

Practitioner’s Perspective Cindy reflected on the current state of the HR field: Choice and change—two things you can rely on today! No longer merely concerned with hiring, firing, and record keeping, the average human resources department (HR) increasingly partners with the strategic planners in the executive suite, thanks to HR-based education and certifications. HR certification is available through HRCI with PHR, SPHR, and GPHR designations, and SHRM also offers its own program of certification with SHRM-CP and SHRM-SCP.

My professional progress began with membership in HR organizations. First, I became a SHRM student member, which provided access to SHRM’s website—which was in turn valuable for research while I was a student. I still use it frequently. Next, my involvement spread to the local HR association. The chapter meetings provided excellent opportunities for education through the monthly programs, as well as for networking and swapping “best practices” with my colleagues.

My involvement inspired me to become certified as a professional. But beyond that, I have found that those who invest in certification tend to become more involved in their profession and, by extension, more successful.

I invite you to join me as we explore the field of human resource management (HRM). Chapter 1 gives an overview of HRM as a profession.

Cindy Wright, PHR, came late to the human resources profession, and perhaps that explains some of her passion for the field. Wright graduated summa cum laude with a Business

SHRM HR CONTENT See Appendix: SHRM 2016 Curriculum Guidebook for the complete list

A. Employee and Labor Relations (required)

4. Employee engagement

5. Employee involvement

6. Employee retention

20. Attendance

B. Employment Law (required)

21. Professional liability

C. Ethics (required)

8. Codes of ethics

D. HR’s Role in Organizations (required)

1. Generally . . . discuss HR’s role with regard to each of the individual HR disciplines . . . .

J. Strategic HR (required)

5. Sustainability/corporate social responsibility

6. Internal consulting (required—graduate students only)

9. Ethics

11. Organizational effectiveness

O. Globalization (required— graduate students only)

8. Global labor markets

Q. Organizational Development (required—graduate students only)

5. Improving organizational effectiveness

6. Knowledge management

9. Ongoing performance and productivity initiatives

10. Organizational effectiveness

Get the edge on your studies. edge.sagepub.com/lussierhrm3e

• Take a quiz to find out what you’ve learned.

• Review key terms with eFlashcards.

• Watch videos that enhance chapter content.

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4 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Administration degree, HR emphasis. She was recognized as “Outstanding Graduate” by the Human Resources Management department. After employment as a benefits administrator for seven thousand telecommunications retirees, then as an HR generalist for a gas well drilling company of 500 employees, Wright is now working in personnel management for the Department of Human Services in the Division of Behavior Health Services. Besides membership in the profession’s national organization—the Society for Human Resource Management (SHRM), Wright has been active in the local affiliated chapter—the Central Arkansas Human Resources Association (CAHRA). Wright served as vice president of administration for the chapter’s board as well as chair of the College Relation Committee. She was recognized by her peers with the “Rising Star” award for her work in creating a student chapter membership and was involved in the initial efforts to create satellite CAHRA chapters. Wright’s mission is to provide assistance to others interested in entering into and advancing within the human resources profession.

CHAPTER OUTLINE Why Study Human Resource Management (HRM)?

HRM Past and Present

HRM in the Past

Present View of HRM

Technology’s Effect on Efficiency

The Changing World of HRM

New HRM Challenges

Labor Demographics

Knowledge Workers and the Pace of Change

Understanding HR’s Critical Factors

Critical Dependent Variables

The Importance of Strategic HRM

The Influence of Social Media

HRM Skills

Technical Skills

Interpersonal Skills

Conceptual and Design Skills

Business Skills

Line Managers’ HRM Responsibilities

Line Versus Staff Management

Major HR Responsibilities of Line Management

HR Managers’ Responsibilities: Disciplines Within HRM

The Legal Environment: EEO and Diversity Management

Staffing

Training and Development

Employee Relations

Labor and Industrial Relations

Compensation and Benefits

Safety and Security

Ethics and Sustainability

Resources for HRM Careers

Society for Human Resource Management (SHRM)

Other HR Organizations

Professional Liability

Practitioner’s Model for HRM

The Model

Sections of the Model

Trends and Issues in HRM

Employee Engagement Improves Productivity

HRM and Organizational Agility

WHY STUDY HUMAN RESOURCE MANAGEMENT (HRM)? It’s natural to think, “What can I get from this book?” or “What’s in it for me?” These are important questions,1 and the answers to them should be based on evidence.2 Success in our professional and personal lives is about creating relationships,3 and students generally understand the importance of relationships.4 The better you can work with people, the more successful you will be in your personal and professional lives—whether as an employee, a line manager, or a human resource manager. And that’s what this book is all about.

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Chapter 1: The New Human Resource Management Process 5

There is strong evidence that today’s students want courses to be applied and have practical relevance.5 Organizations also want their new managers to have the ability to apply knowledge.6 The role of modern managers also continues to change, requiring today’s organizational leaders to deal with increasingly dynamic and complex environ- ments.7 This brings us to the focus of this book; we designed it to be the most relevant “how to” book ever written on managing others in organizations. As indicated by the subtitle, Functions, Applications, and Skill Development, this book uses a three-pronged approach, with these objectives:

• To teach you the important functions and concepts of HRM • To develop your ability to apply HRM functions and concepts through critical

thinking

• To develop your HRM skills in your personal and professional lives

We offer some unique features to further each of these three objectives, as summarized in Exhibit 1-1.

Human resource issues are emerging as some of the most prominent concerns for busi- ness owners and managers.8 You’ve probably heard buzzwords floating around about managers—and particularly human resource managers—needing to be more strategic, business focused, customer focused, and generally more in tune with the overall opera- tional success of the organization.9 So what is happening in today’s business environment that might cause human resource managers to rethink their way of doing business? A key item that is causing this process of rethinking management is the fact that there is much greater competition and an external environment that requires a much greater rate of change.10 That creates an absolute requirement to be more adaptable and productive as an organization.11 As a result, human resource managers as well as operational managers have been forced to think in more strategic terms about how their organization can win against their competitors by utilizing their human resources.12

One simple fact is that in the 21st century organization, human resources (HR)—the people within an organization—are one of the primary means of creating a competitive advantage for the organization, because management of human resources affects company performance.13 This is because most organizations of comparable size and scope within the same industry generally have access to the same material and facilities-based resources that any other organization within the industry may have. This being the case, it’s very difficult to create a competitive advantage based on material, facility, or other tangible or economic resources. What this frequently leaves is people as the organization’s most valuable asset.14 If the organization can manage its human resources more successfully than its competitors do, if it can get its employees involved in working toward the day-to-day success of the

Features That Present HRM Functions and Important Concepts

Features to Apply the HRM Functions and Concepts That You Learn

Features That Foster Skill Development

Learning Outcome Statements Opening Thoughts Self-Assessments

Key Terms Organizational Examples Communication Skills Questions

Step-by-Step Behavior Models Work Applications Skill Builder Exercises

Chapter Summaries with Glossaries Applying the Concepts

Review Questions Cases

Videos

EXHIBIT 1-1 FEATURES OF THIS BOOK’S THREE-PRONGED APPROACH

A:5 Employee Involvement

SHRM

Human resources (HR) The people within an organization

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6 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

organization, and if it can get them to stay with the organization, then it has a much greater chance of being successful—with the term successful defined in this case as being more pro- ductive and more profitable than the competition.15 Managers are responsible for getting the job done through employees,16 so the organization’s human resources are nearly always its most valuable resource. If we can get our employees fully engaged, we can make better decisions, increase employee trust and loyalty, and improve productivity.17 (As you can see, there is a SHRM Guide box next to this section. We will explain them later in this chapter in the section titled “Society for Human Resource Management.”)

While employee job satisfaction can be an important aspect of employee engagement, the overall concept of employee engagement is much larger. It is a combination of job sat- isfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time. Google is an example of an organization that is taking the concept of employee engagement very seriously. Google’s “Project Oxygen” was one attempt to analyze what makes a better boss and use that information to train managers to be more consistent and interactive.18 This training is designed to create greater employee satisfaction and engagement, for very practical reasons. According to HR Mag- azine, companies that fall into “the top 10% on employee engagement beat their competi- tion by 72% in earnings per share during 2007–08.”19 A 2009 study showed that companies with high levels of satisfaction and engagement outperformed those with less engaged employees in return on investment (ROI), operating income, growth rate, and long-term company valuation.20

In this text, we define engaged employees as those who understand what they need to do to add value to the organization and are satisfied enough with the organization and their roles within it to be willing to do whatever is necessary to see to it that the organiza- tion succeeds. This book will teach you how to operate successfully within your organiza- tions and compete productively in a 21st century organization—as an employee, HR manager, or any other type of manager—to get your employees engaged and get the results necessary to succeed against tough competitors in the new century. We will focus on HR management, but the principles within this text apply to any form of management. The bottom line is that if you learn these skills and apply them successfully in your role as any type of manager, you will get your employees engaged and improve productivity.21 That is what will get you noticed by senior management and allow you to move up the organizational ladder. So let’s get started!

HRM PAST AND PRESENT Management of the organization’s human resources has probably changed more in the past 15–20 years than in the entire history of organized companies. Technology and the ability to analyze large data sets have disrupted every industry and the way every company does, or should do, things—from operating processes to marketing to human resources.22 Let’s do a quick introduction to technology in Human Resource Management. Because of the importance of technological change, we will also continue to explore the effects of technology in HRM as we look at strategy in Chapter 2 and in subsequent chapters throughout this book.

HRM in the Past Back in the dark ages, around the mid-1970s—when there weren’t even any computers available to most managers!—the human resource manager (we usually called them per- sonnel managers then) was considered to be an easy management job. HR managers were expected to be only paper pushers who could keep all of the personnel files straight. They maintained organizational records, but they had very little to do with the management of the organization’s business processes.

In this environment, most HR departments provided limited services to the organization—keeping track of job applicants, maintaining employee paperwork, and fil- ing annual performance evaluations.

A:4 Employee Engagement

SHRM

Employee engagement A combination of job satisfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time

WORK APPLICATION 1-1 How can this course help you in

your personal and professional

lives? What are your goals, or

what do you want to get out of this

course?

LO 1-1 Identify the difference between the traditional view of human resource management and the present view.

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Chapter 1: The New Human Resource Management Process 7

In these organizations, the HR department was considered to be a cost center, a divi- sion or department within the organization that brings in no revenue or profit for the organization. It only costs money for the organization to run this function. As you can eas- ily see, we don’t want many (or any) cost centers in an organization if we can help it. We need revenue centers instead. Revenue centers are divisions or departments that generate monetary returns for the organization. Where cost centers eat up available funds, revenue centers provide funds for the organization to operate in the future. HRM departments are not able to generate revenue directly because of their tasking within the organization, but they can generate significant revenue and profit in an indirect fashion.

Present View of HRM The old workplace in which managers simply told employees what to do is gone. In today’s organization, you will most likely work in a team,23 perform lots of quantitative analysis on business data, and share in decision making and other management tasks.

Modern organizations also expect significantly greater productivity than occurred in their historical counterparts.

PRODUCTIVITY CENTERS. Welcome to the new normal and the productivity center. A productivity center is a revenue center that enhances profitability of the organization through enhancing the productivity of the people within the organization. So, why does a modern organization worry so much about HRM? Today’s HR managers are no longer running an organizational cost center. Their function, along with that of all other managers within the organization, is to improve organizational revenues and profits—to be a profit center. But how does HR create revenue and profits for the organization? They do it by enhancing the productivity of the people within the organization. Productivity is the amount of output that an organization gets per unit of input, with human input usually expressed in terms of units of time.

We must be more competitive in today’s business environment if we are to survive for the long term. As managers, we have to do things that will improve the productivity of the people who work for us and our organization, so we create productivity centers. But, how can we become more productive? Productivity is the end result of two components that managers work to create and improve within the organization:

• Effectiveness—a function of getting the job done whenever and however it must be done. It answers the question, “Did we do the right things?”

• Efficiency—a function of how many organizational resources we used in getting the job done. It answers the question, “Did we do things right?”

Both of these are important, but most of the time, we are focused on efficiency.24 Our people allow us to be more efficient as an organization if they are used, and motivated, in the correct manner. This course is about how to make our people more efficient.

Companies around the world are taking this need for efficiency very seriously, and new technologies and new ways of working are helping companies improve their effi- ciency. Chief Human Resource Officers (CHRO) are concerned about employee engage- ment and productivity, and especially about improving efficiency in their respective organizations,25 and companies have learned that they need some of their best managers in the HRM job.26 In addition to improving efficiency, some fairly new research has shown that among Fortune 500 firms, having a senior HR manager in the “C-suite”— meaning having a CHRO in addition to having a chief operations officer (COO), a chief finance officer (CFO), and so on—increased profitability by 105% over peer companies that did not have a CHRO!27

Recall that efficiency is a function of how many organizational resources we use up in order to get the job done. It doesn’t matter what kind of resources we are talking about. We use up material, monetary, and facility resources doing our jobs. But do we use up human resources? Well, not literally, though we can burn them out and thus make them

Cost center A division or department that brings in no revenue or profit for the organization—running this function only costs the organization money

Revenue centers Divisions or departments that generate monetary returns for the organization

Productivity center A revenue center that enhances the profitability of the organization through enhancing the productivity of the people within the organization

Productivity The amount of output that an organization gets per unit of input, with human input usually expressed in terms of units of time

Effectiveness A function of getting the job done whenever and however it must be done

Efficiency A function of how many organizational resources we used in getting the job done

Q:9 Ongoing Performance and Productivity Initiatives

SHRM

Q:5, Q:10, J:11 Improving Organizational Effectiveness; Organizational Effectiveness

SHRM

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8 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

useless if we subject them to intolerable work- ing conditions. But we do use up their time. This is the value that we have in our people— their time. We physically use up monetary resources, facility resources, and material resources, but we use up the time available from our people.

HR management deals primarily with improving the efficiency of the people within our organization. If our people are inefficient over long periods of time, our organization will fail. If we don’t use our people efficiently, we’re ulti- mately going to be forced out of business by somebody who is better at using those resources than we are. So the primary reason we’re worried about HR management within an organization is to improve the efficiency of our human beings.

So how do we make our people more efficient? We can’t really directly affect the per- formance of individuals within the organization. We can’t force employees to act in a cer- tain way all of the time within the organization; and while we have the ability to punish them when they don’t do what we need them to do, we don’t have the ability to directly control all of their actions. So as managers for the organization, we have to do things that will have an indirect effect on our people’s productivity—their efficiency and effective- ness. And we do have certain things within our control as managers that can cause our people to do things that we need them to do.

Technology’s Effect on Efficiency Senior HR Managers have learned that one way to improve efficiency of their workers is through use of technology. Old ways of doing work have become too slow in almost all cases—with competitors constantly innovating processes, and customers and employees demanding that we use technology tools to speed up both work and feedback on the work that is done.28 Using technology allows us to gather, analyze and manage large amounts of data much more quickly than we have ever been able to do before. This in turn allows managers— including HR managers—to find commonalities in the data that can help them create new and more efficient processes. One example will help show what we are talking about:

Sysco, a food service company with more than 50,000 employees, was able to identify “what actions by management will have the greatest impact on the busi- ness” through the use of survey data. Using some of this information, they were

WORK APPLICATION 1-2 Recall your most recent job.

Did you work in a traditional

cost center, a revenue center, or

a productivity center? Briefly

describe the firm and department

and what made it a cost, revenue,

or productivity center.

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o. co

m /B

ra un

APPLYING THE CONCEPT1-1 HRM Past and Present View

Identify each statement as being a present or past HRM view.

a. Past view of HRM b. Present view of HRM

____ 1. The organization uses productivity centers. ____ 2. The organization focuses on answering the question,

“Did we do the right things?”

____ 3. The organization uses cost centers. ____ 4. The organization focuses on answering the question,

“Did we do things right?” ____ 5. The organization uses revenue centers.

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Chapter 1: The New Human Resource Management Process 9

able to improve retention for their delivery associates from 65% to 85%, which in turn saved the company about “$50 million in hiring and training costs for new associates.”29

THE CHANGING WORLD OF HRM Now let’s look at some of the issues facing today’s HR managers, including new HRM challenges, the competencies that will be required in order to do the job, and some demo- graphic factors that we need to be aware of in a tight labor market.

New HRM Challenges What types of issues are today’s corporate executives concerned with? A recent SHRM survey of HR and non-HR executives asked what challenges they think will be most sig- nificant over the next 10 years. Here is a brief review of what they said.30

The three biggest challenges according to HR executives:

1. Maintaining high levels of employee engagement

2. Developing next generation organization leaders

3. Maintaining competitive compensation and benefits offerings

The biggest challenges according to non-HR executives were very similar:

1. Developing next generation organizational leaders

2. Managing the loss of key workers and their skill sets

3. Maintaining competitive benefits and compensation offerings

The HR competencies that will be the most critical: 31

1. Business acumen: ability to understand and apply information to contribute to the organization’s strategic plan

2. Organizational leadership and navigation: ability to direct and contribute to initia- tives and processes within the organization

3. Critical evaluation: ability to interpret information to make business decisions and recommendations

4. HR expertise: ability to apply the principles and practices of HRM to contribute to the success of the business

Reviewing these challenges, HRM has been reasonably good at identifying and meet- ing some of them, while others have gone without significant attention to date in most companies. We have pursued better selection and retention strategies for a number of years, and we have recently become much better at identifying future leaders and manag- ing organizational relationships, culture, and structure.

Where we have still not done as well—at least in most organizations—is in business acumen, especially in quantitative areas dealing with metrics and data analytics. The abil- ity to analyze large data sets allows HRMs to work toward overcoming another of their challenges—creating strategic agility.32 We will introduce you to some basic HR metrics as we go through this text so that you have a working understanding of how they might be used in each functional area of HRM.

Labor Demographics We face significant demographic changes in the labor force that will be available to our com- panies over the next 20 years. “Businesses no longer have a “typical” worker—diversity in terms of gender, ethnicity and religion abounds within organizations.”33 Aging of the work- force, skills shortages, and many other factors affect the ability of HR to provide the organiza- tion with the right numbers and types of employees. Let’s quickly review a few of these issues.

LO 1-2 Identify the major challenges that

HR managers face in a modern organization; note especially where we are not doing well.

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10 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Companies in developed countries are seeing a reduction in the number and quality of poten- tial skilled employees, as well as greater gender, ethnic, and age diversity than at any time in the past.34 The lack of skilled workers for increas- ingly complex jobs is considered to be a major, ongoing problem.35 Partly as a result of this shortage of skilled labor, we are seeing more older employees with high-level skill sets remain in the workforce. So as a manager in a 21st cen- tury organization, your workforce will look much older than it has historically.36

Your organization will soon look more cul- turally diverse—even compared to today. The growth in immigrant workers will be substan- tial. Hispanic workers (of all nationalities) alone are predicted to be approximately 20%

of the workforce in 2024, but today, they compose only about 16.3% of the workforce. Asian workers are expected to move up from about 5.6% now to about 6.6% of the workforce in 2024. But the gender mix will stay fairly close to what it is today. The per- centage of women in the workforce has stabilized at about 47%–48%.

All of this means that managers of a 21st century organization will need to be more culturally aware and able to deal with individuals with significantly different work ethics, cultural norms, and even languages.

Knowledge Workers and the Pace of Change In the Information Age, we see a new kind of worker. Knowledge workers are workers who “use their head more than their hands” and who gather and interpret information to improve a product or process for their organizations. In essence, knowledge workers man- age knowledge for the firm.

One of the most critical issues that HR managers face is the fact that technology is outpac- ing our ability to use it. Computers get faster and faster, but the human beings who have to use them don’t. This means that if the people in the organization can figure out ways to take advantage of the technology better and quicker than our competitors can, then we can create a sustainable competitive advantage. Notice, that we didn’t say create better technology—that wouldn’t give us a sustainable advantage since our competitors could just copy the technology and improve it once we designed it. We must continually figure out ways to use the technology more successfully through hiring and training better and more capable employees—our human resources. If we do this, then as the technology changes, our people will continually figure out ways to take advantage of it before our competitors’ people do. This ability within our people is the thing that creates a continuing advantage over competitors who either don’t have people with numerous and varied knowledge and skills, or don’t have people who want to assist the organization because they are not engaged and not satisfied.

Knowledge is precious in an organization. There is a continuous shortage of knowl- edge workers, and the United States is not alone. In most countries of the world, the news is the same—too few knowledge workers and too many knowledge jobs open and waiting for them. In fact, in one recent study, 38% of worldwide employers reported difficulty in filling jobs.37 This means that for the foreseeable future, we will have a shortage of knowl- edge workers on a global scale.

So each HR manager is going to be competing with every other HR manager in the world for the pool of knowledge workers. If the organization has a reputation as a difficult place to work, will they succeed in getting knowledge workers to come to work for the organization when those workers have so many other opportunities? That would be very unlikely! Only if the organization manages its human resources successfully and maintains a reasonable work- ing environment will it have any chance of filling most of the jobs that it has available.

Today’s technology improves the effectiveness and efficiency of HR managers, leading to higher levels of productivity throughout the organization.

to ck

ph ot

o. co

m /E

rik on

Q:6 Knowledge Management

SHRM

Knowledge workers Workers who “use their head more than their hands” and who gather and interpret information to improve a product or process for their organizations

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Chapter 1: The New Human Resource Management Process 11

UNDERSTANDING HR’S CRITICAL FACTORS While there are many factors in successfully managing the organization’s human resources, a few stand out in today’s business world. Management of people is necessarily different from managing money or other material resources because people have free will and can do things in any way they see fit. So HR managers and all other leaders in organi- zations need to learn how to indirectly control their human resources, where to lead the people resources of the company, and what tools are becoming more important in creat- ing advantage for one business over another. Let’s review these three issues next.

Critical Dependent Variables Before we go any further in this text, let’s look at some of the things that managers tell us they must control to compete in today’s business environment, but that they can’t directly manipulate because people have free will. These items are called dependent variables because they can be affected only through indirect means. We don’t have the ability to directly manipulate them. We have to control some other variable—called an independent variable because we can independently (directly) control it—to affect these items in any meaningful way.

Every time that we survey managers in any industry or any department about manag- ing others, they bring up the following issues as being among the most important and most difficult things that they deal with:38

1. Productivity—previously defined

2. Employee engagement—previously defined

3. Turnover—permanent loss of workers from the organization. When people quit, it is considered voluntary turnover, while when people are fired, it is involuntary turnover.

4. Absenteeism—temporary absence of employees from the workplace

Note that all of these issues deal with people—not computers, not buildings, not finances. Also, managers have no direct control over these things. They only affect these items through indirect actions. In other words, we can’t force an employee come to work and thus avoid absenteeism, nor can we force an employee to be happy with their work. We have to create conditions in which the employee is willing to or even wants to come to work and in which they can enjoy their job. We can and should do this through employ- ment practices that the employee perceives as fair and reasonable, such as providing acceptable pay for the tasks performed by the employee. We have already introduced you to productivity and employee engagement, but let’s take a moment for a more detailed look at absenteeism and turnover.

Turnover is the permanent loss of workers from the organization. Does turnover cost the organization? Absolutely!39 There is strong and “growing recognition that collective turnover can have important consequences for organizational productivity, performance, and—potentially—competitive advantage.”40 What specific issues are associated with turnover? Well, first is the cost of the paperwork associated with the departing employees; and if they left involuntarily, we may have increases in our unemployment insurance pay- ments and might even have some potential security issues. Next, there is finding someone else to do the job, which incurs job analysis costs, recruiting costs, and selection costs (we will talk about all of these later). Once we hire someone new, we have orientation and other training costs, costs associated with getting the new worker up to speed on their job (something we call a learning curve), and the costs associated with them just not knowing our way of doing business (every company has a unique culture, and not knowing how to act within that culture can cause problems). So again, because we have many costs associ- ated with turnover in the organization, we want to minimize turnover.

On the other hand, absenteeism is the failure of an employee to report to the work- place as scheduled. So what’s the problem with that? If employees don’t come to work,

LO 1-3 Identify and briefly describe the four critical dependent

variables that managers must control in order to compete in a

21st century organization.

O:8 Global Labor Markets

SHRM

A:6 Employee Retention

SHRM

A:20 Attendance

SHRM

Turnover The permanent loss of workers from the organization

Absenteeism The failure of an employee to report to the workplace as scheduled

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12 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

we don’t have to pay them, right? Well, some of them anyway—but not when we give paid sick leave or when they are “exempt” employees (we will talk about exemptions in Chapter 11). So why do managers worry about absenteeism? Well, for one thing, it does cost the organization money41—not necessarily directly, but indirectly. On an annual basis, absenteeism costs in the United States went from an estimated $30 billion in 198442 to about $225 billion per year in 2015.43 And even if we don’t have to pay employees when they are absent from work, we still have to maintain benefits like health insurance. We also likely lose productivity from other employees because of having to do the missing employee’s work and not being able to do their normal job; that costs us money, too. In addition, if some of our workers are frequently absent, it causes lower job satisfaction in others who have to continually “take up the slack” for their absent coworker. And there are other issues as well. So, we can quickly see that even though we don’t have to pay some of our workers if they don’t come to work, absenteeism still costs the organization money.

Note that our four dependent variables are interrelated. Absenteeism is costly, is often due to a lack of employee engagement, and leads to lower productivity.44 People tend to leave their jobs (turnover) when they aren’t engaged with their work; and while they are being replaced and sometimes after, productivity goes down.45

So now we can see the importance of these four big issues that managers can’t directly control. The bottom line is this:

As managers, we always need to be doing things that will improve productivity and employee engagement and that will reduce absenteeism and turnover. These items are crit- ical. Everything in HRM revolves around these four things.

The Importance of Strategic HRM Strategy and strategic planning look at our organization and environment—both today and in the expected future—and determine what we as an organization want to do to meet the requirements of that expected future. We work to predict what this future state will look like and then plan for that eventuality.

Only in the last 30–40 years has HR management really gone from reactive to proac- tive in nature. Instead of waiting for someone to quit and then going out and finding a replacement, HR managers are now actively seeking out talent for their organizations.46 Good HR managers are constantly looking at processes within the organization and, if there is something going wrong, figuring out how to assist the line management team in fixing the problem—whether it is a training problem, a motivation problem, or any other people-oriented problem. The function of HR has been redesigned to enhance the other (line) functions of the business.

APPLYING THE CONCEPT1-2 Critical Dependent HRM Variables

Identify each statement by its variable.

a. productivity b. employee engagement c. turnover d. absenteeism

____ 6. I got tired of the poor management, so I left for a better job.

____ 7. Most of us don’t really like management, so we do only enough work to stay out of any trouble with the boss.

____ 8. I’m fed up with management continuing to lay off employees and expecting the rest of us to do their work to maintain production quotas.

____ 9. I’m a good worker. You aren’t really going to fire me are you?

____ 10. Of course I take all my sick days; if I don’t I’ll lose them.

WORK APPLICATION 1-3 How would you rate your

level of productivity, employee

engagement, turnover, and

absenteeism on your current job

or a past job?

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Chapter 1: The New Human Resource Management Process 13

SUSTAINABLE COMPETITIVE ADVANTAGE. Why has HRM been redesigned? To make our organizations more competitive and to create sustainable competitive advantages. This is the basis of strategic HRM.47 Strategy and strategic planning deal with the concept of creating sustainable competitive advantage, a capability that creates value for customers that rivals can’t copy quickly or easily and that allows the organization to differentiate its products or services from those of competitors.

Can we gain an advantage from our buildings, our physical facilities, or our equip- ment? Can we create machinery that our competitors can’t create or imitate? Do we have access to computers that they don’t have access to? Of course not—not in most cases any- way. It is very rare that we can create any real technological advantage over any significant period of time, even if our technology is proprietary. If we create a technological advantage in today’s business environment, it’s usually overcome, or at least closely matched, fairly quickly. So where within the organization can we create sustainable competitive advan- tage? The only place we can consistently create advantage that our rivals can’t quickly match is through the successful use of our human resources—getting them to be more pro- ductive and more engaged with the organization than are our rivals’ human resources.48 If we can create an organization where people want to come to work and where they are therefore more productive, less likely to leave, less likely to be absent, and more creative and innovative—then guess who wins? We win, you lose, you die. It’s that simple.

The Influence of Social Media The last factor we will discuss here is the emergence of social media as a major tool for the workplace. Almost everyone today is familiar with social media in their personal life— Facebook, Instagram, Snapchat and LinkedIn are just a few of the many social media plat- forms. However, many of you probably don’t know how much social media platforms have changed the way work is done in HR and other parts of the organization. Let’s quickly review some of the common areas where social media is put to use. We will also discuss more about social media as we go through the remainder of the book.

• Recruiting and selection. The recruiting process in many companies has almost been taken over by social media. Recruiters scour social media platforms like LinkedIn for talented individuals whose profile fits a job the recruiter is attempting to fill.49 On the other side of the process, many candidates use social media to check out the potential employer, connect with existing employees of the company, and review the company’s social media tools that they will have available if they choose to join its workforce.

Selection may be supported by Skype interviewing, where the candidate can person- ally interact with members of the company at little or no cost to either party. Other social media sites like Facebook and LinkedIn are frequently scoured (as long as the state or country where the selection is taking place allows such reviews) as part of the background checks done on candidates to help the company make a selection that fits with the organi- zational culture.50 These checks are again of little or no cost to the company.

• The onboarding process. Once the person is selected to join the organization, social media can again be used to assist in many steps needed to get the person up to speed and capable of contributing to the company. We can use social media to teach organizational culture; create an FAQ area to answer common questions from new employees; provide mentors or work buddies to support the new employee; and provide commonly required payroll, equal opportunity, safety and other information that can be reviewed at any time. We can create “communities” on the company intranet that can provide the new person with interaction with other employees all over the company. The use of social media to inform and enculturate new members of the organization is really unlimited.

• Training and development. As you will see in Chapter 7, social learning is one of the primary ways that we learn new things. Social media platforms can easily be used to provide training for current jobs, or developmental information to employees.51 Many employees today rate the ability to learn and develop their skills for future jobs as more important than pay. Here again, formal mentoring and development communities can help with training and development for the new employee.

WORK APPLICATION 1-4

Recall your most recent job.

What is the firm’s competitive

advantage, and how would you

rate its sustainability?

Sustainable competitive advantage A capability that creates value for customers that rivals can’t copy quickly or easily and that allows the organization to differentiate its products or services from those of competitors

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14 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

• Performance management. Social media platforms give companies the means for continuous feedback to their employees. Many employees respond better to continuing feedback than to quarterly or annual formal appraisal sessions. Many social media plat- forms can also provide permanent records of the good, bad, and ugly of each employee’s work. This can be useful if we ultimately have to go through a disciplinary process. You can pretty quickly see that social media is invading almost every area of HRM, so HR managers need a strong understanding of the uses and the dangers of social media. We will continue to point out areas where social media can be helpful and harmful as we go through the remainder of this book.

HRM SKILLS What skill sets will an HR manager need in order to succeed in their job? All managers require a mix of technical, interpersonal, conceptual and design, and business skills in order to successfully carry out their jobs (see Exhibit 1-2). HR managers are no different, so all leaders need management skills to improve organizational performance.52 The set of necessary HR skills is similar to the skills needed by other managers; but, of course, it emphasizes people skills more than some other management positions do. The recently promulgated SHRM Competency Model discusses four basic “competency clusters” that match up well with the following four skill sets.53

Technical Skills The first skill set that an HR manager must develop to be successful, and also the easiest one to develop, is the technical skill set.54 Technical skills are defined as the ability to use methods and techniques to perform a task. Being successful as an HR manager requires many skills, including comprehensive knowledge of laws, rules, and regulations relating to HR; computer skills (because everything in HR is now computerized); interviewing skills; training knowledge and skills; understanding of performance appraisal processes; cultural knowledge (so we don’t make culture-related mistakes); and many others. This skill set is part of the SHRM technical expertise competency. We will cover many of these technical skills in the remaining chapters of this book.

Interpersonal Skills The second major skill set is interpersonal skills, which comprise the ability to under- stand, communicate, and work well with individuals and groups through developing effective relationships. The resources you need to get the job done are made available through relationships with people both inside the organization (i.e., coworkers and super- visors) and outside the organization (i.e., customers, suppliers, and others).55

HR managers must have strong people skills. This does not mean that HR managers always have to be gullible or sympathetic to every sob story, but it does mean that they have to be empathetic. Empathy is simply being able to put yourself in another person’s place— to understand not only what he or she is saying but why he or she is communicating that

Technical skills The ability to use methods and techniques to perform a task

Interpersonal Skills The ability to understand, communicate, and work well with individuals and groups through developing effective relationships

Empathy The ability to put yourself in another person’s place—to understand not only what that person is saying but why the individual is communicating that information to you

LO 1-4 Describe the four major HRM skill sets.

EXHIBIT 1-2 HRM SKILLS

Business Skills

Human Relations Skills Conceptual and Design Skills

Technical Skills

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Chapter 1: The New Human Resource Management Process 15

information to you. Empathy involves the ability to consider what the individual is feeling while remaining emotionally detached from the situation.

Interpersonal skills also involve the ability to work well with others in teams; to per- suade others; to mediate and resolve conflicts; to gather information from others; and to jointly analyze, negotiate, and come to a collective decision. This skill set is identified as interpersonal proficiency in the SHRM competency model. We will focus on interper- sonal skills throughout this book, and you will have the opportunity to develop your skill set throughout this course.

Conceptual and Design Skills Conceptual and design skills are another skill set required in a successful HR manager. Such skills help in decision making. Clearly, the decisions you have made over your life- time have affected you today. Likewise, leaders’ decisions determine the success or failure of the organization.56 So organizations are training their people to improve their deci- sion-making skills.57 Conceptual and design skills include the ability to evaluate a situa- tion, identify alternatives, select a reasonable alternative, and make a decision to implement a solution to a problem. This skill set is a critical part of creating and maintain- ing the ability to lead in an organization.

The conceptual part of this skill set is an ability to understand what is going on in our business processes—the ability to “see the bigger picture” concerning how our depart- ment or division and the overall organization operates. It also includes the ability to see if we are getting outside expected process parameters. In other words, are we doing things that we shouldn’t be, or are we not successfully doing things that are necessary for main- taining a high level of productivity?

Design skills are the other part of the equation. This is the skill set that allows us to fig- ure out novel or innovative solutions to problems that we have identified through the use of our conceptual skills. So, one part of this skill set is identification of any problems that exist, and the second part is decision making to solve problems and carrying out (leading) the solution. Learning this skill set is necessary if you are going to become capable in the SHRM leadership proficiency competency.

Business Skills Finally, SHRM’s business-oriented proficiency competency is a mandatory HRM skill. Like technical skills, business skills are easier to develop than human relations and conceptual

Conceptual and design skills The ability to evaluate a situation, identify alternatives, select a reasonable alternative, and make a decision to implement a solution to a problem

WORK APPLICATION 1-5

Give examples of how a present

or past boss of yours used each

of the four HRM skills.

APPLYING THE CONCEPT1-3 HRM Skills

Identify each activity as being one of the following types of HRM skills, and write the letter corresponding to each skill before the activity or activities describing it:

a. technical b. interpersonal c. conceptual and design d. business

____ 11. The HR manager is working on the strategic-planning process.

____ 12. The HR manager is working on determining why more employees have been coming to work late recently.

____ 13. The HR manager is filling out a complex government form.

____ 14. The HR manager is talking socially with a few of her staff members.

____ 15. The HR manager is praising a staff member for finishing a job analysis ahead of schedule.

____ 16. The HR manager is assigning projects to various staff members.

____ 17. The HR manager is communicating with employees throughout the company via email.

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16 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

and design skills. Business skills are the analytical and quantitative skills—including in-depth knowledge of how the business works and its budgeting and strategic-planning processes—that are necessary for a manager to understand and contribute to the profit- ability of the organization. HR professionals must have knowledge of the organization and its strategies if they are to contribute strategically. This also means that they must have understanding of the financial, technological, and other facets of the industry and the organization and be able to manipulate large amounts of data using data analytics programs and HR metrics.

LINE MANAGERS’ HRM RESPONSIBILITIES What if you are not planning on becoming an HR manager? Why do you need to under- stand the topics that we are discussing throughout this book? Well, line managers are the first point of contact with most of our employees when they have questions about human resources policies or procedures. As a result, you have to have a basic understanding of the management of your organization’s human resources. You need to be able to answer employee HR questions; and if you don’t follow company HR policies, you can cause legal problems for your firm, get disciplined and fired, and potentially even spend time in jail. So in this section, we explain the difference between line and staff management and line managers’ major HRM responsibilities.

Line Versus Staff Management Line managers are the individuals who create, manage, and maintain the people and orga- nizational processes that create whatever it is that the business sells. Put simply, they are the people who control the actual operations of the organization. A line manager may have direct control over staff employees, but a staff manager would not generally have any direct control of line employees.58

HR managers, on the other hand, would generally be staff managers, individuals who advise line managers in some field of expertise. These managers act basically as internal consultants for the company, within their fields of specialized knowledge. As an example, a company accountant or lawyer would usually have staff authority within a manufactur- ing firm—they would be there to advise the operational managers concerning what is legal or illegal. However, in a law firm, a lawyer would usually be a line manager, because the organization’s end product is knowledge and application of the law. In this case, the law- yer would have the ability to control the organization’s processes to produce their output—a legal briefing, a lawsuit, or a contract agreement for instance.

Major HR Responsibilities of Line Management What does a line manager need to know about HR management? A lot! Remember that every manager’s primary job is to manage the resources of the organization, including the human resources.59 The following list shows some of the major items that line managers would need to understand in order to successfully do their job.

LEGAL CONSIDERATIONS. Line managers can inadvertently violate the law if they don’t know what the various employment laws say and what actions are prohibited or required in dealing with employees. Laws that a line manager needs to understand include employment laws, workplace safety and health laws, labor laws, and laws dealing with compensation and benefits.

LABOR COST CONTROLS. What can and can’t line managers do to minimize labor costs? All managers need to know how they can manage labor costs, both from an efficiency standpoint and from the standpoint of understanding the state and federal laws that limit our options for managing our labor resources.

LO 1-5 Discuss the line manager’s six HRM responsibilities.

Business skills The analytical and quantitative skills—including in-depth knowledge of how the business works and its budgeting and strategic-planning processes—that are necessary for a manager to understand and contribute to the profitability of the organization

Line managers The individuals who create, manage, and maintain the people and organizational processes that create whatever it is that the business sells

Staff managers Individuals who advise line managers in some field of expertise

WORK APPLICATION 1-6 Give examples of line and staff

positions at an organization where

you work or have worked.

J:6 Internal Consulting

SHRM

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 1: The New Human Resource Management Process 17

LEADERSHIP AND MOTIVATION. Obviously, one of the major reasons to have managers is to provide motivation and leadership to employees in our organizations. Managers are worth less than nothing if they don’t improve their workers’ performance and productivity through the use of motivation and leadership.

TRAINING AND DEVELOPMENT. Line managers are generally the first to see a problem with organizational processes. This is frequently an indication that some type of training is needed. Line managers are also the individuals who would debrief most employees on their annual performance appraisals. This is another situation in which a manager might recognize the need for further training of their workforce. Finally, line managers are the people responsible for making changes to organizational processes. As a result of these changes, we frequently need to train our people on the new methods of doing our work.

Line managers are also the people responsible for identifying the talented workers in the organization whom we need to develop so that they can move into higher-level positions when they are needed. The organization needs to have these people “in the pipeline” so that as others leave the company or retire, we have qualified individuals to take their place.

APPRAISAL AND PROMOTION. Line managers should almost always be responsible for the appraisal (also called evaluation) of the people who work for them as well as for the process of debriefing those individuals on their annual (or more frequent) work evaluations. The line manager should also have a strong voice in who should be eligible for promotions in the organization, since the line manager’s job is to know their people and their capabilities and limitations.

SAFETY AND SECURITY OF EMPLOYEES. Line management has primary responsibility for maintaining the safety and security of the organization’s workforce. They must know federal and state laws concerning occupational safety and health as well as procedures for securing the organization’s workspaces and people from both outsiders and other employees who would want to harm them. Line managers need to monitor the areas under their physical control to minimize the hazards that can occur inside our companies.

So line managers have a lot to do with the human resources in the organization, don’t they? All line managers need to know all of these things and more in order to be successful in their jobs.

HR MANAGERS’ RESPONSIBILITIES: DISCIPLINES WITHIN HRM But what if you are planning to become an HR manager? HR managers take the lead in the management and maintenance of the organization’s people. It is an exciting field with many different paths that you can take over the course of your career.60 The field is so broad that you could do something different each year for a 40-year career and never exactly duplicate an earlier job.

So if you have decided that you would like to explore the field of HRM as a career, what kind of jobs could you expect to fill inside your organization? What are your options for a career, and what kinds of spe- cialized training and certification are available for you in the field? Although there are many different jobs in the field, most of them fall into a few categories. Let’s briefly take a look at each of these disciplines or specialties. We will provide the details in later chapters.

Most HR jobs are either generalist jobs, in which the HR employee works in many different areas, or specialist jobs, in which the employee focuses on a spe- cific discipline of HR. What specialties are available? Below is a partial list of some of the major specialist careers that you can get into if you desire. But first, complete the self- assessment to help you better understand your overall interest in HR and which specialties interest you more.

LO 1-6 Identify and briefly describe the

eight major HRM discipline areas.

HRM in Action HRM Concepts

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18 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

The Legal Environment: EEO and Diversity Management Equal employment opportunity (EEO) and diversity management specialists are involved with the management of the organization’s employee-related actions to ensure compli- ance with equal opportunity laws and regulations as well as organizational affirmative action plans (when such plans are required or desired). Such specialists also have responsi- bilities related to the management of diverse employee groups within the company. There are many management-level issues in the diversity effort, including intergroup conflict management, creating cohesiveness, combating prejudice, and others. We will discuss some of these issues later in the text.

The HR legal and regulatory environment is critical to every organization today. This is also quite likely the area that changes more than any other in HRM. Every court case that deals with the human resource environment inside any organization has the potential to affect every organization because of the results of that case. Even if the court ruling doesn’t change the way a company has to do business, if a federal or state legisla- ture sees that a ruling was unfair, they may change the law at either the federal or state levels, and that affects each organization under their jurisdiction. This is how the Lilly Ledbetter Fair Pay Act (among other laws) was created. The US Supreme Court heard a case dealing with unequal pay and made its ruling based on existing laws. Because the US Congress felt that the ruling was unfair, it enacted a new law to change certain rules on how and when an equal pay complaint can be filed. We will talk a little more about this law in Chapter 3.

So if every court case that deals with equal opportunity, compensation and benefits, harassment, or discrimination in any form has the potential to change the way in which every company does business, then you can quickly see that the HR-related legal environ- ment is an area of critical importance to your company. Therefore, people with strong expertise in HR law are equally critical to the organization. So if you want a job where you really never do the same thing twice, look at becoming an HR legal specialist.

Staffing Staffing includes all of the things that we need to do to get people interested in working for our company—going through the recruiting process, selecting the best candidates who apply, and getting them settled into their new jobs. This is likely one of the most reward- ing areas in HRM. We get to hire people into the organization who want to work for us. However, it is also a highly complex job in which we have to understand the other jobs for

WORK APPLICATION 1-7 Give examples of HR

responsibilities performed by your

present boss or a past boss.

D:1 HR’s Role in Organizations

SHRM

Part of the diversity in today’s workforce is people retiring later in life and working part-time.

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an dj

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Chapter 1: The New Human Resource Management Process 19

which we are hiring, the people who apply to fill those jobs, and the legalities involved with the hiring process. This is the first line of defense for the company. This area can liter- ally make or break the organization in its ability to be productive.61 If we attract and hire the right types of people with the right attitudes and skills, then the organization will have a good start at being successful. If we hire the wrong types—people who don’t want to work or don’t have the correct skill sets—then the organization will have a very difficult time being successful in the long term.

Training and Development Next, we have the training and development discipline. This is where the education and training function occurs in organizations. A modern organization won’t get very far with- out constantly training its employees. Research supports the idea that employees who par- ticipate in more training and development are less likely to leave the company (i.e., less likely to cause turnover) and less likely to engage in neglectful behavior.62 We train people for a variety of reasons, from teaching them their basic job to teaching them the things that they will need to move up in the organization as people above them resign or retire. If you enjoy teaching and learning, this might be an area to consider as a career field in HRM. Many HR managers stay in training and development for their entire career, because they like it. They get to interact with many different people within the organiza- tion and get to learn about many different parts of the company as they go through the training processes.

As a training and development specialist, you would have responsibility for the train- ing processes within the organization, as well as for the development of curricula and les- son plans and the delivery of training courses. You would also be involved with the development of talent within the company so that employees are trained and ready to move into more senior positions as those positions become vacant.

Employee Relations This specialty covers a very wide array of items associated with management and employee relations. It involves such things as coaching, conflict resolution, counseling, and disciplining the workforce as needed. It also involves leadership and team-building efforts within the organization. Virtually every organization today operates with at least some teams as part of its structure, and teams create unique problems within the company that employee relations managers must address.

We also measure and evaluate job satisfaction and employee engagement as part of employee relations. HR managers in this function have to keep up with the many and var- ied laws relating to employee relations, and this specialty also involves the management of employee communication.

Labor and Industrial Relations The labor and industrial relations specialist works with the laws and regulations that con- trol the organization’s labor-related relationships with their workforce. This is also the area that manages any relationships the organization has with unions. HR managers who work in this area might be involved in union votes, negotiations for union agreements, contract collective bargaining, handling grievances, and other items that affect the union/ management relationship within the organization. This area also includes all labor rela- tions activities, even in nonunion businesses. These managers have to maintain a working knowledge of all of the federal labor laws such as the National Labor Relations Act and the Taft-Hartley Act. Again, we will cover this in more detail later.

Compensation and Benefits A compensation and benefits specialist might find jobs in compensation planning, salary surveys, benefits management, incentive programs, and more. This area deals with how we reward the people who work for us. Rewards come in many styles and types, and the

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20 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

SELF-ASSESSMENT1-1 HR Disciplines

The following are 24 HR activities that you could be involved in. Rate your interest in each specialty with a number (1–7) that represents your interest in the activity.

I’m not really interested in doing this I’m really interested in doing this

1 2 3 4 5 6 7 1. _____ Working to make sure everyone in the firm is treated fairly 2. _____ Working against discrimination and helping minorities to get hired and promoted 3. _____ Knowing the laws, helping the firm implement laws, and reporting how the firm complies with the HR laws 4. _____ Working to get people to apply for jobs, such as writing advertisements and attending job fairs 5. _____ Interviewing job candidates 6. _____ Orienting new employees to the firm and their jobs 7. _____ Teaching employees how to do their current jobs 8. _____ Developing employees’ general skills so they can progress in the firm 9. _____ Designing curricula and lesson plans for others to teach employees 10. _____ Coaching, counseling, and disciplining employees whose work quality is not up to standards 11. _____ Working with teams and helping resolve conflicts 12. _____ Working to understand and improve the level of job satisfaction throughout the firm 13. _____ Working with union employees 14. _____ Collective bargaining with unions 15. _____ Solving employee complaints 16. _____ Working to determine fair pay for different jobs, including investigating competitors’ pay scales 17. _____ Creating incentives to motivate and reward productive employees 18. _____ Finding good benefits providers, such as lower-cost and higher-quality health insurance providers 19. _____ Making sure that employees don’t get hurt on the job 20. _____ Working to keep employees healthy, such as developing diet and exercise programs 21. _____ Ensuring the security of the facilities and employees, issuing IDs, and keeping employee records confidential 22. _____ Ensuring that employees are ethical, such as developing and enforcing codes of ethics 23. _____ Enforcing ethical standards, such as maintaining methods for employees to confidentially report ethics violations 24. _____ Working to help the organization develop methods to improve efficiency while protecting our environment

Scoring and Interpreting Individual Discipline Results

Place your rating numbers (1–7) below and total the three scores for each discipline. Then rank your totals from 1 to 8 to determine which disciplines interest you most:

Legal Environment: Equal Employment Opportunity (EEO) and Diversity Management 1 _____ 2 _____ 3 _____ _______ Total (Rank this total: _____ [1–8])

Staffing 4 _____ 5 _____ 6 _____ _______ Total (Rank this total: _____ [1–8])

Training and Development 7 _____ 8 _____

9 _____ _______ Total (Rank this total: _____ [1–8])

Employee Relations 10_____ 11_____ 12_____ _______ Total (Rank this total: _____ [1–8])

Labor and Industrial Relations 13_____ 14_____ 15_____ _______ Total (Rank this total: _____ [1–8])

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Chapter 1: The New Human Resource Management Process 21

Compensation and Benefits 16_____ 17_____ 18_____ _______ Total (Rank this total: _____ [1–8])

Safety and Security 19_____ 20_____

21_____ _______ Total (Rank this total: _____ [1–8])

Ethics and Sustainability 22_____ 23_____ 24_____ _______ Total (Rank this total: _____ [1–8])

The higher your total in each discipline, the greater your interest in that area of HR at this point in time. Of course, your interest levels can change as you learn more about each discipline. You will also be doing self-assessments in all the other chapters that relate to these eight disciplines.

Scoring and Interpreting Total Discipline Results

Now add up your grand total interest score (from all 24 activities) and write it here: ________ Then compare it to the continuum below to gauge your overall level of interest in working in human resources:

Low interest in HR 24 50 75 100 125 150 168 High interest in HR

The higher your score, the greater is your overall interest in HR―again, at this time only.

You should realize that this self-assessment is designed only to show your current level of interest. It may not predict how much you will enjoy working in any HR discipline in the future. For example, if you get a real job in an area where you gave yourself a low score today, you could end up finding it very interesting. The self-assessments throughout this book are designed to give you a better understanding of your interest and aptitudes at the present time, and they are open to your interpretations. For example, some people tend to rate themselves much lower or higher than others even though they have the same level of interest—so don’t be too concerned about your score. There are no correct answers or scores. Some people with lower scores may actually enjoy the course more than those with higher scores. The purpose of these self-assessments is to help you gain self-knowledge and get you thinking about how the topic of HRM relates to you.

So at this point, you should have a better idea of what the eight HR disciplines are and which areas are of more and less interest to you. But as you read the rest of this chapter and the others and learn more about each discipline, you may change your mind.

compensation and benefits specialist helps decide the total compensation package that the organization will use to attract and retain the best mix of people with skills that are specif- ically suited to the organization. Here again, a manager will have to understand the federal and state laws that deal with compensation management within businesses, including the Fair Labor Standards Act plus EEO and discrimination laws. Compensation manage- ment also includes issues such as pay secrecy, comparable worth, and wage compression— topics that we will cover in some detail in later chapters.

In this specialty, you would have a hand in setting pay scales, managing pay of various types, and administering benefits packages. All of the processes within this discipline are designed to help the organization attract and keep the right mix of employees. You would also deal directly with all of the federal and state compensation laws to ensure compliance in organizational pay and benefits procedures.

Safety and Security We also need to protect our human resources. In the safety and security discipline, a man- ager might work in the area of occupational safety and/or health to make sure we don’t injure our people or cause them to become sick because of exposure to some substance they work with. This discipline also includes fields such as stress management and employee assistance programs, which help employees cope with the demands of their jobs

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22 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

on a daily basis. And finally, this function works to ensure that employees are secure from physical harm inflicted by other workers, outsiders, or even acts of nature. We have to protect our people if we are going to expect them to do their jobs.

As a safety and security specialist, the HR manager works to ensure that the work environment is safe for all workers so that on-the-job injuries, illnesses, and other nega- tive events are minimized to the greatest extent possible. You also have responsibility for managing the organization’s plans for securing the workforce, both from being harmed by other people as well as from natural disasters such as earthquakes or torna- dos. Maintaining the privacy of employees’ confidential HR files is also part of this specialty.

Ethics and Sustainability In this specialty, you would bear responsibility for seeing to it that the organization acts in an ethical and socially responsible manner. You would work on codes of ethics and also make sure employees live by those codes, such as by maintaining ways in which employees can report violations of ethics (also known as whistle-blowing).

Environmental issues are major social concerns today,63 and sustainable development has become one of the foremost issues facing the world.64 Sustainability is meeting the needs of today without sacrificing future generations’ ability to meet their needs.65 All developed societies and a growing number of developing countries expect sustainability, and that includes wanting managers to use resources wisely and responsibly; protect the environment; minimize the amount of air, water, energy, minerals, and other materials used in the final goods we consume; recycle and reuse these goods to the extent possible rather than drawing on nature to replenish them; respect nature’s calm, tranquility, and beauty; and eliminate toxins that harm people in the workplace and in communities.66 Some companies have historically done a relatively poor job of maintaining the environ- ment in some less developed countries in which they operated. In fact, in many cases, com- panies decided to operate out of a particular country to minimize their costs associated with conservation and sustainability.

If you take a look at the table of contents as well as the practitioner’s model below, you will realize that this book is organized to discuss the eight areas of HRM listed above. We have gone through the disciplines pretty quickly thus far, but we will deal with each in much more detail as we continue through this text. For right now, just understand that

J:9 Ethics

SHRM

C:8 Codes of Ethics

SHRM

J:5 Sustainability/Corporate Social Responsibility

SHRM

Line and staff employees can work more effectively together with today’s technology.

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Sustainability Meeting the needs of today without sacrificing future generations’ ability to meet their needs

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 1: The New Human Resource Management Process 23

there are many different functions and areas in which an HR manager can work as part of their organization. So, it is pretty much guaranteed that you won’t get bored in your role as a 21st century HR manager if you don’t want to.

Next, let’s take a look at some of the professional organizations that are out there to help you get where you want to go in HRM.

RESOURCES FOR HRM CAREERS If you are interested in HRM as a career, there are several professional associations and certification programs associated with HR management that will help you get into these jobs and help you advance more quickly in the future. We’ve listed some of them below, and there are several others within specific HR disciplines that are not discussed here.

Society for Human Resource Management (SHRM) The Society for Human Resource Management (SHRM) is the largest and most recog- nized of the HRM advocacy organizations in the United States. According to its website, SHRM is “the world’s largest HR professional society . . . representing more than 285,000 members in over 165 countries.”67

What does SHRM do? Probably the biggest part of its work is dedicated to (1) advo- cacy for national HR laws and policies for organizations and (2) training and certification of HR professionals in a number of specialty areas. SHRM also provides its members with a place to network and learn from their peers, plus a vast library of articles and other information on HR management.

SHRM is an outstanding organization that anyone thinking about a career in human resources should consider joining. Student memberships have always been and continue to be very inexpensive, especially considering all that is available to members of the

WORK APPLICATION 1-8

Give brief examples of the HR

disciplines performed by the

HR department (or individuals

responsible for HR) where

you work or have worked.

APPLYING THE CONCEPT1-4 HRM Disciplines

Identify each HRM discipline and write the letter corresponding to it before the activity involving it:

a. Legal Environment: EEO and Diversity Management b. Staffing c. Training and Development d. Employee Relations e. Labor and Industrial Relations f. Compensation and Benefits g. Safety and Security h. Ethics and Sustainability

____ 18. The HR manager is writing an ad to recruit a job candidate.

____ 19. The HR manager is investigating an employee complaint of racial discrimination.

____ 20. The HR manager is taking a class in preparation for the exam to become certified as a Professional in Human Resources (PHR).

____ 21. The HR manager is working with an insurance company to try to keep the high cost of health insurance down.

____ 22. The HR manager is replacing the office copier with a more energy-efficient model.

____ 23. The HR manager is having a new software program installed to protect employee records from theft.

____ 24. The HR manager is working on the new collective bargaining contract with the Teamsters Union.

____ 25. The HR manager is looking for potential new employees at the LinkedIn website.

____ 26. The HR manager is filling out an accident report with a production worker who got hurt on the job.

____ 27. The HR manager is reviewing a company report that compares its wages and salaries to other businesses in the area.

____ 28. The HR manager is giving priority to promoting a member of a minority group to a management position.

____ 29. The HR manager is teaching the new employee how to use the HR software program.

____ 30. The HR manager is referring an employee to a marriage counselor.

Society for Human Resource Management (SHRM) The largest and most recognized of the HRM advocacy organizations in the United States

LO 1-7 List some of the major

resources for HRM careers.

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24 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

organization. If you are a college or university student, does your school have a student SHRM chapter? If it does, and you are serious about a career in HR—join. If your school doesn’t have a chapter, consider starting one.

SHRM also provides a curriculum guide for colleges and universities that offer HRM degree programs. The guide identifies specific areas in which SHRM feels students should gain competence as HRM majors. It breaks down curriculum areas into required, second- ary, and integrated sections. Because SHRM is such a significant force in each of the HRM fields, we have decided to show you where each of the required curriculum areas is cov- ered within this text. In each chapter, you will see notes on the side of the page when a SHRM required topic is discussed. These notes are alphanumerically keyed to the infor- mation in the Appendix: SHRM 2016 Curriculum Guidebook. You might want to pay special attention to these side notes if you have plans to become an HR manager.

If you do decide to work toward a goal of becoming an HR manager, you will need to think about taking the SHRM-CP Exam. To get more information about the SHRM-CP Exam and when you are eligible to take it, go to the SHRM website at http://www.shrm .org/assessment/.

Other HR Organizations In addition to SHRM, there are three organizations that have certification programs that are recognized in many countries around the world. The first one is the Association for Talent Development (ATD). As its name implies, ATD primarily focuses on supporting those who develop the knowledge and skills of employees in organizations around the world.68 Its major certification is the Certified Professional in Learning and Performance (CPLP). According to the ATD websites, CPLP certification is designed to “Validate your knowledge and skills in the talent development profession.”69

The Human Resource Certification Institute (HRCI) is the second organization that provides some of the most respected certifications for HR personnel anywhere in the world.70 The three biggest HRCI certification programs are the PHR, SPHR, and GPHR certifications. PHR stands for Professional in Human Resources, SPHR stands for Senior Professional in Human Resources, and GPHR stands for Global Professional in Human Resources. These certifications are recognized by organizations worldwide as verification of a high level of training.

The other major organization is WorldatWork. Certifications from this organization include Certified Compensation Professional (CCP), Advanced Certified Compensation Professional (ACCP), Certified Benefits Professional (CBP), Global Remuneration Profes- sional (GRP), Work-Life Certified Professional (WLCP), Certified Sales Compensation Professional (CSCP), and Certified Executive Compensation Professional (CECP). As you can quickly see, WorldatWork mainly deals with compensation, benefits, and perfor- mance management programs.71

All of the above certification bodies are quite high in quality within their areas of focus. Each of them has extensive websites (the primary sites are https://www.td.org; https://hrci.org; and http://worldatwork.org). If you are interested in these certifications, take a look as you have time.

Professional Liability One of the more important things that you need to understand if you are thinking about becoming an HR manager is the issue of professional (personal) liability for the actions that you take on behalf of the organization. It is not a well-known fact that HR managers can be held personally liable for some of the actions that they take as part of their job. For instance, two federal laws—the Fair Labor Standards Act and the Family and Medical Leave Act (which we will discuss in more detail in later chapters)—“have both been con- strued by courts to provide for individual liability.”72 Both the organization and managers who have authority to make decisions for the organization can be sued by an employee who feels that their rights under these laws have been violated. This is one of the many

B:21 Professional Liability

SHRM

WORK APPLICATION 1-9 Are you joining or will you join a

professional association, and will

you seek certification? Explain

why or why not.

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Chapter 1: The New Human Resource Management Process 25

reasons why if you plan to manage people, you really want to understand all of the HRM concepts as well as possible. These are only two examples of potential professional liabil- ity that an HR manager can incur if they fail to take federal and state laws into account. There are many others, so you need to be aware of the potential for personal liability, and in some cases, you may even need to consider professional liability insurance—for instance, if you are an HRM consultant to outside organizations.

PRACTITIONER’S MODEL FOR HRM We have given you a (very) brief history of current HRM practices and what HR management does for the organization. Now we need to get into the particulars of the matter and start talking about some of the detailed information that you will need to know in order to be a suc- cessful manager for your organization. How will we do that? We are going to work through what you need to know using a practitioner’s model for HRM, shown in Exhibit 1-3.

The Model The practitioner’s model is designed to show you how each of the sections of HRM inter- act and which items you must deal with before you can go on to successfully work on the next section—kind of like building a foundation before you build a house. The model first

LO 1-8 Explain the five parts of

the practitioner’s model for HRM and how the model

applies to this book.

EXHIBIT 1-3 THE PRACTITIONER’S MODEL FOR HRM END RESULT = ORGANIZATIONAL SUCCESS

Section I: 21st Century HRM, Strategic Planning, and HR Laws What HRM issues are CRITICAL for long-term organizational viability?

Chapter 2 Strategy-Driven Human Resource Management

• Strategy • Structure • Culture

Chapter 3 Legal Environment and Diversity Management

• Legal Environment • Equal Employment Opportunity

(EEO) and Affirmative Action • Diversity

Section III: Developing and Managing How do you successfully MANAGE your Human Resources?

Chapter 7 Train/ Develop

Chapter 8 Performance Management/

Appraisal

Chapter 9 Rights/ Employee

Management

Chapter 10 Employee/

Labor Relations

Section II: Staffing What HRM actions do you NEED for organizational sustainability?

Chapter 4 Matching Employees

and Jobs

Chapter 5 Recruiting Job Candidates

Chapter 6 Selecting New

Employees

Section IV: Compensating How do you REWARD your Human Resources?

Chapter 11 Compensation Management

Chapter 12 Incentive Pay

Chapter 13 Employee Benefits

Section V: Protecting and Expanding Stakeholder Reach How do you PROTECT the organization and EXPAND your Human Resources?

Chapter 14 Safety/ Health/

Security

Chapter 16 Global Issues

Chapter 15 Ethics/

Sustainability CSR

Productivity Satisfaction Absenteeism Turnover

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26 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

provides you with knowledge of which organizational functions are critical to ensure that the organization can be viable over the long term—so that it will operate legally and work toward the goals that it has identified as critical to gaining success. Second, the model helps you learn what things the organization needs to do in order to sustain itself and its human resources over the long term—including identifying and setting up different jobs, finding the right people, and getting them into the organization and ready to work. Next, the model discusses the critical issues in managing those human resources successfully— training, developing them for the future, evaluating and improving their performance, and maintaining a strong relationship between management and employees. Fourth, the model discusses how to maintain your workforce through managing the compensation and benefits provided to your people—including determining fair pay and incentives for work completed, as well as what benefits to provide to workers. Finally we look at some special issues that have become far more important to organizational success: safety and health, ethics and social responsibility, and global issues.

Sections of the Model Let’s discuss the details of each section of the model separately.

SECTION I: 21ST CENTURY HRM, STRATEGIC PLANNING, AND HR LAWS. You have already begun Section I, where we discuss the modern form of HRM, including the necessity of having strategy-driven HRM and a strong understanding of the basic HR legal environment. This is the basis for everything else that an HR manager will do, so it is the foundation of our diagram. These are the things that are most critical to the organization’s basic stability and success, because if we don’t get them right, we will probably not be around long enough as an organization to be successful in the sections resting on this one.

EXHIBIT 1-5 SECTION II: PRACTITIONER’S MODEL FOR HRM

Section II: Staffing What HRM actions do you NEED for organizational sustainability?

Chapter 4 Matching Employees

and Jobs

Chapter 5 Recruiting Job Candidates

Chapter 6 Selecting New

Employees

EXHIBIT 1-4 SECTION I: PRACTITIONER’S MODEL FOR HRM

Section I: 21st Century HRM, Strategic Planning, and HR Laws What HRM issues are CRITICAL for long-term organizational viability?

Chapter 2 Strategy-Driven Human Resource Management

• Strategy • Structure • Culture

Chapter 3 Legal Environment and Diversity Management

• Legal Environment • Equal Employment Opportunity

(EEO) and Affirmative Action • Diversity

SECTION II: STAFFING. Now that we have a stable organization with some form of direction, we start to look at getting the right people into the right jobs in Section II. This section includes the items that will allow the organization to get its work done successfully over long periods of time. We first look at identifying the jobs that will need to be filled and then work through how to recruit the right numbers and types of people to fill those jobs. Finally, we find out what our options are concerning methods to select the best of those job candidates whom we have recruited. The items in Section II are absolutely necessary for long-term organizational sustainability and success.

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Chapter 1: The New Human Resource Management Process 27

SECTION III: DEVELOPING AND MANAGING. In the third section, we learn how to manage our people once they have been selected in to the organization. We have to train (and retrain) our people to do jobs that are ever changing in today’s organization; we have to evaluate them in some formal manner so that they know how well they are doing in the eyes of their management; and we have to develop them so that they can fill higher-level positions as we need people to step up into those positions. We sometimes have to coach, counsel, and/or discipline our employees as well, so we need to learn how to do those things so that we can improve motivation when possible; and if we can’t improve motivation or overcome poor work behaviors, we will know how to correctly and humanely separate (i.e., terminate) the individual from the organization. Finally, Section III addresses the role of employee and labor relations, with emphasis on the function of unions within organizations. So Section III shows us how to manage our human resources on a routine basis.

EXHIBIT 1-8 SECTION V: PRACTITIONER’S MODEL FOR HRM

Section V: Protecting and Expanding Stakeholder Reach How do you PROTECT the organization and EXPAND your Human Resources?

Chapter 14 Safety/ Health/ Security

Chapter 15 Ethics/

Sustainability CSR

Chapter 16 Global Issues

EXHIBIT 1-7 SECTION IV: PRACTITIONER’S MODEL FOR HRM

Section IV: Compensating How do you REWARD your Human Resources?

Chapter 11 Compensation Management

Chapter 12 Incentive Pay

Chapter 13 Employee Benefits

EXHIBIT 1-6 SECTION III: PRACTITIONER’S MODEL FOR HRM

Section III: Developing and Managing How do you successfully MANAGE your Human Resources?

Chapter 7 Train/ Develop

Chapter 8 Performance

Management/Appraisal

Chapter 9 Rights/ Employee

Management

Chapter 10 Employee/

Labor Relations

SECTION IV: COMPENSATING. The fourth section will cover the compensation and benefits packages that we work with to keep our people satisfied (or at least not dissatisfied). Both direct compensation, in the form of base pay and incentives, and indirect pay, in the form of worker benefits, provide us with some level of control over what our employees decide to do for the organization (since we cannot directly make them more productive). Section IV shows us how to reward and maintain our workforce, since they are so critical to our ongoing success.

SECTION V: PROTECTING AND EXPANDING STAKEHOLDER REACH. The last section’s topics include managing safety and health, providing ethical and social responsibility guidelines to members of the organization, and the globalization issues involved in working in multiple countries and cultures. The area of worker safety and health is critical because the employees of a 21st century organization are almost always the basis of at least some of our competitive advantage over our rivals in any industry, so we need to keep them healthy and happy. In addition to safety and health, two other areas have become far more important since the beginning of the information age in the early 1980s: ethical, sustainable, and socially responsible organizations; and the ability to operate in a global business environment. We wind up the text with these topics.

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28 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

TRENDS AND ISSUES IN HRM In each chapter of this book, we will discuss some of the most important issues and trends in HRM today. These issues and trends will cover areas such as the use of technology in HRM, social media, ethical issues, HR metrics, and diversity and equal opportunity. For this chapter, we have chosen the following issues: Employee Engagement Improves Productivity, and HRM and Organizational Agility.

Employee Engagement Improves Productivity Remember that employee engagement is defined as a combination of job satisfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time. This combination of satisfaction, ability, and willingness is a more critical predictor of company performance today than ever before.73 Many of our global employees are highly talented and extremely difficult to replace, but lots of them just aren’t being made an integral part of the organization through the use of management techniques that would cause them to become more interested in both their work and the work of the organization overall.

One Gallup survey recently noted that around 32% of US workers are engaged with their work, and worldwide it is even worse at a dismal 13% engagement.74 In another sur- vey, Gallup reported that companies with the most engaged workforce had 147% higher earnings per share, better productivity and profitability, and lower absenteeism and turn- over than their competitors; so there is certainly strong reason to work toward a more engaged workforce.75

Many managers and employees think that compensation is the most important item in employee engagement, but that is simply not the case—at least in most organizations.76 Engaging employees is not an easy task, but we do have some evidence of things that work—at least in some cases. Overall compensation and benefits matter, but they are not enough. So how do we improve engagement? Take a look at the following tips.

Increasing engagement:

1. Give them the right tools—Mobile, social, digital tools that provide immediate information and feedback.77

2. Create trust—“walk the talk,” as Jack Welch says.78

3. Listen—and then act on the information received. “Not only does a comprehensive approach to listening help an organization pinpoint and quickly address problems, it makes people feel valued.” 79

4. Employees are more important than clients/customers. Manage and lead the indi- vidual employee—they are individuals!80

5. Treat all employees with respect. This was the number one factor in job satisfac- tion, and therefore in employee engagement, in a 2016 SHRM survey.81

Obviously, this is a cursory look at engagement, but we will discuss every one of these issues in more depth as we go through the remainder of the text. For now, just understand the importance of improved employee engagement.

HRM and Organizational Agility One of the words being used to describe successful organizations in today’s environment is agile. The agile organization not only accepts change and disruption but also thrives in such environments. Because nearly every industry is being disrupted by technology, agility is becoming a requirement in order to become, or remain, an industry leader.82 How can HRM help the organization become agile?

• Create a digital culture.83 To do this, HR and line managers must become comfort- able with mobile and on-demand technology that allows the organization to be more agile

LO 1-9 Describe how employee engagement affects productivity.

WORK APPLICATION 1-10 Explain how an organization

motivates employees to

be engaged.

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Chapter 1: The New Human Resource Management Process 29

and to respond more quickly to outside forces. Introduce HR technology to manage and inform the workforce; make it part of daily operations, and have leadership endorse its use. Digital technology can be used in nearly every area of HRM,84 including recruiting, selection, organizational safety, training and development, performance management and appraisal, and tracking individual compensation. Organization culture will be discussed more in Chapter 2; but for now, understand that we can design characteristics into the culture that will enhance the ability of all of our employees to adopt, and adapt to, new technology easily and quickly.

• Develop the ability not only to survive, but to thrive on change.85, 86 Along with creating a culture that is comfortable with digital technology and tools, the business needs to pay close attention to making people at all levels comfortable with immediate and con- tinuing change. Change will be discussed in more detail in Chapter 9.

• Explore the value of “on-demand” workers. The historical stable, large employee workforce is not always going to be the most valuable option in an agile organization.87 Working with all types of individual contributors will need to become the norm. Full-time employees need to work seamlessly with consultants, temporary workers, part- timers, and partner organization employees. They will need to be able to create and maintain these relationships as long as necessary, modify them when needed, and cut off their inter- action when the relationship no longer adds value. We will discuss options for managing labor in more detail in Chapter 4.

• Review legacy processes and structures for adaptability to the agile workplace. Many companies have internal structures and processes that were designed to improve efficiency, but at the expense of adaptability.88 When we design standard ways to do work and train people on those procedures, they become ingrained into the company—they are “the way we do things.” Unfortunately, along with being very efficient, they can prevent employees from seeing the value in doing something in a new way using new tools. If the organization is going to be able to become agile, we have to review the company structure and processes to see what can be kept without significant effect on the ability to adapt to new environments and what has to be modified. Organizational structure will also be dis- cussed in Chapter 2.

Let’s wrap-up this chapter by taking a look at what we have accomplished. We started out by showing you how HRM has changed in the past several decades and how it has become much more important to the organization due to continuing demands to increase productivity. We showed you how productivity, employee engagement, turn- over, and absenteeism are issues that companies have to deal with but have no direct control over; and we showed you how these factors affect work in organizations. We then identified several skills that you will need to be successful as a 21st century line or HR manager, and we identified the functional areas and the specialties that you can choose from if you decide to pursue a career in HRM. Finally, we gave you a model for success as a practitioner of HR management, and we showed you just a few of the issues that HR managers will face in the coming years.

WORK APPLICATION 1-11

Select an organization and describe

how it is and/or is not agile.

Want a better grade?

Get the tools you need to sharpen your study skills. Access practice quizzes, eFlashcards, video and multimedia, and more at edge.sagepub.com/lussierhrm3e.

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30 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

CHAPTER SUMMARY 1-1 Identify the difference between the traditional view

of HRM and the present view.

The traditional view holds that human resource manage- ment is a cost center, meaning a department or division within an organization that uses up organizational resources but doesn’t create revenues for the company. In the 21st century organization, we view HRM as a productivity center for the company. As a productivity center, HR fulfills a reve- nue-generating function by providing the organization with the right people in the right place and with the right skills so that organizational productivity can be improved.

1-2 Identify the major challenges that HR managers face in a modern organization; note especially where we are not doing well.

The combined major challenges are:

• Maintaining high levels of employee engagement

• Developing next generation organization leaders

• Maintaining competitive compensation and benefits offerings

• Managing the loss of key workers and their skill sets

Where we are doing poorly is primarily in the area of busi- ness acumen, especially in quantitative areas such as met- rics and data analytics.

1-3 Identify and briefly describe the four critical dependent variables that managers must control in order to compete in a 21st century organization.

The four critical variables are productivity, employee engagement, turnover, and absenteeism.

1. Productivity is the amount of output that an organization gets per unit of input, with human input usually expressed in terms of units of time. The two parts of productivity are efficiency and effectiveness.

2. Employee engagement is a combination of job satisfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time.

3. Turnover is permanent loss of workers from the organiza- tion. When people quit, it is considered voluntary turnover, while when people are fired, it is involuntary turnover.

4. Absenteeism is temporary absence of employees from the workplace.

1-4 Describe the four major HRM skill sets. The HRM skill sets include technical skills, interper- sonal skills, conceptual and design skills, and business skills. Technical skills include the ability to use methods and techniques to perform a task. Interpersonal skills

DIGITAL RESOURCES

HRM Concepts*

How to Get a Job in HR

Talent Management as High Performance Practice

Importance of HRM*

The History of HR

Employment Rights Disputes

HR Trends*

Employee Engagement

* premium video only available in the interactive eBook

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Chapter 1: The New Human Resource Management Process 31

provide the ability to understand, communicate, and work well with individuals and groups through develop- ing effective relationships. Conceptual and design skills provide the ability to evaluate a situation, identify alter- natives, select an alternative, and implement a solution to the problem. Finally, business skills provide analyti- cal and quantitative skills, including the in-depth knowl- edge of how the business works and of its budgeting and strategic-planning processes that is necessary for a manager to understand and contribute to the profitabil- ity of the organization.

1-5 Discuss the line manager’s six HRM responsibilities.

Line managers require knowledge of each of the following topics:

• Legal considerations. Line managers must know all of the major employment laws so that they don’t accidentally vio- late them in their daily interactions with their employees.

• Labor cost controls. Line managers have to understand what they are legally and ethically allowed to do to control labor costs.

• Leadership and motivation. Probably the most significant function of a line manager is that of being a leader and motivator for the people who work for him or her. Managers are worth less than nothing if they don’t improve employee performance.

• Training and development. Line managers are typically the first point of contact to determine whether or not their workforce needs training or development to perform at a high level. They are also the people responsible for making changes to organizational processes. Training in these new processes is typically required to create maximum produc- tivity in our workforce.

• Appraisal and promotion. Line managers are the primary individuals who evaluate subordinates’ work performance, and they should have a strong voice in who should be eli- gible for promotions in the organization, since their job is to know their people and each of their capabilities and limitations.

• Employee safety and security. Line managers have primary responsibility for the safety and security of the workers in an organization. They have to know the laws that deal with occupational safety and health as well as security proce- dures to protect their people from individuals who might want to do them harm.

1-6 Identify and briefly describe the eight major HRM discipline areas.

• The legal environment: EEO and diversity management. This discipline deals with equal opportunity laws and regu- lations as well as management of a diverse workforce.

• Staffing. This discipline manages the processes involved in job analysis, recruiting, and selection into the organization.

• Training and development. This discipline has responsibility for the training processes within the organization, for devel- oping curricula and lesson plans, and for delivery of train- ing courses. It is also involved with development of talent within the company to provide a group of employees who will be able to move into more senior positions that become vacant.

• Employee relations. This area involves the coaching, coun- seling, and discipline processes, along with employee communication and stress management. It is also typically responsible for the management of job satisfaction and employee engagement.

• Labor and industrial relations. This discipline works with the laws and regulations that control the organization’s relation- ships with their workforce. It also works with any union-man- agement contracts, including but not limited to union votes, grievances, contract negotiations, and bargaining with union representatives.

• Compensation and benefits. This discipline works with pay of various types and with benefits packages, all of which are designed to attract and keep the right mix of employees in the organization. It also deals directly with all of the federal and state compensation laws to ensure compliance.

• Safety and security. This discipline works to ensure that the environment on the job is safe for all workers so that on-the-job injuries and illnesses are minimized to the great- est extent possible. It also involves managing the organiza- tion’s planning for securing the workforce, both from being harmed by other people and from natural disasters such as earthquakes or tornados.

• Ethics and sustainability. This discipline bears responsibility for seeing to it that the organization acts in an ethical and socially responsible manner, to minimize harm to the envi- ronment and its various stakeholders. It involves manag- ing the sustainability efforts in the organization to minimize the organization’s “footprint” on the environment—in other words, to minimize the depletion of worldwide resources caused by the organization’s carrying out its processes.

1-7 List some of the major resources for HRM careers. The major resource for most HR managers is the Soci- ety for Human Resource Management, or SHRM. SHRM maintains information on all of the HR functions that we mentioned in Chapter 1. Other sources for information include ATD (The Association for Talent Development), which focuses on training and developing employees in organizations; and WorldatWork, which primarily focuses on total compensation of the workforce in all types of organizations.

1-8 Explain the five parts of the practitioner’s model for HRM and how the model applies to this book.

The practitioner’s model is designed to show the relation- ships between each of the functions and disciplines within HRM.

• On the first level are the items that are absolutely critical to the organization if it is going to continue to operate (and stay within federal and state laws while doing so) and be stable and successful for a significant period of time.

• The second level encompasses those things that are required to identify the kinds of jobs that must be filled and then to recruit and select the right types of people into those jobs so the company can maximize productivity over the long term. These are the items that will allow the organization to get its work done successfully over long periods of time.

• As we get into the third tier, we concern ourselves with management of the human resources that we selected in the second level. We have to get them training to do their

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32 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

jobs and allow them to perform those jobs for a period of time. We then have to appraise their performance and, if necessary, correct their behaviors that are not allowing them to reach their maximum potential. We do the latter through the coaching, counseling, and disciplinary pro- cesses. As this is occurring, we need to ensure that we maintain positive relationships with our employees so that they remain engaged with the organization and productive. We manage these positive relationships in many ways, from measuring and assessing job satisfaction periodically to managing relationships with union employees.

• In the fourth tier, we look at how to reward and maintain employees. Compensation and benefits can help keep employees satisfied and motivated.

• Finally, in the top tier, we want to make sure that we reward and maintain our workforce to minimize unnecessary

turnover and dissatisfaction. We do this through fair and reasonable compensation planning and through the main- tenance of a safe and secure workplace.

1-9 Describe how employee engagement affects productivity.

Employee satisfaction, ability, and willingness are critical factors to an organization’s success. Compensation and benefits are not enough to improve employee engagement. Employers also need to provide the right tools, create trust, listen and act, and treat employees with respect and as indi- viduals. Employers also need to keep employees engaged to help them better adapt to change, as organizations increasingly need to become agile to navigate new technol- ogies and changing organizational structures.

KEY TERMS REVIEW Complete each of the following statements using one of this chap- ter’s key terms:

1. __________ consists of the people within an organization.

2. __________ is a combination of job satisfaction, ability, and a willingness to perform for the organization at a high level and over an extended period of time.

3. __________ is a division or department within an organiza- tion that brings in no revenue or profit; in other words, it costs money for the organization to run this function.

4. __________ is a division or department that generates mone- tary returns for the organization.

5. __________ is a revenue center that enhances the profitabil- ity of the organization through enhancing the productivity of the people within the organization.

6. __________ is the amount of output that an organization gets per unit of input, with human input usually expressed in terms of units of time.

7. __________ answers the question, “Did we do the right things?” It is a function of getting the job done whenever and however it must be done.

8. __________ is a function of how many organizational resources we used in getting the job done; it answers the question, “Did we do things right?”

9. __________ are workers who “use their head more than their hands” to gather and interpret information to improve a prod- uct or process for their organizations.

10. __________ is the permanent loss of workers from the orga- nization.

11. __________ is the failure of an employee to report to the workplace as scheduled.

12. __________ is a capability that creates value for customers that rivals can’t copy quickly or easily and that allows the organization to differentiate its products or services from those of competitors.

13. __________ include the ability to use methods and tech- niques to perform a task.

14. __________ are the ability to understand, communicate, and work well with individuals and groups through developing effective relationships.

15. ___________ is being able to put yourself in another person’s place—to understand not only what they are saying but why they are communicating that information to you.

16. ___________ are made up of the ability to evaluate a situation, identify alternatives, select a reasonable alter- native, and make a decision to implement a solution to a problem.

17. __________ are the analytical and quantitative skills, includ- ing in-depth knowledge of how the business works and of its budgeting and strategic-planning processes, that are neces- sary for a manager to understand and contribute to the profit- ability of the organization.

18. __________ create and manage the organizational pro- cesses and the people that create whatever it is that a busi- ness sells.

19. __________ are the individuals who advise line management of the firm in their area of expertise.

20. __________ is meeting the needs of today without sacrificing future generations’ ability to meet their needs.

21. __________ is the largest and most recognized of the HRM advocacy organizations in the United States.

KEY TERMS absenteeism 11 business skills 16 conceptual and design skills 15 cost center 7 effectiveness 7 efficiency 7 empathy 14 employee engagement 6

human resources (HR) 5 interpersonal skills 14 knowledge workers 10 line managers 16 productivity 7 productivity center 7 revenue centers 7

Society for Human Resource Management (SHRM) 23

staff managers 16 sustainability 22 sustainable competitive advantage 13 technical skills 14 turnover 11

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Chapter 1: The New Human Resource Management Process 33

COMMUNICATION SKILLS The following critical-thinking questions can be used for class dis- cussion and/or for written assignments to develop communication skills. Be sure to give complete explanations for all answers.

1. Why is it important for all business majors to take this course in HRM?

2. Are you interested in becoming an HR manager? Why or why not?

3. Do you agree with the statement “Effectively utilizing the human resources within the organization is one of the few ways to create a competitive advantage in a modern busi- ness”? Why or why not?

4. Is employee engagement possible in an age when people tend to have very little loyalty to their employers and vice versa? How would you work to increase employee engage- ment as a manager?

5. Can HRM really create revenue for the organization? If so, how?

6. Identify some things that could be done by a manager to increase productivity and employee engagement, and decrease absenteeism and turnover. Make a list for each item.

7. If you were the HR manager for your organization, what would you do to increase the number of applicants who apply for “knowledge worker” positions in your organization? Assume you can’t pay them more.

8. Is there anything that an individual within an organization can do to help improve relations among diverse workers? If so, what?

9. Some say that for managers, hard skills (technical and busi- ness skills) are more important than soft skills (human rela- tions and conceptual and design skills). What do you think, and why?

10. Are external certification programs (in all jobs) becoming more important? Why?

CASE 1-1 BA-ZYNGA! ZYNGA FACES TROUBLE IN FARMVILLE In late 2011, Zynga’s employees were showing serious frus- tration with long hours, high-stress deadlines, and especially the leadership of the company. Responses to a quarterly staff satisfaction survey provided lots of criticism of both the company culture and of Mr. Mark Pincus—the CEO. One individual was so disenchanted that he openly expressed his intent to “cash out” and leave after the company’s initial public offering (IPO) in December 2011.

Zynga was one of the fastest growing web-based compa- nies at that point in time. It operated with an almost military command-and-control structure, with autonomous units in charge of each game (most of you will recognize the games FarmVille and CityVille). At times, it was “a messy and ruthless war.”89 Employees worked long hours while “managers relentlessly track[ed] prog- ress, and the weak links [were] demoted or let go.”90 The entire environment could be described as intense.

There were serious concerns about the long-term viability of this culture, though. “While some staff members thrive in this environment, others find it crushing. Several former employ- ees describe emotionally charged encounters, including loud outbursts from Mr. Pincus, threats from senior leaders, and moments when colleagues broke down [in] tears.”91 A number of former employees spoke about how the high-pressure cul- ture might become a major liability as the company continued to grow. The consensus of these former workers appeared to be that the company might not continue to be able to attract and retain the top engineering and programming talent that they would need going forward.

“While from the outside Zynga may have the fun and whimsy of the Willy Wonka chocolate factory, the organization thrives on num- bers, relentlessly aggregating performance data, from the upper ranks to the cafeteria staff.”92 Everything was measured and mapped, and results were used to identify the top performers along with the “not-so-top” performers and their groups. (Top teams had been known to be rewarded with vacations for the entire team, with spending money provided by the company!) Mr. Pincus personally tracked large amounts of data showing performance levels for the 3,000 employees and their work teams.

It wasn’t that Zynga was failing, or even that there was an open fear of failure. Zynga was one of the rare Internet start-ups that were actually making money. Zynga had garnered $828.9 million in revenue in the first nine months of 2011 and had earned $121 million since the start of 2010. However, the company culture was purely performance driven. The best employees were rewarded very well, while people who couldn’t “hit the numbers” were likely to disappear.

Other local companies and their human resources managers were looking on in anticipation. They also had talent acquisition prob- lems, but many had a much more collaborative culture than Zynga did, and they thought they would be able to use these cultural attributes to steal talent from Zynga after the IPO concluded. They knew that most of Zynga’s early employees who had some type of stock or options in the company would not be likely to leave until the IPO was finalized, but that many would be looking around soon after.

Questions 1. Imagine you are the new HR director at Zynga. What do you

think you might do in this situation to limit the potential loss of a large number of very talented employees?

2. Are there any benefits or incentives that you can think of that might make more people want to stay on at Zynga after the IPO is complete and they can “get their money”?

3. HR managers frequently have to teach other senior manag- ers how to deal with their employees better. What do you think you can do about Mr. Pincus? Is there anything you can do? Can you coach him concerning his management style? Do you think this will be effective?

4. Do you think that big cash and stock rewards for top perform- ers and “the boot” for poor performers is the appropriate way to manage talent in this type of high-tech business? Why or why not?

Case written by Herbert Sherman, Long Island University

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34 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

CASE 1-2 FRACTURING THE LABOR MARKET—EMPLOYMENT IN THE OIL SERVICES INDUSTRY

When oil hit $26.21 a barrel in 2016, down from nearly $100 a barrel from five years earlier, jobs in the oil service industry were rare and people were out of work. “Everyone [was] so hungry, it [was] like we were hanging a steak in front of a bunch of starving people,” said Joseph Triepke, founder of the industry research company Infill Thinking in Dallas. A year later with oil at $55 a bar- rel, an employer like Piotr Galitzine is having a hard time keeping up with his orders and is running 24/7 one of his Houston-based, steel-pipe shops.(1)

The rising oil prices are fueling orders with the oilfield-equipment giant National Oilwell Varco Inc. as well, with a ten-year shift in their business from offshore gear to land-based. “It’s tough,” said the chief executive officer of Agility Energy Inc. “We’ve got commit- ments that are very difficult to keep right now because we can’t get the drivers.”(2) Surprising, since truckers who haul fracking sand have a starting pay of around $80,000 per year.

Yet the shift of employment in this market segment is not evident when looking at the larger labor picture, since unemployment for the most part has been unchanged. The Bureau of Labor Statistics (the government agency charged with tracking US employment) reported that long-term unemployment, defined as those being out of work for more than 26 weeks, remained stable at 1.8 million in February 2017. This constituted 23.8% of total unemployment. The annual rate of total unemployment dropped from 4.9% to 4.7% with the total number of unemployed remaining constant at 7.5 million.

Construction employment did account for the largest growth in February 2017. Construction in general over the last six months accounted for job growth of 177,000 with a one-month gain of 58,000 jobs. Heavy and civil engineering construction added 15,000, while specialty trade contractors accounted for 36,000.(3)

With the price of crude oil doubling over the past three years, oil companies are quite busy. This growth has been supported by new technology that allows for faster drilling, more intelligent frack- ing, and locating a greater quantity of rich oil deposits. This boom could be very short-lived, given the fact that finding good shale for- mations are hit-or-miss. Once found, the fracking process begins— the adjacent rock is bombarded with chemicals, water, and sand. The most stress-free drilling is in pancaked layered formations (predominately found in the Permian Basin of New Mexico and West Texas).

When business booms, so does employment. Canada and the United States are outpacing worldwide expenditures on produc- tion and exploration by 4:1, with the U.S. outpacing the last oil surge with an additional 125,000 barrels a day since September 2016.

“Every time I push that computer button that says ‘approved’ on the rehire, I feel better.”(4) CEO Galitzine of pipe-supplier TMK Ispco, the US unit of Russia’s TMK PJSC, said that just over the past four months, he has hired nearly 300 employees, increasing the number of his workers to the highest level since January of 2016; yet he feels this boom of oils prices may not last.

“When we were at $100, to look at $50 would have been very scary. . . . Now, the confidence $100 used to instill can probably be had at $65. . . . That’s how much cost has been squeezed out of the supply chain. So $65 is the new $100.”(5)

Is Galitzine right? Supply and demand drives the industry; and Galitzine is tracking how growth in shale drilling is offsetting the November reduction of 1.2 million barrels a day of crude from the 13-member Organization of Petroleum Exporting Countries and Russia.

Bryan Sheffield, chief executive officer of Parsley Energy Inc. is worried that the boom/bust cycle will repeat itself; he just doesn’t know when. “For every barrel that OPEC cuts, the American shale drillers are putting on half a barrel. If that remains, then I think we’re okay.” If shale fields start churning out much more, “then who knows what’s going to happen to the price of oil,” he said. “Probably nothing good.”(6)

Questions 1. One of the two main goals of strategic HRM is to ensure the cor-

rect number of employees with the types of skills the organiza- tion requires. Given the boom/buster nature of the oil services industry, what external factors in this case should an HRM man- ager monitor to ensure that employment needs are met?

2. What types of jobs and related skill sets seem to be in short supply currently in the oil supply industry, given the increase in construction employment in the past year? Which of the three new HRM challenges and four critical dependent vari- ables does this issue most closely address?

3. HR managers have several disciplines of responsibilities— which disciplines does this case directly and indirectly address?

4. Given the feast/famine cycle in the oil supplier industry, what trends and issues in HR address the necessity of retaining these firms’ best employees?

5. The people quoted in the case are all CEO’s of their firms and not HRM managers. Why would CEO’s concern them- selves with HR issues if these issues are the responsibility of HR managers?

References (1) Wethe, D. (2017, March 8). The shale industry is scram-

bling to catch up to its own boom. Bloomberg. Retrieved from http://www.msn.com/en-us/money/markets/the- shale-industry-is-scrambling-to-catch-up-to-its-own-boom/ ar-AAnXLz3? srcref=rss

(2) Ibid.

(3) U.S. Department of Labor, Bureau of Labor Statistics. (2017, March 10). The employment situation—February 2017 (USDL-17-0300). Retrieved from https://www.bls.gov/ news.release/archives/empsit_03102017.pdf

(4) Wethe, D. (2017, March 8). The shale industry is scram- bling to catch up to its own boom. Bloomberg. Retrieved from http://www.msn.com/en-us/money/markets/the- shale-industry-is-scrambling-to-catch-up-to-its-own-boom/ ar-AAnXLz3? srcref=rss

(5) Ibid.

(6) Ibid.

Case written by Herbert Sherman, Long Island University

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Chapter 1: The New Human Resource Management Process 35

SKILL BUILDER 1-1 GETTING TO KNOW YOU Objectives

1. To get acquainted with some of your classmates

2. To gain a better understanding of what the course covers

3. To get to know more about your instructor

Skills The primary skills developed through this exercise are as follows:

1. HR management skill—Human relations

2. SHRM 2016 Curriculum Guidebook—A: Employee Relations

Procedure 1 (5–8 minutes) Break into groups of five or six, preferably with people you do not know. Have each member tell the group his or her name and two or three significant things about himself or herself. Then have all group members ask each other questions to get to know each other better.

Procedure 2 (4–8 minutes) Can everyone in the group address every other person by name? If not, have each member repeat his or her name. Then each per- son in the group should repeat the names of all the group members until each person knows everyone’s first name.

Application What can you do to improve your ability to remember people’s names?

________________________________________________________

Procedure 3 (5–10 minutes) Elect a spokesperson for your group. Look over the following cate- gories and decide on some specific questions you would like your spokesperson to ask the instructor from one or more of the catego- ries. The spokesperson will not identify who asked the questions. You do not have to have questions for each area.

• Course expectations. What do you expect to cover or hope to learn from this course?

• Doubts or concerns. Is there anything about the course that you don’t understand?

• Questions about the instructor. List questions you’d like to ask the instructor to get to know him or her better.

Procedure 4 (10–20 minutes) Each spokesperson asks the instructor one question at a time until all questions have been answered. Spokespeople should skip questions already asked by other groups.

Apply It What did I learn from this experience? How will I use this knowl- edge in the future?

________________________________________________________

SKILL BUILDER 1-2 COMPARING HR MANAGEMENT SKILLS AND HR RESPONSIBILITIES Objective To better understand the importance of good HR management skills and implementing HR responsibilities effectively

Skills The primary skills developed through this exercise are as follows:

1. HR management skills—Conceptual and design

2. SHRM 2016 Curriculum Guidebook—A: Employee Relations

Compare Your Supervisors’ HR Management Skills and HR Responsibilities Effectiveness Recall the best supervisor or boss you ever worked for and the worst one you ever worked for (preferably line managers, not HR managers). Compare these two people by writing brief notes in the following chart about each person’s HR management skills and HR responsibilities.

HR Management Skills and HR Responsibilities Best Supervisor or Boss Worst Supervisor or Boss

Technical Skills

Interpersonal Skills

Conceptual and Design Skills

Business Skills

Legal Considerations Responsibilities

Labor Cost Control Responsibilities

Leadership and Motivation Responsibilities

Training and Development Responsibilities

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36 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Appraisal and Promotion Responsibilities

Safety and Security Responsibilities

Based on your own experiences with a good boss and a poor one, what do you believe are the key differences between good and poor managers?

Apply It What did I learn from this exercise? How will I use this knowledge in the future?

___________________________________________________________________________________________________________________

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JONATHAN NACKSTRAND/AFP/Getty Images

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LEARNING OBJECTIVES After studying this chapter, you should be able to do the following:

2-1 Identify and explain the major components of the external environment. PAGE 40

2-2 Discuss how having a vision and mission helps organizations design a strategy and focus their resources. PAGE 44

2-3 Identify the three types of strategy, two methods to analyze strategy, and the objective writing model. PAGE 47

2-4 Identify and describe the major components of organizational structure and why it is important to understand them. PAGE 53

2-5 Discuss how organizational culture affects the members of the organization. PAGE 56

2-6 Identify areas of HRM where data analytics and other HR technologies can have an effect on organizational success. PAGE 59

2-7 Describe human resource management systems (HRMS) and identify how they can help HR make decisions. PAGE 61

2-8 Identify the common measurement tools for strategic HRM. PAGE 62

2-9 Discuss the role of culture, technology, and globalization in HRM. PAGE 64

2 Strategy-Driven Human Resource Management ©iStockphoto.com/sanjeri

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Chapter 2: Strategy-Driven Human Resource Management 39

Practitioner’s Perspective Cindy notes that one thing many family get-togethers have in common is storytelling—reminiscing about common experiences and outstanding members. These stories are part of the ties that bind and define the group, and the same is true for your work “family.”

For example, take this story about Bill, an executive who started work as an emergency medical technician. One time while Bill was moving a nursing home resident, the resident’s bedridden roommate feebly attempted to say good-bye. Young and impatient, Bill didn’t stop to let the two talk but hurried off to the hospital with his passenger. The next time he was at that location, Bill was pulled aside by a nurse who said, “What I am about to say will break your heart, but it will make you a better man. The woman you transported died in the hospital that night. The roommate was her husband of 70 years, and you didn’t give him time to say good-bye.” Ever afterward in his career, Bill’s motto was “patients first,” and that goal permeates his institution even today in everything it does.

What else defines company culture? Chapter 2 examines strategies, mission statements, vision, and values—all important pieces of a company’s identity.

A. Employee and Labor Relations (required)

3. Managing/creating a positive organizational culture

C. Ethics (required)

3. Individual versus group behavior

E. Job Analysis/Job Design (required)

9. Organization design (missions, functions, and other aspects of work units for horizontal and vertical differentiation)

G. Outcomes: Metrics and Measurement of HR (required)

1. Economic value added

2. Balanced scorecard: HR and organization level

7. Return on investment (ROI)

8. HR scorecard

9. Organizational scorecard

J. Strategic HR (required)

1. Strategic management

2. Enhancing firm competitiveness

3. Strategy formulation

4. Strategy implementation

7. Competitive advantage

8. Competitive strategy

10. Linking HR strategy to organizational strategy

13. Mission and vision

14. Quality management

Q. Organizational Development (required—graduate students only)

12. Organizational structure and job design

SHRM HR CONTENT See Appendix: SHRM 2016 Curriculum Guidebook for the complete list

Get the edge on your studies. edge.sagepub.com/lussierhrm3e

• Take a quiz to find out what you’ve learned.

• Review key terms with eFlashcards.

• Watch videos that enhance chapter content.

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40 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

CHAPTER OUTLINE Strategy and Strategic Planning: The Organization and

the Environment

The External Environment

Strategic Vision and Mission

What Is Strategy?

Visions and Missions

Strategy Types and Analysis

Types of Strategies

How Strategy Affects HRM

Strategic Analysis

Designing a Strategy

How HR Promotes Strategy

Structure

Basics of Organizational Structure

How Does Structure Affect Employee Behavior?

How Does Structure Affect HRM?

Organizational Culture

What Is Organizational Culture?

How Culture Controls Employee Behavior in Organizations

Social Media and Culture Management

An Introduction to Data Analytics and HR Technology

A Brief on Data Analytics

HR Technology

Desired Outcomes

Human Resource Management Systems (HRMS)

What Are HRMS?

How Do HRMS Assist in Making Decisions?

Measurement Tools for Strategic HRM

Economic Value Added (EVA)

Return on Investment (ROI)

Balanced Scorecard (BSC)

HR Scorecard

Trends and Issues in HRM

Structure, Culture, and Technology Are Misaligned

Continuing Globalization Increases the Need for Strategic HRM Planning

STRATEGY AND STRATEGIC PLANNING: THE ORGANIZATION AND THE ENVIRONMENT The concepts of strategy and strategic planning were introduced briefly in Chapter 1. As indicated there, strategy and strategic planning deal with a process of looking at our orga- nization and its environment—both today and in the expected future—and determining what our organization decides to do to meet the requirements of that expected future (see Exhibit 2-1). This process of strategic analysis and building a coherent strategy is more critical today than it has ever been before. This is because in most worldwide industries today, we have far more competition and capacity than ever before, making it more diffi- cult to create the sustainable competitive advantage that we need in order to survive over the long term.1, 2, 3

Strategic planning is about planning for the long-term future; and to be successful, you need to plan using goals and measurable standards.4 There is an old saying: “When you fail to plan, you plan to fail.” Research supports this saying and confirms the importance of planning.5 Some managers complain that they don’t have time to plan, yet research shows that managers who plan are more effective and efficient than nonplanners. Before we get into the details of strategic planning, complete Self-Assessment 2-1 to determine your level of planning.

Our internal (company) and external (competitors, customers, governments, etc.) environments largely determine how we as managers must act to provide the organization with the right combination of people to help us reach our strategic goals. HRM is a critical component of meeting organizational goals, because without the right people with the right types of education, skills, and mind-set, we cannot expect to accomplish the

LO 2-1 Identify and explain the major components of the external environment.

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Chapter 2: Strategy-Driven Human Resource Management 41

objectives that we set for ourselves.6 Again, people are one of the most difficult organiza- tional resources to imitate; and, therefore, the right people give us a powerful competitive advantage over our rival firms.

In this chapter, we focus primarily on the organization’s environment. The environment has two parts: internal and external. First, let’s briefly discuss the external environment. Then, in the next section, we will describe in detail three key aspects of the internal environment: strategy, structure, and culture.

The External Environment The external environment consists of a series of influences that originate outside the organiza- tion and that the company cannot control. Each of these forces acts on the firm and requires it to change and adapt, usually in the form of strategic responses to these environmental changes.7 The nine major forces origi- nating in the external environment are shown in Exhibit 2-2, along with an explanation of each.

• Customers. Customers have more power today than ever before, as they have a major effect on the organization’s performance through their purchase of products and services. Without customers, there’s no need for an organization. Therefore, companies must continually improve products and services to create value for their customers.8 This process of improvement requires skilled employees who are willing to use their creativity to add to the organization’s knowledge and thereby help manage products and services for customers. During a recent takeover effort of Safeway grocery stores by Sobeys, Inc., CEO Marc Poulin was removed as CEO when Safeway amassed a significant number of customer complaints “about out-of-stock products” as well as other internal issues that angered customers and disturbed employees.9

• Competition. Businesses must compete for customers, and their performance is not simply a function of their own actions. Each firm’s performance must be understood rel- ative to the actions of its competitors.10 For example, Walmart has historically worn the

Strategic planning is a key part of the foundation of an organization’s success.

Da vi

d Ry

de r/

Bl oo

m be

rg vi

a G et

ty Im

ag es

Pick the best option

External Analysis

Current Strategy Strategic Options Strategy Choice

Internal Analysis

EXHIBIT 2-1 STRATEGIC CHOICE

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42 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

EXHIBIT 2-2 THE EXTERNAL ENVIRONMENT

Organization

Customers

Competition

Suppliers

Labor force

ShareholdersSociety

Technology

The economy

Governments

title of the low-price leader in retail sales for many years, which provides it a competitive advantage over its rivals. However, Amazon has now taken over in many segments as not only the low-price leader, but also by providing delivery to your doorstep. Walmart is fighting back, partially by buying Jet.com and through many others competitive moves, but it is likely to be a long and difficult fight.11 Organizations also frequently compete for the same employees and sometimes for suppliers;12 and almost everyone has heard of one organization stealing employees from another similar organization, especially in high-technology fields.13 Also, changes in competitors’ strategy often affect the perfor- mance of the organization.

• Suppliers. Organizations buy resources from suppliers. Therefore, partnerships with suppliers also affect firm performance.14 The Japanese earthquake and tsunami in Fukushima, for instance, affected virtually every company in the auto industry because electronic components made in northern Japan were unavailable for an extended period of time.15 Therefore, it is important to develop close working relationships with your suppliers; and building close relationships requires employees who have the ability to communicate, empathize, negotiate, and come to mutually advantageous agreements.

• Labor force. The employees of and the talent pool available to an organiza- tion have a direct effect on the organization’s performance. The US labor market has rebounded somewhat from the recession of 2007–2008, but current predictions for future labor force participation show a slower growth rate for the foreseeable future. This prediction holds in the United States and in many other industrialized countries, due to slower population growth overall.16 Management recruits human resources from the available labor force outside the company’s boundaries, so slow population growth will limit the available talent pool. Unions can sometimes provide employees for the orga- nization, but they are considered an additional external factor because they collectively bargain for those employees. Nevertheless, some companies are growing rapidly, even in the current labor market. Facebook planned to hire more than 3,000 people in 2017 just to improve their ability to review questionable posts, along with thousands of others for various other jobs within the company.17

• Shareholders. The owners of a corporation, known as shareholders, influence management. Most shareholders of large corporations are generally not involved in the day-to-day operation of the firm, but they do vote for the directors of the corporation. The board of directors is also generally not involved in the day-to-day operation of the firm, but it may hire or fire top management. The top manager reports to the board of direc- tors; and if the organization does not perform well, the board can fire that manager and others.18

WORK APPLICATION 2-1 Give examples of how customers,

competitors, and suppliers have

affected an organization where

you work or have worked.

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Chapter 2: Strategy-Driven Human Resource Management 43

• Society. Our society, to a great extent, determines what acceptable business prac- tices are.19 Individuals and groups of stakeholders work in various ways to pressure busi- nesses to make changes. For example, protesters held up completion of the Dakota Access oil pipeline for almost a year when they were concerned for the safety of a source of drink- ing water for Native Americans.20 In other cases, people who live in the same area as the business do not want it to pollute the air or water or otherwise abuse natural resources.

• Technology. Few organizations operate today as they did even a decade ago. Products not envisioned a few years ago are now being mass-produced. New 3-D printers can even make a car body from basic materials (e.g., the new Urbee by KOR Ecologic).21 Computers and the Internet have changed the speed at which, and the manner in which, organizations conduct and transact business; and they are often determining factors in the firm’s business processes. Changing technologies require technologically savvy employees who have the ability to adapt to new processes.22 Without employees who are comfort- able with changing technologies, organizations today will soon find themselves unable to compete.

• The economy. No corporation has control over economic growth, inflation, inter- est rates, foreign exchange rates, and so on. In general, as measured by gross domestic product (GDP), businesses do better during times of economic growth than during reces- sions. During periods of inflation, businesses experience increased costs. When interest

WORK APPLICATION 2-2

Give examples of how society

and technology have affected

an organization where you

work or have worked.

SELF-ASSESSMENT2-1 Level of Planning

Write a number from 1 to 5 before each statement to indicate how well each statement describes your behavior.

Describes me Does not describe me

5 4 3 2 1 _____ 1. Whenever I start a project of any kind, I have a specific end result in mind. _____ 2. When setting objectives, I state only the end result to be accomplished; I don’t specify how the result will be accomplished. _____ 3. I have specific and measurable objectives; for example, I know the specific grade I want to earn in this course. _____ 4. I set objectives that are difficult but achievable. _____ 5. I set deadlines when I have something I need to accomplish, and I meet those deadlines. _____ 6. I have a long-term goal (what I will be doing in 3–5 years) and short-term objectives that will get me there. _____ 7. I have written objectives stating what I want to accomplish. _____ 8. I know my strengths and weaknesses, am aware of threats, and seek opportunities. _____ 9. I analyze a problem and consider alternative actions, rather than immediately jumping in with a solution. _____ 10. I spend most of my day doing what I plan to do, rather than dealing with emergencies and trying to get organized. _____ 11. I use a calendar, appointment book, or some form of to-do list. _____ 12. I ask others for advice. _____ 13. I follow appropriate policies, procedures, and rules. _____ 14. I develop contingency plans in case my plans do not work out as I expect them to. _____ 15. I implement my plans and determine if I have met my objectives.

Add up the numbers you assigned to the statements to see where you fall on the continuum below.

Planner Nonplanner

75 65 55 45 35 25 15 Don’t be too disappointed if your score isn’t as high as you would like. All of these items are characteristics of effective planning. Review the items that did not describe you and consider making an effort to implement those characteristics of planning.

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

44 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

rates are high, it costs more for companies to borrow money. Foreign exchange rates also affect businesses both at home and abroad. Thus, the economy has a direct impact on the firm’s performance and profits. We always have to take the economy into account when performing strategic-planning activities.

• Government. National, state, and local governments all set laws and regulations that businesses must obey. According to the National Association of Manufacturers, the annual cost of complying with all federal government regulations averages $19,564 per employee.23 The Occupational Safety and Health Administration (OSHA) sets safety stan- dards, and the Environmental Protection Agency (EPA) sets pollution standards that must be met. Companies like Pfizer, Novartis, and Merck cannot market drugs without Food and Drug Administration (FDA) approval, and virtually every employer must follow wage guidelines from the Department of Labor (DOL). As a result, to a large extent, busi- ness may not do whatever it wants to do; the government tells business what it can and cannot do.24 So government matters, as it affects how business is conducted.25 Due to the financial crisis of 2007–2009, Congress decided to create new financial regulations to help prevent another crisis and recession. One was the Regulatory Flexibility Act, which low- ered costs of compliance for small businesses by about $2.5 billion in 2013.26 Federal and state governments create both opportunities and obstacles for businesses. Allstate insur- ance left the state of Massachusetts because of the unfavorable regulatory environment there. To learn more about the US federal government, visit its official web portal at http:// www.usa.gov/.

In addition to our analysis of the major external environmental factors above, we need to review some internal organizational factors to decide what we want to do as an organi- zation as we move into the future. The major factors in our analysis of our internal envi- ronment are shown in Exhibit 2-3 and are discussed in the next three sections.

STRATEGIC VISION AND MISSION Strategy and the strategic-planning process have a long history, and businesses have adapted the principles of strategic planning to their own use. As G. F. Keller said, “Many military historians and contemporary business students view the Chinese military strate- gist Sun Tzu (ca. 500 BCE) as the developer of ‘the Bible’ of strategy. . . . Sun Tzu’s princi- ples are divided into two components: 1) knowing oneself and 2) knowing the enemy.”27 To put Sun Tzu’s words in a contemporary business context, one should know one’s inter- nal and external environments. But how does a modern business go about creating and

WORK APPLICATION 2-3 Give examples of how the

economy and government have

affected an organization where

you work or have worked.

J:8 Competitive Strategy

SHRM

LO 2-2 Discuss how having a vision and mission helps organizations design a strategy and focus their resources.

S t

r a

t e

g y C

u l

t u

r e

S t r u c t u r e

EXHIBIT 2-3 THE INTERNAL ENVIRONMENT

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 45

implementing a strategic plan? Well, strategic planning follows a process,28 so let’s discuss that process now.

What Is Strategy? Research has shown that HRM is an important strategic business function that influences the performance of both large and small firms.29 But what is strategy? At its most basic level, a strategy is a plan of action designed to achieve a particular set of objectives. And what does strategy take into account? It looks at the external (industry and macro-) envi- ronment and the internal (organizational) environment in order to create strategic advan- tage. Strategic advantage occurs when you analyze the environment better and react to it quicker than your competitors do while using all of your internal resources efficiently, thus creating the sustainable competitive advantage that we introduced in Chapter 1.

In this section, we look at the following three major strategic questions to analyze what kind of strategic plan we need:30

1. What is our present situation (where are we now)?

2. Where do we want to go?

3. How do we plan to get there?

These questions are both very simple and very complex. On the surface, you would think that answering question 1 would be easy—but you must answer many other ques- tions before you can confidently answer the question, “Where are we now?” These other questions include: “Are we making a profit?” “Do our products satisfy our customers’ current needs?” “Do we have the right kind of workforce in place at this time?” “Is our technology working like it should?” “Do we have sufficient physical resources like plant, machinery and equipment, and retail locations?” “Are our advertising and marketing programs successful?” and many more. Answering these questions creates a picture of your organization at a particular point in time; and that picture has to be comprehensive so that you know what is happening, good and bad, within the organization in significant detail. If you think about each of these other questions for just a second, you will see how complex answering question 1 really becomes.

Answering questions 2 and 3 is just as complex. Question 2 is basically asking what we plan to “look like” as an organization at a particular point in the future—meaning it’s asking what our vision and mission are for the organization. Answering question 3 gives

J:1 Strategic Management

SHRM

Strategy A plan of action designed to achieve a particular set of objectives

J:7 Competitive Advantage

SHRM

APPLYING THE CONCEPT2-1 The External Environment

Read each statement and write in the letter corresponding to the external environmental factor it refers to.

a. customers b. competition c. suppliers d. labor force e. shareholders f. society g. technology h. the economy i. governments

____ 1. The CEO was fired by the owners because our com- pany is not profitable.

____ 2. GE wanted to acquire our company, but the Securities and Exchange Commission (SEC) said that would be in violation of antitrust laws, thereby preventing the deal.

____ 3. Karen bought a new oven that will cook our pizza in half the time and make it taste even better.

____ 4. eHarmony online dating service is losing some cus- tomers to other services focusing on Christian, Afri- can-American, and older people seeking matches.

____ 5. Our purchasing agent just closed a deal that will let us buy sugar for a few cents less per pound, saving us thousands of dollars per year.

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

46 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

us the necessary information to create the plan that will allow us to reach the goals that we identify in our answer to question 2 so that we can become the organization that we envi- sion and, at the same time, create a sustainable competitive advantage.

Visions and Missions A vision and a mission are two of the most critical components of any successful corporate strategy. Together, they provide the information necessary to focus every employee on the company’s goals and objectives. Let’s take a look at them now.

THE VISION. A vision is what we expect to become as an organization at a particular point in time in the future. The vision, by necessity, is a fuzzy thing; it is not specific, in that it doesn’t say how we’re going to achieve it. But we identify the vision as a future state of being. It is who we are, what we stand for, what we believe in, and what we want to become. Despite their fuzziness, visions are very powerful when used correctly. A vision provides a focus point for the future; it tells the company where it is headed.31 It allows the company leaders to look into the future and see what they want to look like as a company at that time—basically, it lets them answer the question of what they want to be when they “grow up.” If everyone is focused on the same future end state, they will work toward that same end state.

So, basically the vision answers the question, “What do we want to become as an organization?” But the firm is successful only when the followers share the leader’s vision,32 and HR is where many organizations perform the culture training that promotes a shared vision within the organization.

THE MISSION. In contrast, the mission is where we start to become specific. The mission statement lays out our expectations of what we’re going to do in order to become the organization that we have envisioned. The mission statement is a statement of what the various organizational units will do and what they hope to accomplish, in alignment with the organizational vision. The mission is generally narrower and more specific than the vision, which means that it generally must be a bit longer-winded. The mission statement takes into account things like whom we serve (in terms of customer groups, types of products and services, technologies we use, etc.) and how we serve them. Fundamentally, it answers the question, “What do we need to do in order to become what we have envisioned?”

PUTTING THE VISION AND MISSION TOGETHER. Let’s use as an example the vision and mission statements of the College of Business of the University of Arkansas at Little Rock. Its vision statement is as follows: “The College of Business serves as a catalyst to advance education and economic development in the State of Arkansas.”33 Notice that this vision statement does not tell you how the college will be a catalyst. It doesn’t say what the college is going to do. All it tells you is that it expects to be a catalyst. But what is a catalyst? It’s “a substance that modifies and increases the rate of a reaction without being consumed in the process.”34 So, that means the college is going to be an organization that increases the rate of change in education and economic development in its home state.

However, this vision does not tell us anything about how the college is going to do this. For that information, we look at the mission of the organization, which tells us how the organization expects to do what the vision puts forth. So let’s look at the mission state- ment of this college of business. It says, “The mission of the College of Business is to pre- pare students to succeed as business professionals in a global economy and to contribute to the growth and viability of the region we serve.”35 So this means the college of business will achieve its vision by providing education that gives its students the tools they need to succeed in business and create change in the state. This, in turn, will act to improve the state’s economic fortunes.

J:13 Mission and Vision

SHRM

Vision What we expect to become as an organization at a particular point in time in the future

Mission statement A statement laying out our expectation of what we’re going to do in order to become the organization that we have envisioned

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 47

When you put the vision and mission together, the people—executives, managers, and staff—in the organization get a more complete picture of the direction in which they are expected to go. This allows all the people in the organization to focus on going in that direction, and that in turn makes it much easier for them to help the organization achieve its goals. The fact that they create a focus is the thing that makes a vision and mis- sion so powerful. If everyone in the organiza- tion is focused on the same end result, it is much more likely that the organization will achieve that end result.

This focus on an end result also gives everyone a clearer picture of what is expected of them individually. Think of it as follows: If you’re a bricklayer and you’re laying bricks, you may not pay attention to each of the bricks you lay if you have no mental picture of the finished project. How- ever, if you’re building a beautiful art museum and you have been shown a picture of what the museum will look like when finished, you’re more likely to pay close attention to each brick because you will want to be able to say that you helped create something beautiful.

A strong vision and a good mission statement are critical parts of the strategic- planning process. Everything else in strategic planning comes from the vision and mission.

Vision + Mission = FOCUS!

Finally, organizations go through a series of analyses of both external and internal factors to come up with the plan of action that answers question 3. Strategic planners look at each of the environmental factors that we noted above, and they analyze the company’s capabilities and limitations to come up with a workable plan. We will discuss some of these factors in the following sections.

STRATEGY TYPES AND ANALYSIS Types of Strategies There are several generic strategy types that we are able to categorize. Some researchers break these down into just two or three categories, while others list several more. We will try to keep this as simple as possible right now because, for our purposes, we need to know only the major categories. So we will break the types of strategies down into three categories: cost leadership, differentiation, and focus or niche strategies.36

COST LEADERSHIP. Cost leaders do everything that they can to lower the organizational costs required to produce their products or services. However, cost leaders do not necessarily provide their products or services to the customer for a lower price. They can choose to keep their prices down and maintain the same margin as their higher- cost competitors, or they can choose to charge the same price as their competitors and thus increase their profit margin above that of their competitors on each of the goods or services they sell. Walmart has had great success with this strategy; and during the recession and coming out of it, Walmart reduced its prices even more aggressively to combat loss of business to “dollar” stores.37 However, low-cost strategies can have a downside as well. Tata Motors’ cheap Nano automobile at first failed because potential

WORK APPLICATION 2-4

Identify the vision and mission

of an organization where you

work or have worked.

LO 2-3 Identify the three types of strategy,

two methods to analyze strategy, and the objective writing model.

Ben Cohen and Jerry Greenfield created a three-part mission for Ben & Jerry’s: to make great ice cream, to create prosperity, and to make the world a better place through ethical sourcing.

AD E

JO HN

SO N/

AF P/

Ge tt

y I m

ag es

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

48 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

customers saw it as “too cheap” and therefore thought, “It must be unreliable.” So, Tata is now building more expensive Nanos, hoping that they will catch on with young buyers.38

DIFFERENTIATION. This strategy attempts to create an impression of difference for the company’s product or service in the mind of the customer. The differentiator company stresses its advantage over its competitors.39 If a company like Apple is successful in creating this impression, it can charge a higher price for its product or service than can its competitors. Differentiation, it should be noted, is not necessarily based on real difference but on the perception of difference, which is often created through advertising.40 Nike, Harley Davidson, Margaritaville, and others place their corporate name prominently on their products to differentiate those products from those of the competition. According to Coca-Cola, the three keys to selling consumer products are differentiation, differentiation, and differentiation, which it achieves with its scripted name logo and contour bottle.

FOCUS OR NICHE. With this strategy, the company focuses on a specific portion of a larger market. For instance, the company may focus on a regional market, a particular product line, or a buyer group. Within a particular target segment or market niche, the firm may use differentiation or a cost leadership strategy. Businesses can win big by thinking small.41 It is hard to compete head-on with the big companies like Coca-Cola and Pepsi, but the much smaller Dr Pepper Snapple Group’s two non-colas have a differentiated taste for a much smaller target market. However, it is still very profitable.42

How Strategy Affects HRM There are several areas where the generic corporate strategy affects how we do our jobs within HR. Let’s take a look at a few of the significant differences between generic strate- gies. A little later in this chapter, we will also review how HRM affects the ability to com- mit to a particular corporate strategy. We will continue to discuss these areas in greater detail as we progress through the book.

HRM AND COST LEADERSHIP. If our organization is following a generic cost leadership strategy, we are going to be most interested in minimizing all internal costs, including employee costs. So we are concerned with maximum efficiency and effectiveness.43 Because we are concerned with maximum efficiency, we will probably create highly specialized jobs within the organization so that we have people doing the same thing repeatedly, like McDonald’s. This will generally cause employees to get much better and faster at their jobs. We will also have a specific job description for each position and job- specific training with very little, if any, cross-training. We will hire new workers based

WORK APPLICATION 2-5 Identify the strategy of an

organization where you work

or have worked and explain

how the organization uses the

strategy against its competitors

to gain customers.

APPLYING THE CONCEPT2-2 Strategy

Identify which strategy is used by each brand or company listed, and write the letter corresponding to the company’s strategy by the company’s name.

a. cost leadership b. differentiation c. focus or niche

____ 6. iPhone ____ 7. Bodybuilder magazine ____ 8. Rolex watches ____ 9. TOMS shoes ____10. Walmart

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 49

on technical skills and abilities, and we will most likely emphasize performance pay by which the employees get paid more if they perform their job faster and better. We may also provide incentives that emphasize cost controls and efficiency. Finally, it’s quite likely that managers will use narrowly focused performance appraisals as a control mechanism to allow them to weed out less efficient and less effective employees.

HRM AND DIFFERENTIATION. On the other hand, if our organization is following a differentiator strategy, we’re going to be more concerned with employees who are flexible and adaptable, who have the ability to innovate and create new processes, and who can work in uncertain environments within cross-functional teams.44 In a differentiator organization, we will most likely have much broader job classifications, as well as broader work-planning processes. Individuals will be hired and paid based on individual knowledge and skill sets, not specifically based on skills related to the job they fill upon entering the organization. Training will be broad, and designed to provide flexibility in operating the business. Here, our incentive programs will reward innovation and creativity. Finally, in the differentiator organization, performance appraisals will generally be used as a tool to develop the skill sets of the valuable knowledge workers within the organization, not as a tool to punish and weed out poor performers. So you can see very quickly that HRM will need to do its job in a significantly different way based on the type of generic strategy that the company decides to follow.

Strategic Analysis There are two primary components of strategic analysis used by most organizations. The first is called five-forces analysis, and it is a tool that organizations use to analyze the external competitive environment. The second is called SWOT analysis (SWOT stands for strengths, weaknesses, opportunities, and threats), and it is used to analyze the company-specific environment. There are many other strategic analysis tools, but let’s save those for another course.

FIVE-FORCES ANALYSIS. Five-forces analysis is again brought to us by Michael Porter, who identified competition within an industry as being a composite of five competitive forces that should be considered in analyzing competitive situations.45 See Exhibit 2-4 for a list of the five forces.

1. Rivalry among competitors. Porter calls this scrambling and jockeying for posi- tion.46 Businesses do this in different ways, including competing for customers on the basis of price, quality, or speed of delivery. How much rivalry there is among competitors determines things like how competitive the industry is and which com- petitors are targeting the same customer groups. Rivals need to anticipate each other’s moves. Coke and Pepsi are long-time rivals in the soft drink industry, while Nissan and Toyota are long-time rivals in the auto industry.

2. Threat of substitute products and services. Companies in other industries may try to take a company’s customers away. For example, newer methods of storing and playing music and videos—like the streaming music services YouTube and Pandora—are taking significant market share from manufacturers of MP3/MP4 players, which previously took significant market share from CD and DVD manufacturers.

3. Potential new entrants. How difficult and costly is it for new businesses to enter the industry as competitors? Does the company need to plan for new competi- tion? Are there significant barriers to entry that would prevent such new competi- tion? In many industries today, all it takes to enter is the ability to create and host a website.47 If it is easy to enter an industry and profitability is significant, then the threat of new entrants is much higher. If it’s more difficult to enter an indus- try, for instance because of high capital equipment costs or other barriers to

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50 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

entry, and profitability is lower, possibly because the product is a commodity (think about the steel manufacturing industry), then the threat of new entrants is significantly lower.

4. Power of suppliers. How much does our business depend on its suppliers? If the business has only one major supplier of a critical component, with no alternatives available, then the supplier has greater bargaining power over the business. How- ever, if our business can get its major supplies from any one of many different sup- pliers, then the suppliers will have very little power over the business.

5. Power of buyers. How much does our business depend on its buyers? If one buyer or a few large buyers purchase most of what we provide, then the buyer has signifi- cant bargaining power over our company. As an example, almost every business student has heard of the power Walmart holds over its suppliers because of the vol- ume of goods that it buys. However, if we provide products or services to many dif- ferent buyers, none of which provides us with a major portion of our business, then the buyers may have very little bargaining power.

Companies use the five-forces analysis and other industry and competitive situa- tion analysis tools primarily at the corporate level to make decisions regarding which lines of business to enter and exit and how to allocate resources among existing lines of business.

SWOT ANALYSIS. While five-forces analysis is a primary tool for analyzing the external environment, SWOT analysis is a tool to analyze the organization’s internal environment, meaning its specific capabilities and limitations. In the process of SWOT analysis, the organization creates a list of its strengths, weaknesses, opportunities, and threats. See Exhibit 2-5 for a format in which to list SWOTs. Once this list is created, the organization evaluates each of the sections of the list in order to decide where it can use its resources most effectively.

WORK APPLICATION 2-6 Conduct a five-forces competitive

analysis for an organization where

you work or have worked.

2. Threat of substitute

products and services

1. Rivalry among competitors

3. Potential new entrants

4. Power of suppliers

5. Power of buyers

EXHIBIT 2-4 FIVE-FORCES COMPETITIVE ANALYSIS

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 51

If, for example, we have an organizational strength that is critical to maintain in order to serve our most important customer groups, then we will allocate resources toward main- tenance of that strength. If, however, we have strengths on our list that no longer provide us with the potential for advantage over our competitors, then we may choose not to use organizational resources to maintain those strengths. So as you can see, the process of SWOT analysis is a process of balancing our available resources in order to make the most of our strengths and opportunities and to minimize any danger to the organization from its weaknesses and threats.

Designing a Strategy Once we have identified an organizational vision and mission, decided which generic stra- tegic type we’re going to pursue, and done some analysis of the external environment and our organizational capabilities, we’re ready to start designing our organization’s strategy. The next steps in the design process include setting objectives, creating a strategic plan, implementing that plan, and monitoring and evaluating its success. Let’s take a brief look at each of these steps.

SETTING OBJECTIVES. Successful strategic management requires a commitment on the part of managers to a defined set of objectives. Successful managers have a goal orientation,48 which means they set and achieve objectives. Goal orientation can also be learned.49

After developing our vision and mission and completing a situation analysis, the next step is to set objectives that flow from the mission to address strategic issues and problems

WORK APPLICATION 2-7

Conduct a SWOT analysis

for an organization where you

work or have worked.

EXHIBIT 2-5 SWOT ANALYSIS

Strengths

Organization name Weaknesses

Opportunities

Threats

American Airlines’ strategy includes starting new routes and having a strong customer loyalty program; however, it risks both competition from airlines with lower fares and the increasing costs of fuel and labor.

FG /B

au er

-G rif

fin /G

C Im

ag es

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

52 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

identified through situation analysis. Objectives state what is to be accomplished in singu- lar, specific, and measurable terms, with a target date. The organization has to write at least one objective for every major goal that is set forth in its strategy. You must begin with the end in mind. Objectives do not state how they will be accomplished—just the end result you want to accomplish.50

Here is a model adapted from Max Weber to help you write effective objectives, followed by a few company examples.

To + action verb + singular, specific, measurable result + target date

Tesla:51 To + increase + vehicles sales to 500,000 annually + by 2020

Anheuser-Bush InBev:52 To increase revenues to $100 billion by 2020

Honda:53 To make two-thirds of overall unit sales from plug-in hybrid or hybrid vehicles and zero-emission vehicles by 2030

We will talk a little more about organizational objectives a little later.

CREATE A STRATEGY. Once we’ve identified our set of objectives, the next step is to weave them into a cohesive organizational plan. This is the point at which we determine what we’re going to do to achieve the objectives that we have set. Taking into account the vision and mission that we have decided on—and having determined our environment and each of our strengths, weaknesses, opportunities, and threats—we begin to plan activities within the organization that will allow us to reach those objectives. Looking at this process, you should be able to quickly see that no organization should ever just copy another organization’s strategy—even if that strategy has been successful for the company that is being copied. Why? The simple answer is that no two organizations have the same vision and mission; organizational environment; or strengths, weaknesses, opportunities, and threats. As a result, no two organizations should have the same objectives. Therefore, no two organizations could ever expect to be successful by following the same strategy.

IMPLEMENTING, MONITORING, AND EVALUATING STRATEGIES. Green Bay Packers coach Vince Lombardi was known to have said, “The best game plan in the world never blocked or tackled anybody.”54 This is true, no matter the organization and the

Objectives Statements of what is to be accomplished in singular, specific, and measurable terms, with a target date

WORK APPLICATION 2-8 Write an objective for an

organization where you work

or have worked that is specific,

that is measurable, and that has

a target date.

J:3 Strategy Formulation

SHRM

APPLYING THE CONCEPT2-3 Writing Objectives

For each objective, write in the letter corresponding to which “must” criteria is not met.

a. single result b. specific c. measurable d. target date

____ 11. To start working out aerobically within a few weeks ____ 12. To double ticket sales

____ 13. To sell 7% more sandwiches and 15% more chips in 2019

____ 14. To decrease the number of sales returns by end of year 2019

____ 15. To be perceived as the best restaurant in the Boston area by 2019

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 53

strategic plan—execution of the plan is the key. The last items in the strategic-planning process are implementing and then monitoring and evaluating the plan’s success. The goal here is to ensure that the mission and objectives of the organization are achieved. Successful implementation of strategies requires effective and efficient support systems throughout the organization. It also requires a dedication to the plan at all levels of the organization. Although strategic planning usually goes well, implementation is often a problem.55 One reason is that strategic plans often end up getting buried in bottom drawers; all too frequently, no action is taken to implement the strategy.

As strategies are implemented, they must also be monitored and evaluated. Controlling is the process of establishing and implementing mechanisms to ensure that objectives are achieved. An important part of controlling is measuring progress toward the achievement of the objective and taking corrective action when needed. Another important part of controlling is staying within budgets when appropriate or changing them when necessary to meet changes in the environment.

Quality management is one example of where the controlling process allows the company to adjust its internal processes to reach a predetermined level of quality control. Quality must consistently be monitored—because while quality costs, lack of quality costs much more. So as part of strategy execution, we always need to watch quality through the controlling process.

How HR Promotes Strategy So, HR managers need to recruit, select, train, evaluate, and interact with employees dif- ferently based on different organizational strategies. We showed you earlier how we might manage people differently based on different generic strategies. The same holds true when looking at different sets of objectives, different competitors, different organizational strengths and weaknesses, and many other industry and company characteristics. If the objective is to win a race, you wouldn’t hire an Uber driver to drive a Formula One race car! Both the cabbie and the Formula One driver can drive, but they do it differently to achieve different goals. HR managers have to evaluate all of the organizational character- istics to determine what kinds of people to bring into the organization and then how to maintain those people once they have become a part of the company. This is the reason that it’s so critical for HR managers to understand organizational strategy.56 In fact, as you go through the remainder of this book, you will see continuing references to how HRM will affect the company’s ability to do its work over the long term. Everything that HR does must mesh with the chosen strategy to provide the right kinds of employees, who will learn and do the right types of jobs so that the company can achieve its goals.

STRUCTURE The selection of a proper organizational structure is critical to successfully implement strategy and therefore to business success.57 Organizational structure refers to the way in which an organization groups its resources to accomplish its mission. There must be a sound organizational structure if a strategy is to be successfully implemented.58 Why do you see firms that seem to be equal in size and capability execute at different levels of efficiency? The answer lies in how their resources are differently structured and managed.59

In HRM, managers need to have an understanding of organizational structure to do their jobs correctly. An organization is a system that is typically, but not always, struc- tured into departments such as finance, marketing, production, human resources, and so on. Each of these departments affects the organization as a whole, and each department is affected by the other departments. Organizations structure their resources to transform inputs into outputs. All of an organization’s resources must be structured effectively if it is to achieve its mission.60 As a manager in any department, you will be responsible for part of the organization’s structure.

J:4 Strategy Implementation

SHRM

J:14 Quality Management

SHRM

J:10 Linking HR Strategy to Organizational Strategy

SHRM

J:2 Enhancing Firm Competitiveness

SHRM

LO 2-4 Identify and describe the major components of organizational

structure and why it is important to understand them.

Organizational structure The way in which an organization groups its resources to accomplish its mission

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

54 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Basics of Organizational Structure One way to look at organizational structure is to identify a series of fundamental compo- nents. Each of these components identifies a way in which we divide the organization up and group its resources to make them more efficient and effective. Let’s discuss complexity, formalization, and centralization as structural components.

COMPLEXITY. Complexity, the first major component of organizational structure, is the degree to which three types of differentiation exist within the organization. These three types of differentiation are vertical differentiation, horizontal differentiation, and spatial differentiation. Each of these three subcomponents demonstrates a way in which we break the organi zation up into smaller and more differentiated pieces. How one does this is very important. For example, Microsoft is currently working through how it wants to change its organizational structure under new CEO Satya Nadella because its historical structure has become too expensive.61

Vertical differentiation deals with how we break the organization up vertically, mean- ing how many layers there are in the organization from the top to the bottom. How many bosses are there, and whom does each one report to? Whom does the HR manager report to? You also need a clear overall boss who is accountable for results.62 The organizational chart is typically used to show the chain of command. The federal government’s General Schedule (GS) Pay System has 15 vertical grades, plus 10 steps within each grade for a whopping 150 vertical tiers!63

Horizontal differentiation identifies how we break the organization up horizontally. We usually do this by breaking the organization up into departments. For example, HR is commonly a department within the organizational structure, advising and assisting all the other departments in the firm. But there are other ways in which we can segment the orga- nization horizontally, including by customer type, product or process type, geographic divisions, and so on. Zappos famously changed to a “holacracy” form of structure, mean- ing a structure in which there are no departments, job titles, or managers. This is a radical way to wipe out vertical and horizontal differentiation.64

Spatial differentiation deals with the physical separation of different parts of the orga- nization. For instance, we may have headquarters in Los Angeles, California, while we may have a production plant in Indonesia. Spatial differentiation can make it much more difficult to manage the organization due to the fact that the organization is spread out among many locations. For example, GE operates in more than 160 countries.65 Now that is complex!

So complexity involves the way in which we divide the organization into different segments, both physically and within artificial boundaries such as departments. Why does this matter to the organization’s managers? The more the organization is broken into segments, the more difficult it becomes to manage within it. If we have many ver- tical layers in the organization (vertical differentiation) and many horizontal divisions of the organization (horizontal differentiation), and if the organization has many dif- ferent physical locations (spatial differentiation), then it is much more difficult to con- duct business than if there were fewer divisions. More complexity makes it more difficult to communicate between the different parts of the organization, makes it more difficult to make decisions within the organization, and makes it more difficult to find information that we need when it’s in another part of the organization. In fact, duplication of processes is a common problem in highly complex organizations.66 As a result of this difficulty in making decisions and communicating, the cost of managing an organization goes up as it becomes more complex and bureaucratic. As an exam- ple, in a February 2014 article, Bloomberg noted that as college and university bureaucracies in the United States get larger, the cost of college goes up for students.67 This means that we want to minimize complexity as much as possible in order to mini- mize organizational costs.

E:9 Organization Design

SHRM

Complexity Degree to which three types of differentiation exist within the organization

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 55

FORMALIZATION. Formalization, the second major component of organizational structure, is the degree to which jobs are standardized within an organization, meaning the degree to which we have created policies, procedures, and rules that “program” the jobs of the employees. If we make things routine by creating standard operating procedures and other standard processes, we can usually increase the efficiency and effectiveness of the people within the organization, in turn making the entire organization more productive on a per-unit basis.68 So the more that we can formalize the jobs within the organization, the easier it is to manage the people in those jobs. We also tend to see lower costs in organizations that are highly formalized, because jobs in such organizations are done in a routine, repetitive manner—at least when it is possible to do so.

As a result, we generally want to formalize all of the processes that we can within the organization, but we can’t always formalize everything that we do. How much we’re able to formalize jobs within the organization depends on what the organization is designed to do. If the organization is designed to do the same thing over and over, such as producing a low-cost commodity, then we can usually formalize many of its procedures. On the other hand, if the organization is designed to do unique and nonroutine things as a differentia- tor (meaning it never does the same thing twice), then we will probably not be able to for- malize very much of what the organization does.69

CENTRALIZATION. Centralization, the third major component of organizational structure, is the degree to which decision making is concentrated within the organization. The degree of centralization in an organization has to do with dispersion of authority for decision making and delegation of authority. If we can concentrate authority in decision making with one or a few individuals, we can concentrate on hiring people who are very good at making business decisions in those few positions and not worry about the decision-making skills of the rest of our employees.70

Centralization of decision making tends to create greater control within the organi- zation, because the organization’s few decision makers will soon find that they make similar decisions over and over. They thereby become very good at determining the best course of action in a particular situation. In other words, there is a learning curve in deci- sion making. The more decisions you make, the better you get at making high-quality decisions.71

However, there’s a tradeoff to centralized decision making. As the organization gets larger, we may have to go through many layers of the organization in order to get a decision made. This can slow down the processes within the firm—in some cases, to such an extent that by the time a decision is made, it becomes irrelevant. For example, TEPCO was criticized for having a complex bureaucratic decision-making process that led to the meltdown of three reactors at one of its nuclear plants in Japan.72 So we have to balance centralization and decentralization within our firms, and the current trend has been toward decentralization.73 However, we know that centralized decision mak- ing gives us greater control and thus generally tends to lower our costs for decision making. So other things being equal, we would rather have highly centralized decision making.

IS THERE ONE “BEST” STRUCTURE? No. The best structure is one that fits the firm’s current competitive situation as well as its internal capabilities and that enables it to implement its strategies successfully. Warren Buffett advises businesses to keep things simple.74 Peter Drucker may have said it as well as anyone when he noted: “The simplest organization structure that will do the job is the best one. What makes an organization structure ‘good’ is the problems it does not create. . . . To obtain both the greatest possible simplicity and the greatest ‘fit,’ organization design has to start out with a clear focus on KEY ACTIVITIES needed to produce KEY RESULTS.”75

WORK APPLICATION 2-9

Briefly describe the complexity,

formalization, and centralization

of the organizational structure

where you work or have worked.

Formalization Degree to which jobs are standardized within an organization, meaning the degree to which we have created policies, procedures, and rules that “program” the jobs of the employees

Centralization Degree to which decision making is concentrated within the organization

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

56 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

How Does Structure Affect Employee Behavior? We now know that structure is made up of complexity, formalization, and centralization. Does the way in which we combine these components cause employees within the organi- zation to act in different ways? In fact, it does. Think for a second of an organization that in your mind is a bureaucracy. It might be a government agency, a corporation that you’ve worked for, or the college or university at which you study. Chances are that this organi- zation is highly complex, has many standard procedures or ways of doing things (formal- ization), and is probably at least partially centralized (meaning only certain individuals can make major decisions). If you are part of this organization and someone asks you to do something that is outside the scope of your job, then you most likely would say, “That’s not my job,” and tell them to go to a different person to accomplish that task. You don’t have the authority or the knowledge to be able to help them.

Now let’s look at a different kind of organization. You have taken a job with a brand- new, entrepreneurial firm—like Zappos. There are no departments or standard proce- dures, and you were hired at least in part because of your ability to “think on your feet” and make decisions. Someone again asks you to do something that is outside the scope of your normal job. In this environment, you’re much more likely to take upon yourself the task of figuring out a way to assist the other person instead of passing them to someone else. The structure of the organization has changed the way that you react to a request to do something that is outside the scope of your job. Either that, or the request becomes your job.

How Does Structure Affect HRM? As the HR manager, would your job change if your organization adopted the structure of one of the two companies above? In a small entrepreneurial firm, there usually is no HRM department, but someone has to perform the HR functions. Would you need to recruit and hire different types of people in a bureaucratic organization than you would in an entrepreneurial organization? Indeed, you would. In the more bureaucratic organization, you would most likely look for and hire people who had significant depth of expertise in a narrow area within their field of knowledge, so that they could apply that expertise in a highly efficient manner. That would make the organization more productive over the long term. Your training programs would also probably be more specific and geared toward particular jobs. In addition, your performance appraisal processes would be aimed at evaluating more specific tasks and functions than would be the case in the entrepreneurial organization. In fact, the organizational structure will affect virtually every function of the HR manager. So in order to be a successful HR manager, you have to understand and adapt to the particular organizational structure of your firm.

ORGANIZATIONAL CULTURE Organizational culture is another characteristic that affects how the HR manager operates within the firm. Fostering the right organizational culture is one of the most important responsibilities of the CEO and other corporate executives.76 Management needs to be involved in establishing shared values, beliefs, and assumptions so that employees know how to behave.77 Every group of humans that gathers together anywhere at any point in time creates a unique group culture. They have their own group standards, called norms, which create pressure for the group’s members to conform. Social groups have societal cultures, nations have national cultures, and organizations have their own distinct organi- zational cultures.

What Is Organizational Culture? Organizational culture consists of the values, beliefs, and assumptions about appropriate behavior that members of an organization share. Culture describes how employees do what they do (behavior) and why they do what they do (values, profits, customers,

C:3 Individual Versus Group Behavior

SHRM

Q:12 Organizational Structure and Job Design

SHRM

LO 2-5 Discuss how organizational culture affects the members of the organization.

A:3 Managing/Creating a Positive Organizational Culture

SHRM

Organizational culture The values, beliefs, and assumptions about appropriate behavior that members of an organization share

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 57

employees, society). Every organization has a culture, and success depends on the health and strength of its culture.78 Therefore, leaders should spend a lot of time building the organization’s culture.79 Organizational culture is primarily learned through observing people and events in the organization.

ARTIFACTS OF ORGANIZATIONAL CULTURE. There are five artifacts of organizational culture that help employees learn the culture:

1. Heroes, such as founders Steve Jobs of Apple, Sam Walton of Walmart, Mark Zuckerberg of Facebook, Elon Musk of Tesla, and others who have made outstanding contributions to their organizations.

2. Stories, often about founders and others who have made extraordinary efforts. These include stories about Sam Walton visiting every Walmart store yearly, or someone driving through a blizzard to deliver a product or service. Public statements and speeches can also be considered stories.

3. Slogans, such as at McDonald’s. Q, S, C, V (or quality, service, cleanliness, and value)

4. Symbols, such as plaques, pens, jackets, or a pink Cadillac at the cosmetics firm Mary Kay.

5. Ceremonies, such as awards dinners for top achievers at Mary Kay.

THREE LEVELS OF CULTURE. The three levels of culture include behavior, values and beliefs, and assumptions. Exhibit 2-6 illustrates the three levels of culture.

Level 1: Behavior. Behavior includes the observable things that people do and say or the actions employees take. Artifacts result from behavior and include written and spoken language, dress, material objects, and the organization’s physical layout. Heroes, sto- ries, slogans, symbols, and ceremonies are all part of behavior-level culture. The behav- ior level is also called the visible level. Values, beliefs, and assumptions are considered the invisible level, as you cannot actually observe them.

Level 2: Values and beliefs. Values represent the way people believe they ought to behave; and beliefs represent “if, then” statements like “If I do X, then Y will happen.” Values and beliefs provide the operating principles that guide decision making and shape the behaviors that result in level-1 culture. Values and beliefs cannot be observed directly; we can only infer from people’s behavior what they value and believe.

Although organizations use heroes, stories, symbols, and ceremonies to convey important values and beliefs, slogans are critical to level-2 culture. A slogan expresses key values. Slogans are part of organizational mission statements, while a philosophy (e.g., FedEx’s philosophy of people-service-profit) is a formal statement of values and beliefs.

WORK APPLICATION 2-10 Briefly describe some of the

organizational culture artifacts

where you work or have worked.

Slogans

Heroes Stories

Symbols

Ceremonies

Level 2 Values and beliefs

Level 1 Behavior

Level 3 Assumptions

EXHIBIT 2-6 CULTURE ARTIFACTS AND LEVELS OF CULTURE

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58 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Level 3: Assumptions. Assumptions are values and beliefs that are so deeply ingrained that they are considered unquestionably true. Because assumptions are shared, they’re rarely discussed. They serve as an automatic pilot to guide behavior. In fact, people often feel threatened when assumptions are challenged. If you question employees about why they do something or suggest a change, they often respond with statements like, “That’s the way it’s always been done.” Assumptions are often the most stable and enduring part of culture and are difficult to change.

Notice that behavior is at the top of the diagram in Exhibit 2-6. Assumptions, values, and beliefs affect behavior, not the other way around; in other words, cause and effect work from the bottom up.

How Culture Controls Employee Behavior in Organizations Because organizational culture is based at least partly on assumptions, values, and beliefs, it is a very powerful force in controlling how people act within its boundaries. For instance, if the culture says that we value hard work and productivity but an individual on one of the teams fails to do his or her part, work hard, and be productive, then the other members of the team are quite likely to pressure that individual to conform to the culture or to leave the organization. Since assumptions, values, and beliefs are so strong, shirking individuals will most likely change their actions to conform to those that the culture values.

You may not believe that culture has the ability to cause you to change the way you act, but it does. Have you ever done something to fit in, or have you ever done something you really didn’t want to do because of peer pressure? Doesn’t peer pressure control most people—at least sometimes? Think about the way you act as part of your family, and then compare that to the way you act as a student at school, with a group of your friends, or as an employee at work. Chances are quite high that you act differently within these different “cultures.” We all act to conform, for the most part, to the culture that we happen to be in at that point in time, because the culture’s values push us to act that way.

Social Media and Culture Management Recall that there is an internal and an external environment that every organization is concerned with. See Exhibit 2-7 for a review of the com- ponents making up the environment.

Social media is one of the mechanisms that we now use to both mon- itor and—at least partially—control organizational environments.80 Whether it is finding that an employee posted some things she should not have when the company was monitoring social media and happened to find the posting she made, or using a company Facebook page to pro-

vide sustainability information to customers and workers, social media can be used to identify and defend the company and its values. This is a form of monitoring and manag- ing both the internal and external environment, which gives management more control over the culture within the organization.

Companies can also actively seek out information internally using various forms of social media81 and can even ask company members to interact on social media platforms such as LinkedIn and Facebook. Have you ever known a friend whose organization asked employees to “like” them on Facebook? This mechanism is becoming more important every day and will continue to do so for the immediate future.

The same is true for the external environment, from following competitors on social media sites to following government Web pages and media links. Governments and other entities are even using social media to extend their reach into communities that are generally hard to reach, because they don’t pay much attention to standard methods of communication like State of the Union addresses and regulatory bulletins. In the United States, President Obama’s administration turned to social media to attract younger indi- viduals (who don’t tend to get as involved with government issues) to the federal health

WORK APPLICATION 2-11 Give examples of how culture

controls employee behavior where

you work or have worked.

HRM in Action Organizational Culture

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Chapter 2: Strategy-Driven Human Resource Management 59

APPLYING THE CONCEPT2-4 The Internal Environment

Identify which internal environmental factor is referred to in each statement, and then write the letter corresponding to that factor before the statement.

a. strategy b. structure c. culture

____ 16. “At Victoria’s Secret, we focus on selling clothes and other products to women.”

____ 17. “At the SEC, we have several layers of management.” ____ 18. “At Ford, quality is job one.” ____ 19. “Walking around the office, I realized that I would have to wear a jacket and tie every day.” ____ 20. “I work in the production department, and she works in the marketing department.”

care exchanges. The administration did this because the Affordable Care Act required younger people to sign up to offset the higher cost of insuring older individuals.82

So as you can see, social media continues to become more important to business and government. You can bet that governments will pay more attention to social media in the future, since many of the “Arab Spring” uprisings were coordinated via social media.83 This is just one example of the power of social media sites.

AN INTRODUCTION TO DATA ANALYTICS AND HR TECHNOLOGY According to a recent SHRM symposium, “HR is ripe for disruption and transforma- tion.”84 HR managers will have to become even more knowledgeable of data management and manipulation in order to continue to do their jobs. One area of required knowledge is

WORK APPLICATION 2-12

Give examples of how you have

used social media at work.

LO 2-6 Identify areas of HRM where data analytics and other HR

technologies can have an effect on organizational success.

Governments

Competition

The economy Labor force

Shareholders

Customers

Suppliers

Technology

Society

S t

r a

t e

g y C

u l

t u

r e

S t r u c t u r e

EXHIBIT 2-7 THE INTERNAL AND EXTERNAL ENVIRONMENT

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60 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

data analytics. Data analytics is the process of accessing large amounts of data in order to analyze those data and gain insight into significant trends or patterns within organizations or industries. Computing power has obviously been increasing at a remarkable rate for the past 25 years, as has the ability to both create and store large amounts of data and information. This ability to create huge amounts of data has led to the concept of “big data.”

Big data involves the collection of extremely large data sets—so large, in fact, that data analytics on these data sets would have been impossible until recently, since we just did not have the computing power or the programs available. With the advent of faster com- puters and new analytics programs, we can now find patterns in these massive data sets that allow us to make important organizational decisions—especially strategic decisions.

A Brief on Data Analytics Companies like Google grew up on data analytics and big data. Director of Research Peter Norvig said recently, “We don’t have better algorithms than anyone else; we just have more data.”85 And Google analyzes all of that data looking for patterns that it can use. Many other companies have joined this movement, including some powerful outsourcers like IBM and Oracle, who are selling big data services.86 Other companies are doing their own big data analysis. Amazon and Harrah’s in the United States, Tesco in the United Kingdom, and Telco Smart Communications in the Philippines all have successfully used big data as a competitive weapon, according to a McKinsey & Company report.87

Analysis of big data is providing informa- tion that companies can immediately act on as well. A New York Times article notes that a recent analytical study showed that “the com- munication skills and personal warmth of an employee’s supervisor are often crucial in determining the employee’s tenure and performance.”88 A lot of HR managers have anecdotally passed this information on to their line managers for many years, but now there is at least some hard evidence support- ing the view that the manager’s skill set mat- ters when working to improve productivity.

Because of big data, we can now analyze thousands or even millions of instances of interaction between people in and between organizations and look for patterns to those interactions. According to the Harvard Busi-

ness Review, “We can measure, and therefore manage, more precisely than ever.”89 If we find a pattern, it may tell us what we should do based on data rather than instinct. We can “directly translate that [pattern] knowledge into improved decision making and performance.”90

HR Technology Data analytics has a place in HRM, just as it does in other areas of management. HR man- agers must become comfortable with collecting and analyzing big data to drive results.91 Analytics tools and other HR technology can be used for many HR functions, such as tal- ent acquisition and management, training and development, work and job analysis, pro- ductivity analysis, motivation, retention, and engagement.92 However, according to a recent set of studies from Accenture and the United Kingdom’s Chartered Institute of Per- sonnel and Development (CIPD), organizational silos, skills shortages, and suspicion about reducing human beings to data points are “preventing HR departments from effec- tively using talent analytics.”93

Data analytics Process of accessing large amounts of data in order to analyze those data and gain insight into significant trends or patterns within organizations or industries

The Coffee Bean uses data analytics to appraise employees’ performance, including the revenue each employee brings in at the cash register. This creates an incentive for employees to upsell products.

Je ff

Gr ee

nb er

g/ UI

G vi

a G et

ty Im

ag es

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 61

The convergence of HRM and big data is sometimes called workforce science. Peter Capelli, director of the Center for Human Resources at the University of Pennsylvania at Wharton, says, “This is absolutely the way forward.”94 The ability to measure actions and reactions in large numbers and find patterns in them is going to change the management of people in organizations—not just in the long term, but in the immediate future. In fact, it is already happening. Again, Google uses data analysis in HR just as much as it does in the marketing of products and services. Google knows, for instance, that its most innova- tive workers “are those who have a strong sense of mission about their work and . . . have autonomy.”95

In addition to analytics, HR has begun using other technologies to reach and inform workers to a much greater extent than in the past. Part of this shift is because of the com- fort level of most employees with using technology. Virtually all HR recordkeeping in business today is done through databases where information has to be entered only one time. According to Insperity, an HR technology company, just about every aspect of employment, from selection and onboarding to training, compensation and benefits, per- formance reviews and mobile workforce management is being managed through a variety of computers and personal technology devices like smartphones and tablets.96

Desired Outcomes Companies shouldn’t do anything without good reason. What are the outcomes that we seek from data analytics and HR Technology? A recent Boston Consulting Group (BCG) study found that “companies that are highly skilled in core HR practices experience up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable companies.”97 That is a shocking differential between skilled and less skilled organizations. Successful discovery and utilization of data in HR metrics is one major point of difference between top companies and others. HR managers who can use such metrics can gain their “seat at the table” when strategy is being discussed in their firms.

A study by Accenture also noted that businesses are increasingly looking at internal people processes in order to predict the impact of those processes on their business results.98 There is no doubt that data analytics is becoming a critical area of expertise for HR managers—especially at higher management levels.

A couple of quotes from a recent Harvard Business Review research report summarize these issues nicely: “The evidence is clear: data-driven decisions tend to be better deci- sions,” and “Smart leaders across industries will see using big data for what it is: a man- agement revolution.”99

HUMAN RESOURCE MANAGEMENT SYSTEMS (HRMS) Strategic planning requires the management and manipulation of large amounts of data through the use of the data analytics processes introduced above, and HR serves as a broad-based organizational system using data to influence business performance.100 As a result, most organizations today use complex computer systems to manage and manipu- late those data. Human resource management systems (HRMS) are one type of system used to manage and analyze data in organizations.

What Are HRMS? Human resource management systems (HRMS) are interacting database systems that “aim at generating and delivering HR information and allow us to automate some human resource management functions.”101 A slightly older term for such systems that you may hear is Human Resource Information System or HRIS. Some of the most common features in HRMS include modules for tracking attendance and leave, job, and pay history and for logging appraisal scores and review dates. Others include modules for benefits enrollment and tracking, succession management, training management, and time logging. There are additional modules available, depending on the size and type of the organization.102

WORK APPLICATION 2-13

How does the HR department

where you work or have worked

use HRMS? If you don’t know,

ask an HR manager

LO 2-7 Describe human resource

management systems (HRMS) and identify how they can help HR make decisions.

Human resource management systems (HRMS) Interacting database systems that aim at generating and delivering HR information and allow us to automate some human resource management functions

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62 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

How Do HRMS Assist in Making Decisions? According to a recent HR Magazine article, “HRMS platforms have come a long way. . . . [T]oday’s systems include such key features as workforce management, performance monitoring of the recruiting process, e-mail alert systems, and predictive analytics.”103 And these new systems are very user-friendly. If we are planning a new strategic initiative that is going to require certain training and skill sets, we can immediately search the HRMS database to see how many individuals have the requisite skills and training. We can also use the information stored in the database to make daily decisions within the HR department. For example, since training records are available in the HRMS, if we need to determine who has completed conflict management coursework for a new team being cre- ated in the company, we can quickly identify those individuals with that skill set. We can also use the same databases when considering promotions, transfers, and many other daily activities that are required inside the organization.

MEASUREMENT TOOLS FOR STRATEGIC HRM Housed within many HRMS are statistical packages for HRM. Just as we have to quan- tify and measure other parts of the organization, we also have measurement tools specific to HRM. Some of the most common tools are economic value added (EVA) balanced scorecards, including organizational scorecards and HR scorecards, and return on invest- ment (ROI). Let’s take a brief look at each of these tools.

Economic Value Added (EVA) Economic value added (EVA) is designed as a method for calculating the creation of value for the organization’s shareholders. Economic value added (EVA) is a measure of profits that remain after the cost of capital has been deducted from operating profits. It provides shareholders and managers with a better understanding of how the business is performing overall. As an equation, EVA would look like this:104

EVA = Net operating profit after tax – (Capital used × Cost of capital)

So EVA is a measure of how much money we made through our operations minus the amount of money that we had to spend or borrow (at a particular interest rate) in order to perform those operations. For a company to grow, it must generate average returns higher than its capital costs.

Return on Investment (ROI) The concept of ROI is, at its core, very simple. Return on investment (ROI) is a measure of the financial return we receive because of something that we do to invest in our organi- zation or its people. ROI is most commonly used in financial analyses, but many areas of HR lend themselves to ROI calculations. These areas include training, outsourcing, benefits, diversity, and many others. In each of these areas, we can calculate the cost of the process—whether that process is training, diversity management, or anything else—and compare that to the returns we get from the process.

To calculate ROI, you need two figures: the cost of the investment and the gain that you receive from making the investment. From there, the calculation is pretty simple:

=ROI Gain from investment – Cost of investment Cost of investment

Let’s use a quick example to illustrate. Assume that we create a training course to improve the skills of our assembly workers, and also assume that we send those work- ers through that program. To send all of the workers through the training costs us $1,000,000. We know that historically, during a normal year of production, the assembly

LO 2-8 Identify the common measurement tools for strategic HRM.

G:1 Economic Value Added

SHRM

G:7 Return on Investment (ROI)

SHRM

Economic value added (EVA) Measure of profits that remain after the cost of capital has been deducted from operating profits

Return on investment (ROI) Measure of the financial return we receive because of something that we do to invest in our organization or its people

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 2: Strategy-Driven Human Resource Management 63

workers have been able to assemble $5,000,000 worth of our product. However, after the training is complete, we measure our assembly process over the ensuing year and find that our amount of product created that year has increased to $8,000,000. This gives us a $3,000,000 gain from the investment. We can plug these numbers into our calculation and find out the following:

= = =ROI $3,000,000 – $1,000,000 $1,000,000

$2,000,000 $1,000,000

2 or 200%

So in this case, our return on investment over the course of 1 year is 2 times the cost of the investment.

It is always important to calculate at least a rough ROI for any investment in organiza- tional resources. There’s a definite need to understand how much we get in return for an investment in our people. Don’t just assume that the return on investment is always positive—because it’s not.

Balanced Scorecard (BSC) Is your organization achieving its mission? If you don’t have a quick and accurate answer, then besides financial measures, you need a BSC.105 The BSC is one of the most highly touted management tools today.106 The BSC concept, credited to Robert Kaplan and David Norton,107 basically states that measurement of an organization’s success using purely financial measures is not sufficient. The organization also has to take into account nonfinancial measures, like the learning and growth rate of its human resources pool, designed to help the organization compete strategically within its industry.108

The balanced scorecard (BSC) measures financial, customer service, internal process, and learning and growth (or sustainability) measures. All four dimensions of the score- card are equally important, because the results in each area affect the other areas of performance.

HR Scorecard In addition to the organization’s balanced scorecard, an HR scorecard has been designed and is being used by many businesses in operation today. The HR scorecard identifies HR deliverables and HR system alignment, compares HR alignment with strategy, and mea- sures organizational gains created by HR practices.109 Let’s explain each of these four dimensions of the HR scorecard.

1. Identifying HR deliverables. What functions does HR perform, and what services does HR deliver that provide value to the organization? These functions include many things we will introduce you to in this book—recruiting, selection, training, employee development, compensation and incentives, and many more.

2. Identifying HR system alignment through the use of a high-performance work system (HPWS). HPWS is a set of HR practices—including comprehensive employee recruitment and selection procedures, compensation and performance management systems, information sharing, and extensive employee involvement and training—that can improve the acquisition, development, and retention of a talented and motivated workforce.110

3. Aligning the system with company strategy. This is the process of comparing the HPWS with the organization’s strategic plan and making sure that the HR proce- dures being followed match well with a strategic direction of the company. In other words, if we are a differentiated producer, we need to make sure all of the recruiting, selection, training, and other processes are aligned with that differentiation strategy.

4. Identifying HR efficiency measures. This is the process of measuring the returns that the organization gets from its HR management policies through the use of items such as the EVA and ROI calculations above.

G:2/G:9 Balanced Scorecard/ Organizational Scorecard

SHRM

WORK APPLICATION 2-14

Which measurement tools are used

where you work or have worked?

If you don’t know, ask a financial

manager whether EVA, ROI, BSC,

and/or an HR scorecard are used.

Balanced scorecard (BSC) A scorecard measuring financial, customer service, internal process, and learning and growth (or sustainability) measures

HR scorecard A score identifying HR deliverables and HR system alignment; compares HR alignment with strategy, and measures organizational gains created by HR practices

G:8 HR Scorecard

SHRM

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64 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

TRENDS AND ISSUES IN HRM Here we continue our discussion of some of the most important issues and trends in HRM today. In this chapter, we chose the following issues: the misalignment of structure, cul- ture, and the rate of technological change; and the continuing globalization of business, which increases the need for strategic planning. Let’s discuss each of these topics separately.

Structure, Culture, and Technology Are Misaligned A 2017 Deloitte Global Human Capital Trends report noted that “Technology is advanc- ing at an unprecedented rate. Individuals are relatively quick to adapt to ongoing innova- tions, but organizations move at a slower pace. Many still retain industrial age structure and practices that are long outdated.”111 These structural and cultural issues plague cor- porations in all industries and all parts of the world—most of them don’t adapt quickly to change. We briefed you on the general issue of organizational agility in the Chapter 1 Trends and Issues section, but here we want to quickly review the inertia that is caused by organizational structure and culture and show why companies have to make a concerted effort to modify those elements to become more agile.

Recall from earlier in the chapter that strong (centralized, formalized, and moderately complex) organizational structures can provide strong control over what happens within a company. This control is a desired state for the leaders because it helps stabilize the firm—nobody likes losing control of their business. So, in order to adapt to technologies that are “advancing at an unprecedented rate” companies will need to let go of some of

that control, and that’s not easy for managers who have maintained control for many years as leaders of their business. Managers and executives will have to decentralize, allowing members of the company to make decisions within their areas of responsibility. Leaders will also have to lower formalization and allow processes to adapt to new ways to accomplish tasks, and they probably have to allow even more complexity so that line employees can react quickly when necessary.

Similarly, a strong culture can be a serious impediment to fast adaptation, or agility. Remember that culture is based on a collec- tive set of values that members of the organi- zation share, and is one of the most powerful controlling forces in an organization. Also, remember that values are deeply held beliefs

and, as a result, are extremely hard to change—at least quickly. Some cultures have adapt- ability built in, but most do not. So strong, rigid cultures will resist quick rates of change in the business. If a company is going to need to adapt fast to many different changes in lots of areas, inflexible cultures will have to be modified. In a battle between culture and mar- ket forces, culture will win almost every time. So we have to modify the culture to be more agile in adopting and in figuring out new uses for the technology that is becoming readily available, or we will never be able to create or maintain a sustainable competitive advan- tage over competitors.

Continuing Globalization Increases the Need for Strategic HRM Planning You may think that with the current state of affairs, where federal governments from North America to the European Union are retrenching and breaking off trade and busi- ness partnerships with former partners in other countries, globalization is becoming a less significant issue. However, you would be wrong. As business in most industries continues to globalize out of necessity, competition will inevitably increase. Competitors need to

LO 2-9 Discuss the role of culture, technology, and globalization in HRM.

Going global takes effective strategic planning. As Nissan continues evaluating its global strategy, they emphasize utilizing local human resources in each market. They also emphasize the value of diversity in discussing its global corporate culture in its strategic plan for globalization.

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Chapter 2: Strategy-Driven Human Resource Management 65

gain access to more markets; and as more competitors gain access to more and more markets, competition will steadily increase. This increasing competition puts pressure on businesses to create a plan to overcome their competitors’ advantages.

As we noted earlier in this chapter, the process of strategic planning is designed to analyze the competitive landscape that our organization faces and to create a workable plan that will allow us to compete within that landscape. So as competition increases, developing a good, solid “global” strategy and implementing continuous reviews of our strategic plans become more and more significant.

Companies must become more competent global competitors. For HRM, this means that HR managers will need to become better at managing expatriate employees, pay- ing wages across national borders, managing disparate country laws and regulations, and much more. We will discuss the globalization issues for HRM in more detail in Chapter 16.

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DIGITAL RESOURCES

Organizational Culture*

From Organizational Development to Change Management

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Social Remembering and Organizational Memory

HR Skills*

Strategic Planning Process

* premium video only available in the interactive eBook

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66 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

CHAPTER SUMMARY 2-1 Identify and explain the major components of the

external environment.

There are nine major external forces:

• Customers. Companies must continually improve products to create value for their customers.

• Competition. Organizations compete against each other for customers, for the same employees, and sometimes for suppliers. Competitors’ strategic moves affect the perfor- mance of the organization.

• Suppliers. The firm’s performance is affected by its sup- pliers. Therefore, it is important to develop close working relationships with your suppliers; and close relationships require employees who have the ability to communicate, empathize, negotiate, and come to mutually advantageous agreements.

• Labor force. The recruits available to, and the employees of, an organization have a direct effect on its performance. Management recruits human resources from the available labor force outside the company’s boundaries.

• Shareholders. The owners of a corporation, known as shareholders, influence management. Most shareholders of large corporations are not involved in the day-to-day oper- ation of the firm, but they do vote for the board of directors, and the top manager reports to the board of directors.

• Society. Individuals and groups within society pressure business for changes. People who live in the same area with the business do not want it to pollute the air or water or otherwise abuse natural resources.

• Technology. Technology has changed the speed and the manner in which organizations conduct and transact busi- ness. Changing technologies require technologically savvy employees who have the ability to adapt to new processes.

• The economy. No organization has control over economic growth, inflation, interest rates, foreign exchange rates, and so on. In general, businesses do better when the economy is growing than they do during recessions.

• Governments. National, state, and local governments all set laws and regulations that businesses must obey. Gov- ernments create both opportunities and obstacles for busi- nesses. To a large extent, business may not do whatever it wants to do; the government sets guidelines.

2-2 Discuss how having a vision and mission helps organizations design a strategy and focus their resources.

The vision is fuzzy; it is not specific in that we don’t say how we’re going to do a particular thing. Instead, we identify a future state for the organization. So, the question that we answer with the vision is, “What do we want to become as an organization?”

In contrast, the mission is more specific. It is a statement of what the various organizational units will do and what they hope to accomplish, in alignment with the organizational vision. So, the mission statement answers the question, “What do we need to do in order to become what we have envisioned?”

When you put the vision and mission together, the peo- ple in the organization get a more complete picture of what direction they are expected to go in. This allows

the people in the organization to focus on going in that particular direction. Once everyone is focused on going in the same direction, it becomes much easier for the organization to design and achieve goals in keeping with the mission and vision. This focus on moving in the same direction is the thing that makes a vision and mission so powerful. If everyone in the organization is focused on the same end result, it is much more likely that the organiza- tion will achieve that end result.

2-3 Identify the three types of strategy, two methods to analyze strategy, and the objective writing model.

The three types of strategy are: cost leadership focusing on keeping the cost of producing products or services; often selling at lower prices. Differentiation focusing on creating an impression of difference and charging higher prices. Focus or niche focusing on a specific portion of a larger market.

The two methods of strategic analysis are: The five-force analysis to determine the external competitive situations; analyzing the rivalry among competitors, threat of substitute products or services, potential new entrants, power of sup- pliers, and power of buyers. The SWOT analysis analyzes the internal environment of strengths, weaknesses, opportu- nities, and threats.

The writing objective model is:

To + action verb, + singular, specific, measurable result + target date

2-4 Identify and describe the major components of organizational structure and why it is important to understand them.

All of an organization’s resources must be structured effec- tively if it is to achieve its mission. Structure is made up of three major components:

• Complexity, which is the degree to which three types of dif- ferentiation exist within the organization. These three types are vertical differentiation, horizontal differentiation, and spatial differentiation. The more the organization is divided— whether vertically, horizontally, or spatially—the more difficult it is to manage.

• Formalization, which is the degree to which jobs are stan- dardized within an organization. The more we can stan- dardize the organization and its processes, the easier it is to control those processes.

• Centralization, which is the degree to which decision making is concentrated within the organization at a single point—usually at the top. A highly centralized organization would have all authority concentrated at the top, while a decentralized organization would have authority spread throughout. If authority can be centralized, we can take advantage of learning curve effects that help to improve our decision making over time.

2-5 Discuss how organizational culture affects the members of the organization.

Organizational culture consists of the values, beliefs, and assumptions about appropriate behavior that members of an organization share. Organizational culture is primarily

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Chapter 2: Strategy-Driven Human Resource Management 67

learned through observing people and events in the organization.

Because organizational culture is based at least partly on assumptions, values, and beliefs, the culture can control how people act within its boundaries. Since assumptions, values, and beliefs are such strong influences, individuals will generally act to conform to the culture. For the most part, we all act to conform to the culture that we happen to be in at any given point in time, and that’s because cultural values push us to act that way.

2-6 Identify areas of human resource management (HRM) where data analytics and other HR technolo- gies can have an effect on organizational success.

Analytics can tell us what to do based on data rather than instinct. We can directly translate historical patterns that we find into improved decision making and performance. Vir- tually every aspect of HR in organizations is being affected by this and other technologies. Insperity, an HR technol- ogy company says: from selection and onboarding to train- ing, compensation and benefits, performance reviews and mobile workforce management is being managed through a variety of computers and personal technology devices like smartphones and tablets.

2-7 Describe human resource management systems (HRMS) and identify how they can help HR make decisions.

Human resource management systems (HRMS) are inter- acting database systems that aim to generate and deliver HR information and allow us to automate some HRM func- tions. They are primarily database management systems, designed especially for use in HR functions.

HRMS allow us to maintain control of our HR information and make it available for use during the strategic-planning pro- cess. Having this information immediately available makes the strategic-planning process both quicker and smoother. We can also use the information stored in the database to make daily decisions within the HR department, such as a decision on whom to send to a particular training class. We

can also use these databases when considering promotions, transfers, team assignments, and many other daily activities that are required inside the organization.

2-8 Identify the common measurement tools for stra- tegic HRM.

We discussed four common tools in this chapter: economic value added (EVA), return on investment (ROI), the bal- anced scorecard (BSC), and the HR scorecard.

EVA is a measure of profits that remain after the cost of capital has been deducted from operating profits. ROI is a measure of the financial return we receive because of something that we do to invest in our organization or its people. The BSC says that measurement of an organi- zation’s success using purely financial measures is not sufficient. The organization also has to take into account nonfinancial measures designed to help the organization compete strategically within its industry. While financial measurement is one of the four perspectives in the organi- zation’s BSC, the BSC also includes customer measures, internal process measures, and learning and growth (or sustainability) measures.

Many businesses today use the HR scorecard. The four dimensions of the HR scorecard are (1) identifying HR deliverables, (2) identifying HR system alignment through use of the high-performance work system, (3) aligning the system with company strategy, and (4) identifying HR effi- ciency measures.

2-9 Discuss the role of culture, technology, and global- ization in HRM.

Managers and executives will need to foster a culture where individuals can adapt to workplace changes driven by technology and globalization. They may do this through decentralization of responsibility, and lower formalization to allow employees to work more quickly amid increas- ing complexity. By modifying inflexible cultures, organiza- tions can be better suited to the modern workplace, which includes accessing more markets and navigating increased competition.

KEY TERMS balanced scorecard (BSC) 63 centralization 55 complexity 54 data analytics 60 economic value added (EVA) 62 formalization 55

HR scorecard 63 human resource management systems

(HRMS) 61 mission statement 46 objectives 52

organizational culture 56 organizational structure 53 return on investment (ROI) 62 strategy 45 vision 46

KEY TERMS REVIEW Complete each of the following statements using one of this chapter’s key terms.

1. __________ is a plan of action to achieve a particular set of objectives.

2. __________ is what we expect to become as an organization at a particular future point in time.

3. __________ consists of our expectations of what we’re going to do in order to become the organization that we have envisioned.

4. __________ state what is to be accomplished in singular, specific, and measurable terms, with a target date.

5. __________ refers to the way in which an organization groups its resources to accomplish its mission.

6. __________ is the degree to which three types of differentia- tion exist within the organization.

7. __________ is the degree to which jobs are standardized within an organization.

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68 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

8. __________ is the degree to which decision making is con- centrated within the organization at a single point—usually at the top of the organization.

9. __________ consists of the values, beliefs, and assumptions about appropriate behavior that members of an organization share.

10. __________ is the process of accessing large amounts of data in order to analyze those data and gain insight into sig- nificant trends or patterns within organizations or industries.

11. __________ are interacting database systems that aim at generating and delivering HR information and that allow us to automate some human resource management functions.

12. __________ is a measure of profits that remain after the cost of capital has been deducted from operating profits.

13. __________ is a measure of the financial return we receive because of something that we do to invest in our organization or its people.

14. __________ measures financial, customer service, internal process, and learning and growth (sustainability).

15. __________ identifies HR deliverables, identifies HR system alignment, compares HR alignment with strategy, and mea- sures organizational gains created by HR practices.

COMMUNICATION SKILLS The following critical-thinking questions can be used for class discussion and/or for written assignments to develop communica- tion skills. Be sure to give complete explanations for all answers.

1. Can you name a business that you know of in which compe- tition has increased significantly in the past few years? Why do you think competition has increased in this case?

2. What are some of the ways in which the environmental factors that we discussed in this chapter directly affect the organization?

3. Do you agree that every organization needs a strategic plan? Why or why not?

4. Think about the technological changes that have occurred since you were born. Do you think those changes have affected the strategic-planning process? How?

5. What should a mission statement focus on—customers, competitors, products/services, the employee environment, or something else? Identify why you chose a particular answer.

6. We discussed the three major generic strategies in this chapter. Can you think of examples of each of the three strate- gies in specific businesses you know of? In your opinion, how successful have these companies been with their strategy?

7. If you were going to design the structure for a new, innova- tive start-up company, what kind of structure would you try to create in regard to level of complexity, formalization, and centralization? Why would you set up this type of structure?

8. Which of the five artifacts, or important ways in which employees learn about culture, do you think is most important? Why?

9. Name some situations in HRM when you would want to use either economic value added (EVA) or return on investment (ROI) as an analytical tool.

10. Do you agree that balanced scorecards are good tools for evaluating the organization’s overall performance? Why or why not? What measures would you add to the scorecard to improve it?

CASE 2-1 CATALYA HATS: PULLING A RABBIT OUT OF THE HAT OR COMING UP EMPTY HANDED?(1)

Catalya Hats, a millinery company began from a simple design of a Panama hat in Ricardo Catalya’s home in Ecuador. Mr. Catalya had no idea that when he created his first Panama hat in 1906 to pro- tect himself from the sun, it would become an iconic fashion clas- sic. His hats were crafted from the finest natural toquilla straw fiber; no fibers were ever the same. In fact, each hat had its own charac- ter because the materials were different in shape and color. Toquilla comes from a straw plant, which cannot be woven by a machine. It can be woven only by hand. Depending on the weave count, one hat could take anywhere between one week and three months to manufacture.

It did not take long for many powerful businesspersons and celeb- rities from the United States to take recognition of these hand- crafted pieces at the time. The company’s strategy was to become a globally integrated, quality hat company. For over 100 years, the industry has praised the company, and helped the company raise its annual revenue to $25.5 million by 2006.

Nearly all of the top managers started their careers with the firm and had worked their way up to their positions. The firm’s practice, started by its founder, was for all employees to learn the business from the

ground up, starting with working on the production line assisting the hat makers (regardless of their actual field of expertise), and then rotating through every job dealing with hat production and distribu- tion, including actual hat making. This approach to employee training ensured that everyone in the firm, regardless of their specific tasks and responsibilities, had a personal connection not only to every job performed but also to most of the people who performed them.

The company’s accomplishments were due in no small part to its cross-functional corporate structure, a structure that reinforced egalitarian decision making. By definition, the company’s team or project members came from more than one functional area of the company, working together toward a common goal and a common bond: a love of hats. This structure ensured that the work groups were able to carry out the company’s mission of making every hat a unique experience. Catalya’s organizational culture was therefore family-based and family-driven, as enlivened through the manag- ers’ and employees’ work attitudes and behaviors. The top-level managers were leaders who set and implemented these values and beliefs, as well as how an employee should be treated; they role-modeled how an employee should perform when representing the firm, both within and without.

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Chapter 2: Strategy-Driven Human Resource Management 69

The firm finally maxed out its production capacity at the turn of the 21st century, stalling the family’s plans for international growth and expansion. Although profitable, the family did not have the financial wherewithal to support a sizable plant investment and thereby con- tinued to focus on process and production improvements through technological innovation. In 2016, the firm was reluctantly sold to a private investor, Ralph Dweck, who had the capital needed to expand the name and brand. Essential parts of the purchas- ing agreement were that Mr. Dweck agreed to retain the current employees and staff for a minimum of two years and that he would remain true to the quality and traditions of the firm. Mr. Dweck under- stood that his new staff might not see or agree with his “big picture,” his vision for international growth and expansion, and he hoped that he could move them out of their “familial” surroundings and transi- tion them into a more corporate, professional milieu and mind-set.

At the first major executive meeting, he rolled out his plans to enter into new international markets and distribution channels. Everyone seemed onboard with these growth plans until Mr. Dweck dis- cussed the need to find international business partners in order to expand the firm’s operation. These partners, specifically firms with innovative technology and excess production capability, would dra- matically increase the firm’s production capacity while leveraging Catalya’s good name. Some form of outsourcing of production seemed to make the most sense to Mr. Dweck, given the limited financial investment required. Nonetheless his proposal received opposition from many of the top managers within the firm.

Brian Bianco, the vice president of operations, argued that no one could make Catalya hats like Catalya employees and that unless these “partners” were going to be trained by Catalya hat makers that the products would be of inferior quality. He proposed instead to increase the current plant size and capacity, take on a larger work force, and continue the tradition of producing high-quality hats made in Ecuador. He felt that local monitoring and quality con- trol techniques would ensure that the firm would maintain high pro- duction standards, standards that would allow the firm to continue to excel as a top-flight connoisseur hat maker.

Evelyn Choi, manager of production, echoed Bianco’s concerns about outsourcing production reminding everyone of Ricardo Catalya’s legacy and the pride employees had in working for such a prestigious firm. Janice Warling in Public Relations thought that they would garner far more public support by “making local, being global” and that they could leverage the “fair trade” movement by

touting how well their workers were paid as well as their pristine working conditions. She thought that they could even seek govern- ment funding and support to help them grow the business (low or no interest loans, tax abatements or rebates, etc.). Tori Baugmart, the vice president of human resources, reinforced these senti- ments and indicated that labor was plentiful, fairly well skilled, and was not overly costly as compared to other workforces.

In response to these negative comments, Mr. Dweck tried to explain to his team the need to ride the wave of consumer demand for these hats without committing a huge amount of resources for gearing up production. He was afraid that this increased demand might be short-lived, having quadrupled in the last five years, and that the firm might get caught in a fad downturn rather than climb- ing up the surging wave of a fashion trend. Outsourcing seemed to be the best short-term solution to solving the supply gap, a gap that could not be shrunk through price increases.

Questions 1. What is Catalya Hats’s vision/mission and how might it

explain why the Catalya family sold their firm to a private investor, Ralph Dweck?

2. What external environmental factors underlie the discussion of whether production of Catalya hats should or should not be outsourced?

3. What is the strategy of Catalya Hats, and how does it affect its HR policies?

4. The discussion around outsourcing of production to foreign partners is an example of which five forces of competitive analysis?

5. What was the firm’s basic structure, and how did it reinforce their strategy?

6. How did the firm’s culture support their strategy?

Reference (1) This is a real, field-based case where the organization and indi-

vidual names have been changed to protect their anonymity. This is an abridged version of the case by Amanda DiResto and Herbert Sherman. (2017). “The ‘Mad’ Hatter: Catalya Hats.” Under review at Management and Organizational Studies.

Case written by Herbert Sherman, Long Island University

CASE 2-2 STRATEGY-DRIVEN HR MANAGEMENT: NETFLIX, A BEHIND-THE-SCENES LOOK AT DELIVERING ENTERTAINMENT

Netflix is a highly successful retailer of movie rental services, with a market value of over $25 billion. It offers a subscription service that allows its members to stream shows and movies instantly over the Internet on game consoles, Blu-ray players, HDTVs, set-top boxes, home theater systems, phones, and tablets. Netflix also includes a subscription service for those who prefer to receive discs via the US mail (rather than streaming), without the hassle of due dates or late fees.

The idea of a home delivery movie service came to CEO Read Hastings when he was forced to pay $40 in overdue fines after returning a video of the movie Apollo 13 to Blockbuster. He real- ized that he could capitalize on an existing distribution system (the US Post Office) that did not require renters to leave their homes. The Netflix website was launched on August 29, 1997,

with only 30 employees and 925 movies available for rent. It used a traditional pay-per-rental model, charging $0.50 per rental plus US postage, and late fees applied. Netflix introduced the monthly subscription concept in September 1999, and then it dropped the single-rental model in early 2000. Since that time, the company has built its reputation on the business model of flat-fee unlimited rentals without due dates, late fees, or shipping and handling fees. In addition, its online streaming service doesn’t have per-title rental fees.(1) Throughout 2014, Netflix’s total sales grew by 21%, gen- erating a net income of $112 million.(2) Subscribers increased by almost 40% that year, reaching 46 million, and the stock value tri- pled from 2012 to 2014. But how did they reach that point?(3)

There are many reasons why Netflix’s strategy is successful, yet the numbers tell only the results and not the behind-the-scenes

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70 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

story. According to Read Hastings and former chief talent officer (CTO) Patty McCord, this success is not a surprise at all, given Netflix’s business model. But more important, they say, is Netflix’s HR strategy, which is to create an environment of fully motivated employees who understand the culture of the company and per- form exceptionally well within it. Hastings and McCord had the foresight to document their HR strategy via PowerPoint, and soon these slides went viral, with more than 5 million views on the Web. McCord described Netflix’s HR strategy as consisting of the fol- lowing steps:

1. Selecting new employees/recruiting. Hire employees who care about, understand, and then prioritize the company’s interests. This will eliminate the need for formal regulations and policies, because these employees will strive to grow the company for their own self-satisfaction. This sets Netflix apart from the many companies that do not hire employees who would be a great fit with the company’s culture and that therefore still spend great amounts of time and money on enforcing their HR policies—policies that target only 3% of their workforce.(4)

2. Talent management/matching employees with jobs. To avoid high employee turnover, a company must recruit tal- ented people with the right skills, although mismatches may occur. Layoffs and firings are also inevitable, given chang- ing business cycles. In such cases, it is HR’s duty to place employees in departments that match the employees’ skill sets, as well as to train employees to meet changing busi- ness needs.(5)

3. Send the right messages. To boost overall employee morale, most HR departments throw parties or give away free items. But when stock prices are decreasing or sales numbers are not as high as predicted, what use would a company have for an office party? Netflix executives stated that they have not seen an HR initiative that truly improved morale. Instead of cheerleading, employees need to be educated about how the company earns its revenue and what behaviors will drive its success. By receiving clear messages about how employ- ees should execute and commit to their duties, employees will be more informed about the criteria they will need to meet to receive their bonuses, and they will therefore be more apt to receive those bonuses. Knowing what to do and how to do it, employees’ motivation will increase; and with increased motivation, morale and performance will improve.(6)

4. Performance evaluation. Netflix implemented informal 360-degree reviews after realizing that formal review ses- sions were not effective. These informal 360-degree sessions allowed workers to give honest opinions about themselves and colleagues—focusing on whether certain policies should stop, start, continue, or change. Instead

of relying on bureaucratic measures, employees valued these conversations as an organic part of their work; and those conversations have been demonstrated to increase employee performance.(7) For example, Netflix found that when its employees perceived their bosses as less than expert in their field, employee performance dropped. Employees indicated that managers who relied on charm or IQ were not trusted and received low subordinate appraisals.

Questions 1. Netflix was a pioneer in the online video rental market, making

“old-fashioned” DVD rentals a thing of the past and putting Blockbuster out of business. Using the five-forces model, describe how Netflix changed the entertainment rental industry.

2. What is Netflix’s competitive strategy? What does it believe is the driving force that makes this strategy so successful? Do you agree?

3. In terms of sustaining the company’s competitive advantage, what is the most important step that Netflix has taken, as noted by Hastings and McCord?

4. “Where we want to be, how to get there, and where are we now” are key points of a successful company’s strategy. How do the company’s HR policies support the firm’s strategy?

5. How does Netflix monitor its employees’ performance? Would you prefer to be evaluated this way or through a bal- anced scorecard (BSC) approach? Explain your position.

6. How would you create a link between customers and the way employees perform to assure that incentives are distributed evenly and equally at Netflix?

References (1) Wikipedia. (2014). Netflix. Retrieved June 15, 2014, from

http://en.wikipedia.org/wiki/Netflix

(2) McCord, P. (2014). How Netflix reinvented HR. Harvard Business Review, 92(1/2), 70–76.

(3) Sikka, P. (2014). Netflix will raise its prices after better-than- expected earnings. MarketRealist.com. Retrieved from http:// marketrealist.com/2014/04/netflix-will-raise-prices- better- expected-earnings/

(4) McCord, P. How Netflix reinvented HR. Harvard Business Review, 92(1/2), 70–76.

(5) Ibid.

(6) Ibid.

(7) Ibid.

Case created by Herbert Sherman and Theodore Vallas, Long Island University School of Business, Brooklyn Campus

SKILL BUILDER 2-1 WRITING OBJECTIVES For this exercise, you will first work at improving ineffective objec- tives. Then you will write nine objectives for yourself.

Objective To develop your skill at writing objectives

Skills The primary skills developed through this exercise are as follows:

1. HR management skills—conceptual and design

2. SHRM 2016 Curriculum Guidebook—J: Strategic HR

PART A Indicate which of the criteria each of the following objectives fails to meet in the model and rewrite the objective so that it meets all those criteria. When writing objectives, use the following model:

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Chapter 2: Strategy-Driven Human Resource Management 71

To + action verb + single, specific, and measurable result + target date

1. To improve our company image by the end of 2020

Criteria not met: ________________________________________

Improved objective: _____________________________________

______________________________________________________

2. To increase the number of customers by 10%

Criteria not met: ________________________________________

Improved objective: _____________________________________

______________________________________________________

3. To increase profits during 2020

Criteria not met: ________________________________________

Improved objective: _____________________________________

______________________________________________________

4. To sell 5% more hot dogs and 13% more soda at the base- ball game on Sunday, June 14, 2020

Criteria not met: ________________________________________

Improved objective: _____________________________________

______________________________________________________

PART B Write three educational, three personal, and three career objec- tives you want to accomplish. These may be short-term (something you want to accomplish today), long-term (something you want to have accomplished 20 years from now), or medium-term objec- tives. Be sure to structure your objectives using the model and meeting the criteria for effective objectives.

Educational Objectives 1. __________________________________________________

___________________________________________________

2. __________________________________________________

___________________________________________________

3. __________________________________________________

___________________________________________________

Personal Objectives 1. __________________________________________________

___________________________________________________

2. __________________________________________________

___________________________________________________

3. __________________________________________________

___________________________________________________

Career Objectives 1. __________________________________________________

___________________________________________________

2. __________________________________________________

___________________________________________________

3. __________________________________________________

___________________________________________________

Apply It What did I learn from this experience? How will I use this knowl- edge in the future?

_______________________________________________________

Your instructor may ask you to do this Skill Builder in class in a group. If so, the instructor will provide you with any necessary infor- mation or additional instructions.

SKILL BUILDER 2-2 STRATEGIC PLANNING AT YOUR COLLEGE This exercise enables you to apply the strategic-planning process to your college or university as an individual and/or a group. Com- plete each step by typing or writing out your answers. You can also conduct this exercise for another organization.

Objective To develop your strategic-planning skills by analyzing the internal environment of strategy, structure, and culture

Skills The primary skills developed through this exercise are as follows:

1. HR management skills—conceptual and design

2. SHRM 2016 Curriculum Guidebook—J: Strategic HR

PART A: STRATEGY

Step 1: Develop a Mission 1. What is the vision and mission statement of your university/

college or school/department?

2. Is the mission statement easy to understand and remember?

3. How would you improve the mission statement?

Step 2: Identify a Strategy Which of the three generic strategies does your school or depart- ment use?

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72 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Step 3: Conduct Strategic Analysis 1. Conduct a five-forces competitive analysis, like that in Exhibit

2-4 (page 50).

2. Complete a SWOT analysis, like that in Exhibit 2-5 (page 51).

3. Determine the competitive advantage (if any) of your univer- sity/college or school/department.

Step 4: Set Objectives What are some objectives of your university/college or school/ department?

Step 5: Implement, Monitor, and Evaluate Strategies How would you rate your university/college’s or school/depart- ment’s strategic planning? How could it be improved?

PART B: STRUCTURE Describe your school or department’s organizational structure in terms of its complexity, formalization, and centralization.

PART C: CULTURE Identify artifacts in each of the categories of heroes, stories, slo- gans, symbols, and ceremonies.

Identify the cultural levels of the organization’s behaviors, values and beliefs, and assumptions.

Apply It What did I learn from this experience? How will I use this knowl- edge in the future?

_______________________________________________________

Your instructor may ask you to do this Skill Builder in class in a group. If so, the instructor will provide you with any necessary infor- mation or additional instructions.

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LEARNING OBJECTIVES After studying this chapter, you should be able to do the following:

3-1 Describe the OUCH test and its four components, and identify when it is useful in an organizational setting. PAGE 76

3-2 Identify the major equal employment opportunity (EEO) laws and the groups of people that each law protects. PAGE 79

3-3 Briefly describe the EEOC’s functions, employee rights, and employer responsibilities in conjunction with EEO laws. PAGE 91

3-4 Discuss the differences among equal employment opportunity, affirmative action, and diversity. PAGE 93

3-5 Identify the two primary types of sexual harassment and how to reduce company risk from harassment lawsuits. PAGE 99

3-6 Discuss the employer accommodations that are required to avoid unnecessary religious discrimination. PAGE 102

3-7 Discuss trends in HRM including the role of technology in diversity management and sexual orientation and gender identity discrimination. PAGE 102

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Chapter 3: The Legal Environment and Diversity Management 75

Practitioner’s Perspective Cindy says: One of the reasons some agree with the Dilbert comic strip depiction of the HR manager as devoid of feeling is due to the necessity of fair and uniform enforcement of government rules and regulations, as well as the company’s own policies and procedures. Aaron—a favorite with the patients and a willing overtime worker—misread the schedule and missed a day of work at the hospital. A no-call/no-show merits a written warning, but Aaron’s supervisor didn’t want to administer the discipline.

“Well,” I asked, “what if we were talking about another less exemplary employee? What about, oh, let’s say—Sandy? What would you do if she was NC/NS?”

SHRM HR CONTENT See Appendix: SHRM 2016 Curriculum Guidebook for the complete list

B. Employment Law (required)

1. Age Discrimination in Employment Act of 1967

2. Americans with Disabilities Act of 1990 and as amended in 2008

3. Equal Pay Act of 1963

4. Pregnancy Discrimination Act of 1978

5. Title VII of the Civil Rights Act of 1964 and 1991

6. Executive Order 11246 (1965)

10. Rehabilitation Act (1973)

15. Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

17. Enforcement agencies (EEOC, OFCCP)

24. Disparate impact

25. Disparate treatment

27. Unlawful harassment

Sexual

Religious

Disability

Race

Color

Nation of origin

28. Whistle-blowing/retaliation

29. Reasonable accommodation

ADA

Religious

31. Lilly Ledbetter Fair Pay Act

32. Genetic Information Nondiscrimination Act (GINA)

35. Immigration Reform and Control Act (IRCA)

38. Immigration and Nationality Act (INA)

E. Job Analysis/Job Design (required)

6. Compliance with legal requirements

Equal employment (job- relatedness, bona fide occupational qualifications, and the reasonable accommodation process)

F. Managing a Diverse Workforce (required)

1. Equal employment opportunity (EEO)

2. Affirmative action (AA)

4. Individuals with disabilities

6. Racial/ethnic diversity

7. Religion

8. Reverse discrimination

9. Sex/gender issues

12. Business case for diversity

I. Staffing: Recruitment and Selection (required)

15. Bona fide occupational qualifications (BFOQs)

Get the edge on your studies. edge.sagepub.com/lussierhrm3e

• Take a quiz to find out what you’ve learned.

• Review key terms with eFlashcards.

• Watch videos that enhance chapter content.

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76 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

“Hey, no problem there—I’d write up Sandy in an instant!” replied the supervisor.

“Wait—wouldn’t that be discrimination?” Different treatment of individuals who are in similar circumstances opens the door to legal liability. In Chapter 3, we’ll explore why HR is required to advise and assist with compliance issues—no matter how “heartless” it may appear.

CHAPTER OUTLINE The Legal Environment for HRM and a User’s Guide to

Managing People

Protecing Your Organization

The OUCH Test

Objective

Uniform in Application

Major Employment Laws

Equal Pay Act of 1963

Title VII of the Civil Rights Act of 1964 (CRA)

Age Discrimination in Employment Act of 1967 (ADEA)

Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA)

Pregnancy Discrimination Act of 1978 (PDA)

Americans With Disabilities Act of 1990 (ADA), as Amended in 2008

Civil Rights Act of 1991

Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

Veterans Benefits Improvement Act of 2004 (VBIA)

Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA)

Lilly Ledbetter Fair Pay Act of 2009 (LLFPA)

Immigration Laws Relating to Employment and Equal Opportunity

Reminder: State and Local EEO Laws May Be Different

Equal Employment Opportunity Commission (EEOC)

What Does the EEOC Do?

Employee Rights Under the EEOC

Employer Rights and Prohibitions

EEO, Affirmative Action, and Diversity: What’s the Difference?

Affirmative Action (AA)

The Office of Federal Contract Compliance Programs (OFCCP)

Diversity in the Workforce

Sexual Harassment: A Special Type of Discrimination

Types of Sexual Harassment

What Constitutes Sexual Harassment?

Reducing Organizational Risk From Sexual Harass- ment Lawsuits

Religious Discrimination

Trends and Issues in HRM

Technology May Create New Dangers in Equal Opportunity and Diversity Management

Sexual Orientation and Gender Discrimination

THE LEGAL ENVIRONMENT FOR HRM AND A USER’S GUIDE TO MANAGING PEOPLE Let’s begin this chapter by discussing the legal environment and the need to protect your organization from discrimination. Next, we present the OUCH test as a guide to manag- ing people without discrimination.

Protecting Your Organization The HRM legal environment has become significantly more complex in the past 30 years. There have been a significant number of laws enacted just in the past ten years that affect how organizations must do business. In addition, we have grown to believe in the value of a diverse workforce, much more so than in the 1960s and ’70s.1 In this chapter, we will explore some of the laws that HR managers have to work with on a daily basis, and we will also look in some more depth at diversity and why it is valuable in an organization.

LO 3-1 Describe the OUCH test and its four components and identify when it is useful in an organizational setting.

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Chapter 3: The Legal Environment and Diversity Management 77

Recall from the first chapter that one of the primary jobs of an HR manager in any organization is to assist in avoiding any discriminatory employment situations that can create legal, ethical, or social problems with employees, former employees, the commu- nity, or other stakeholders. As a result, one of the first things we need to do in this chapter is define discrimination, which is the act of making distinctions or choosing one thing over another; in HR, it is making distinctions among people. So you can quickly see that we all discriminate, every day. If managers don’t discriminate, then they’re not doing their jobs. However, we want to avoid illegal discrimination based on a person’s membership in a protected class (we will discuss protected classes shortly), and we want to avoid unfair treatment of any of our employees at all times. Illegal discrimination is making distinc- tions that harm people and that are based on those people’s membership in a protected class. This chapter will teach you some of the tools that we can use to avoid illegal discrimination.

The OUCH Test Before we start talking about equal employment opportunity and all of the forms of illegal discrimination in the workplace, let’s take the opportunity to introduce you to the OUCH test.2 The OUCH test is a rule of thumb used whenever you are contemplating any employment action, to maintain fairness and equity for all of your employees or appli- cants. You should use this test whenever you are contemplating any action that involves your employees. For example you should use it when hiring new people, promoting employees, deciding whether or not to give someone a raise, analyzing potential disci- plinary action against an employee, or in any other job-related action.

OUCH is an acronym that stands for Objective, Uniform in application, Consistent in effect, Has job relatedness (see Exhibit 3-1).

Objective Is the action objective, or is it subjective? Something that is objective is based on fact, cog- nitive knowledge, or quantifiable evidence, not on personal feelings or prejudices.3 Some- thing that is subjective is based on your emotional state, your opinion, or how you feel in a certain circumstance, not on your cognitive knowledge. You should make your employ- ment actions as objective as possible, in all cases.

Uniform in Application Is the action being uniformly applied? In other words, if you apply an action in an employ- ment situation, are you applying that same action in all cases of the same type? For exam- ple, if you have one applicant for a position take a written test, are you also having all the applicants for that same position take the same written test, under the same conditions, to the best of your ability? Making your actions uniform in application is more difficult than you probably think it is.

If you ask someone to perform a test (whether written, verbal, or physical), you need to create the exact same testing circumstances, as much as you can control them. For instance, if you asked people to take a written exam, you would need to provide the exact

Discrimination The act of making distinctions or choosing one thing over another; in HR, it is making distinctions among people

Illegal discrimination The act of making distinctions that harm people and that are based on those people’s membership in a protected class

OUCH test A rule of thumb used whenever you are contemplating any employment action, to maintain fairness and equity for all of your employees or applicants

WORK APPLICATION 3-1

Select an employment policy at the

company where you work or at a

company where you have worked.

Give it the OUCH test, stating

whether it does or does not meet

each of the four criteria.

EXHIBIT 3-1 THE OUCH TEST

Objective Fact-based and quantifiable, not subjective or emotional

Uniform in Application Apply the same “tests” in the same ways

Consistent in Effect Ensure the result is not significantly different for different groups

Has Job Relatedness Action must relate to the essential job functions

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78 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

same type of setting for the test. If one person took the exam in a quiet room and the other in a noisy hallway, your actions would not be uniform in application.

Consistent in Effect Does the action taken have a significantly different effect on one or more protected groups than it has on the majority group? Determining consistency in effect is a bit more difficult than the other three OUCH test characteristics. There are many protected groups in US law. We have to try to make sure that we don’t affect one of these protected groups dis- proportionately with an employment action. But how can we know?

The Department of Labor and the Equal Employment Opportunity Commission (EEOC) have given us the Four-Fifths Rule,4 which is a test used by various federal courts, the Department of Labor, and the EEOC to determine whether disparate impact exists in an employment test. If the selection ratio for any group (e.g., Asian males) is less than four-fifths of the selection rate for the majority group (e.g., white males) in an employ- ment action (e.g., promotions), then it constitutes evidence of potential disparate impact (we will discuss the term “disparate impact” in more detail shortly).

The best way to quickly explain the Four-Fifths Rule is to give you a simplified example. Take a look at Exhibit 3-2. Let’s suppose that we live in an area that is basically evenly split between African-American and white, non-Hispanic populations. You are planning on hir- ing about 40 new employees for a general position in your company. You decide to give each of the potential employees a written test. If the results of the test disproportionately

Four-Fifths Rule A test used by various federal courts, the Department of Labor, and the EEOC to determine whether disparate impact exists in an employment test

Example 1: You are planning to hire about 40 new employees. The statistical information on applicants is below:

White Males African-American Males

Applicants 100 100

Selected 20 17

Selection rate 20% (20/100) 17% (17/100)

4/5ths = 80%, so 80% of 20% (0.80 × 0.20) = 16%.

The selection rate of 17% is greater than 16%, so the Four-Fifths Rule is met.

Example 2: What if you didn’t have equal numbers of applicants in each group?

White Males African-American Males

Applicants 100 40

Selected 29 9

Selection rate 29% 22.5% of 40

4/5ths = 80%, so 0.80 × 0.29 = 0.232 or 23.2%

The selection rate of 22.5% is less than the 23.2% required, so the Four-Fifths Rule is not met.

You would have to hire 9.28 or more people (23.2% of 40 = 9.28) in this case to be in compliance with the Four-Fifths Rule. You can’t have 28% of a person, so you need to round up to 10 to be within the requirement. Therefore, you need one more African-American male (10 – 9 selected) to meet the Four-Fifths Rule requirement.

In the first example, the selection rate of African-American males (the protected group in this case) was 17%, which is above the Four-Fifths Rule threshold of 16%. Therefore, we are “consistent in effect,” based on the Four-Fifths Rule. However, in the second example, the selection rate of African-American males was 22.5%, and the minimum value by the Four-Fifths Rule was 23.2%. As a result, we would be outside the boundaries of being consistent in effect in this case.

EXHIBIT 3-2 THE FOUR-FIFTHS RULE

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Chapter 3: The Legal Environment and Diversity Management 79

rule out the African-American portion of the population, then your writ- ten test is not consistent in effect. So let’s use the Four-Fifths Rule to find out whether or not you were being consistent. Look at the numbers in Exhibit 3-2.

If we are out of compliance with the Four-Fifths Rule, have we auto- matically broken the law? No.5 We do have to investigate why we are outside the four-fifths parameter, though. If there is a legitimate reason (we will discuss this shortly) for the discrepancy that we can prove in a court, then we are probably OK with a selection rate that is outside the parameters. By the way, we can also look at six-fifths to determine the possibility of reverse discrimination—reverse discrimination is discrimination against the majority employee group based on a legally protected factor, such as race or religion—so we would want to have between 16 and 24 African-American males selected in the first example, since 6/5 of 20 is 24.

Consistency in effect is by far the most complex of the four OUCH test factors. How- ever, it is also very important for us to show consistency in our actions as managers in an organization.

Has Job Relatedness Is the action directly related to the primary aspects of the job in question? The word “pri- mary” will become very important later, when we discuss the Americans with Disabilities Act (ADA), which calls these factors “essential functions.” For right now, just understand that our actions have to be directly job related.6 In other words, if your job has nothing to do with making coffee for the office in the morning, I cannot base any employment action such as a hiring or firing on whether or not you do a good job making the coffee.

Remember that the OUCH test is a rule of thumb and does not work perfectly. It is not a legal test by itself. It is a good guide to nondiscriminatory practices, but it is only a guide.

MAJOR EMPLOYMENT LAWS In any management position within any organization today, you need a basic understand- ing of the major employment laws that are currently in effect. If you don’t understand what is legal and what isn’t, you can inadvertently make mistakes that may cost your employer significant amounts of money and time; and if that happens, your employer may not remain your employer for very long. You don’t want that to happen, so let’s take a chronological look at some of the laws listed in Exhibit 3-3.

The EEOC has also set up a website to teach younger employees about the rights and responsibilities at work. You may want to visit this site and remember it for future use when you are managing others. It will help your employees understand what they can and can’t do in the workplace. The site is called Youth@Work, and it is available at www .eeoc.gov/youth/index.html7

Equal Pay Act of 1963 (EPA) The first modern equal employment opportunity (EEO) law that we will review is the Equal Pay Act. The act requires that women who do the same job as men, in the same organization, must receive the same pay. It defines equal in terms of “equal skill, effort, and responsibility, and . . . performed under similar working conditions.”8 Members of the US Women’s Soccer Team filed an Equal Pay complaint with the EEOC in 2016 based on a disparity in the per-game and win-incentives paid to the men’s and women’s team members.9 They claim that if the US men’s team won a game, they would receive average compensation of $13,166 while if the women’s team won a game, their compensation would average $4,950.10 The EPA says that if pay differences are the result of differences in seniority, merit, quantity or quality of production, or any factor other than sex (e.g., shift differentials, training programs), then those differences are legally allowable.11

Reverse discrimination Discrimination against the majority employee group based on a legally protected factor, such as race or religion

F:8 Reverse Discrimination

SHRM

B:3 Equal Pay Act of 1963

SHRM

LO 3-2 Identify the major equal

employment opportunity (EEO) laws and the groups of people

that each law protects.

HRM in Action Religious Diversity and Management

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80 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

However, based on the players’ allegations and the records of the US men’s and women’s teams at the time the suit was filed, these factors should probably not play a part in decid- ing the compensation differentials that the women claim. While the EPA was designed to equalize pay between men and women, the act was never fully successful; but the next law we will discuss added serious consequences to such unequal treatment.

Title VII of the Civil Rights Act of 1964 (CRA) This act was probably the most significant single piece of legislation regulating EEO in the history of the United States.12 It changed the way that virtually every organization in the country did business, and it even helped change employers’ attitudes about discrimination. Even in cases where the law does not directly apply to an organization, it has been used to evaluate internal policies to attempt to ensure fairness and equity for all of our workers.

The 1964 CRA states that it is illegal for an employer “(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such indi- vidual’s race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.”13

The act applies to organizations with 15 or more employees who are working 20 or more weeks a year and who are involved in interstate commerce. Why does the organiza- tion have to be involved in interstate commerce? Mainly because of the 10th Amendment

Law Description

Equal Pay Act of 1963 Requires that women be paid equal to men if they are doing the same work

Title VII of the Civil Rights Act of 1964

Prohibits discrimination on the basis of race, color, religion, sex, or national origin in all areas of the employment relationship

Age Discrimination in Employment Act of 1967

Prohibits age discrimination against people 40 years of age or older and restricts mandatory retirement

Vietnam Era Veterans Readjustment Assistance Act of 1974

Prohibits discrimination against Vietnam veterans by all employers with federal contracts or subcontracts of $100,000 or more. Also requires that affirmative action be taken

Pregnancy Discrimination Act of 1978

Prohibits discrimination against women affected by pregnancy, childbirth, or related medical conditions

Americans with Disabilities Act of 1990

Strengthened the Rehabilitation Act of 1973 to require employers to provide “reasonable accommodations” to allow disabled employees to work

Civil Rights Act of 1991 Strengthened civil rights by providing for possible compensatory and punitive damages for discrimination

Uniform Services Employment and Reemployment Rights Act (USERRA) of 1994

Ensures the civilian reemployment rights of military members who were called away from their regular (nonmilitary) jobs by US government orders

Veterans Benefits Improvement Act of 2004

Amends USERRA to extend health care coverage while away on duty, and requires employers to post a notice of benefits, duties, and rights of reemployment

Genetic Information Nondiscrimina- tion Act of 2008

Prohibits the use of genetic information in employment, prohibits intentional acquisition of same, and imposes confidentiality requirements

Lilly Ledbetter Fair Pay Act of 2009 Amends the 1964 CRA to extend the period of time in which an employee is allowed to file a lawsuit over pay discrimination

EXHIBIT 3-3 MAJOR EEO LAWS IN CHRONOLOGICAL ORDER

B:5 Title VII of the Civil Rights Act of 1964 and 1991

SHRM

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Chapter 3: The Legal Environment and Diversity Management 81

to the US Constitution, which deals with states’ rights. The federal government can’t make any laws that apply wholly within the borders of a single state. The law also generally applies to state and local governments; educational institutions, public or private; all employment agencies; and all labor associations of any type.

Let’s discuss some of the important concepts introduced by the CRA of 1964 including:

• Disparate treatment • Disparate (also called adverse) impact • Pattern or practice • Bona fide occupational qualification (BFOQ) • Business necessity • Job relatedness

TYPES OF DISCRIMINATION. The 1964 CRA identified, really for the first time, three specific types of discrimination. While it didn’t name them, it did describe the process of each of the three in some detail.14 Once this was done, court rulings helped to further define the three types, which we have come to call disparate treatment, disparate impact, and pattern or practice. Disparate treatment and impact are also called adverse treatment or impact.

In addition to the three types of discrimination that were more or less directly identi- fied in the 1964 CRA, a fourth and fifth type have been determined to exist by federal courts based on the wording of the CRA. These other two types of discrimination are reli- gious discrimination and sexual harassment.15 But for now, let’s discuss the three forms of discrimination that were directly identified in the CRA. We will save the fourth and fifth items for later in the chapter.

Disparate (Adverse) Treatment. Disparate treatment exists when individuals in similar situations are intentionally treated differently, and the different treatment is based on an individual’s membership in a protected class. In a court case, the plaintiff must prove that there was a discriminatory motive—that is, that the employer intended to discriminate— in order to prove disparate treatment.16 Disparate treatment is generally illegal unless the employer can show that there was a “bona fide occupational qualification” (or BFOQ— we will talk about these shortly) that caused the need to intentionally disallow members of a protected group from applying for or getting the job. One place where disparate treat- ment still occurs with some frequency is in access to mentoring and leadership develop- ment, where women and minority individuals are still “substantially underrepresented.”17

Disparate (Adverse) Impact. Disparate impact occurs when an officially neutral employ- ment practice disproportionately excludes the members of a protected group; it is gener- ally considered to be unintentional, but intent is irrelevant. For there to be discrimination under disparate treatment, there has to be intentional discrimination. Under disparate impact, intent does not matter.18

As an example, some characteristics (e.g., height, strength) are not distributed equally across race and gender groups, and in some jobs, these characteristics may be related to successful performance in the job. Therefore, disparate impact is not necessarily illegal. The important question is whether the characteristic is related to successful performance on the job, meaning whether it has job relatedness. Disparate impact is generally judged by use of the Four-Fifths Rule that we discussed earlier. Both the Department of Labor (through their Uniform Guidelines on Employee Selection Procedures) and the EEOC have expressed a preference for using the Four-Fifths Rule to determine disparate impact.19 If the four-fifths requirement is not satisfied, discrimination is considered to have occurred but illegal discrimination has not necessarily occurred.

The Four-Fifths Rule requires that if we fall outside of its boundaries, we must investi- gate to ensure that we haven’t used an illegal protected class characteristic to bias an

Disparate treatment When individuals in similar situations are intentionally treated differently, and the different treatment is based on an individual’s membership in a protected class

Disparate impact Occurs when an officially neutral employment practice disproportionately excludes the members of a protected group; it is generally considered to be unintentional, but intent is irrelevant

B:25 Disparate Treatment

SHRM

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82 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

employment outcome. If our inves- tigation shows that an employment test or measure was biased toward or against a certain group, then we have to correct the test or measure unless there was a legitimate reason to measure that particular charac- teristic (as discussed below). How- ever, if our investigation shows that the test was valid and reliable and that there was some other legiti- mate reason why we did not meet the four-fifths standard, then illegal discrimination may not exist. We always need to investigate thor- oughly if we fall outside the four- fifths standard.

Pattern or Practice. Pattern or practice discrimination occurs when a person or group engages in a sequence of actions over a significant period of time that is intended to deny the rights provided by Title VII of the 1964 CRA to a member of a protected class. If there is reasonable cause to believe that any organization is engaging in a pattern or practice that denies the rights provided by Title VII, the US Attorney General may bring a federal lawsuit against it.20 In general, no individual can directly bring a pattern or practice law- suit against an organization. As with the disparate treatment concept, it must be proven that the employer intended to discriminate against a particular class of individuals and did so over a protracted period of time.

See Exhibit 3-4 for types of discrimination and types of organizational defenses against illegal discrimination charges.

ORGANIZATIONAL DEFENSES AGAINST DISCRIMINATION CHARGES. The organization does have some ways to defend against charges of illegal discrimination. We can defend ourselves by showing either that there was a need for a particular characteristic or qualification for a specific job or that there was a requirement that the business do certain things in order to remain viable and profitable so that we didn’t harm all of our employees by failing and shutting down. Let’s review these defenses now.

Bona Fide Occupational Qualification (BFOQ). The first defense is a bona fide occupational qualification (BFOQ), a qualification that is absolutely required in order for an individual to be able to successfully do a particular job. The qualification cannot just be a desirable quality within the job applicant—it must be mandatory.21 A BFOQ would be a legitimate defense against a charge of disparate treatment. As an example, in 2012 in a case brought by the EEOC against Exxon-Mobil, a US District Court judge in Texas ruled that ter- minating pilots from corporate employment at age 60 was legal because federal aviation

Effective HRM practices can help to prevent lawsuits. Firefighter Mark Broach filed a complaint against two white captains at the Cincinnati Fire Department for discrimination.

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I:15 Bona Fide Occupational Qualifications (BFOQs)

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Pattern or practice discrimination When a person or group engages in a sequence of actions over a significant period of time that is intended to deny the rights provided by Title VII of the 1964 CRA to a member of a protected class

Bona fide occupational qualification (BFOQ) A qualification that is absolutely required in order for an individual to be able to successfully do a particular job

EXHIBIT 3-4 ORGANIZATIONAL DEFENSES AGAINST

DISCRIMINATION CHARGES

Discrimination Type Intent Organizational Defense

Disparate Treatment Intentional BFOQ

Disparate Impact Unintentional BFOQ or business necessity and job relatedness

Pattern or Practice Intentional BFOQ (unlikely defense)

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 83

regulations required commercial pilots to be under 60 years old. The judge deemed that this regulation created a BFOQ of “age” for both corporate and commercial pilots, since the corporate pilots acted in the same general way as commercial pilots do, by flying passengers all over the world.22 Another example of a BFOQ is a requirement that only persons of particular religious faith be allowed to apply for a job as a worker within a mosque, church, or synagogue. In this case, there’s a reasonable expectation that people who do not share the same faith would not have the knowledge (qualifications) to be able to fill the job and would in fact almost certainly violate some of the rules of the faith if they were to be employed in such a position.

On the other hand, there was a very famous case of an employer attempting to use the BFOQ defense in response to a lawsuit where the defense did not work. In 1971, a man named Celio Diaz sued Pan American World Airways in the United States for discrimina- tion based on the fact that he had been denied the opportunity to apply for a flight attendant position with the airline. At the time, the airline required that flight attendants be female. In court, the airline defended the requirement that flight attendants be female based on the fact that passengers expected the role of a flight attendant to be filled by a woman. The company maintained that the passengers’ expectation was tantamount to a requirement. However, the courts ruled against the airline. The reasoning of the courts was that expectation or “cus- tomer preference” does not create a requirement in the eyes of the law.23 A BFOQ defense can be used against both disparate impact and disparate treatment allegations.

Business Necessity. Business necessity exists when a particular practice is necessary for the safe and efficient operation of the business and when there is a specific business pur- pose for applying a particular standard that may, in fact, be discriminatory. A business necessity defense is applied by an employer in order to show that a particular practice was necessary for the safe and efficient operation of the business and that there is a specific business purpose for applying a particular standard that may, in fact, be discriminatory.

Business necessity defenses must be combined with a test for job relatedness (discussed next). If an organization can show a legitimate business necessity for the test that they apply in an employment action, then they have a legitimate defense against charges of dis- parate impact. However, business necessity is specifically prohibited as a defense against disparate treatment.24

Job Relatedness. Job relatedness exists when a test for employment is a legitimate mea- sure of an individual’s ability to do the essential functions of a job. For job relatedness to act as a defense against a charge of discrimination, the organization’s action first has to be a business necessity, and then the employer must be able to show that the test for the employment action was a legitimate measure of an individual’s ability to do the job.25 This test doesn’t have to be a paper and pencil test. The federal government defines a “test for employment action” as the full range of assessment techniques, including written exams, performance tests, training programs, probationary periods, interviews, reviews of experi- ence or education, work samples, and physical requirements.26

As an example of business necessity and job relatedness, the 5th Circuit Court of Appeals agreed that the National Park Service was allowed to transfer a park ranger out of the field due to the onset of a disability (Type I diabetes). The Park Service claimed the transfer was job related and consistent with business necessity, and the Court agreed. In the ruling, the Court noted that in the specific standards under which Atkins was trans- ferred, the “focus on the physical consequences of uncontrolled diabetes was ‘related to the specific skills and requirements’ of being a park ranger and, therefore, job-related,” and “the Standards also ‘substantially promote[d]’ [National Park Service] needs, consis- tent with business necessity.”27

There is one thing that all good managers, especially HR managers, should keep in mind, though. The best way to defend against illegal discrimination charges is to avoid actions that could bring such charges about. If the company follows the laws and regula- tions, charges of discrimination become significantly less likely, so HR needs to ensure that we do everything possible to avoid those charges.

WORK APPLICATION 3-2

Give examples of BFOQ for

jobs at an organization where

you work or have worked.

Business necessity When a particular practice is necessary for the safe and efficient operation of the business and when there is a specific business purpose for applying a particular standard that may, in fact, be discriminatory

Job relatedness When a test for employment is a legitimate measure of an individual’s ability to do the essential functions of a job

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

84 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Age Discrimination in Employment Act of 1967 (ADEA) The ADEA prohibits discrimination against employees age 40 or older. In this case, it applies if the organization has 20 or more workers instead of 15. The wording of this act almost exactly mirrors Title VII with the exception of the 20-worker minimum. This mir- roring of the 1964 CRA is true of nearly all of the protected class discrimination laws that came about after 1964.

Why did Congress pass the ADEA? It was passed in response to a business practice that started to become a significant issue in the 1960s. Companies began to lay off older work- ers who tended to have higher salaries and then hire younger workers who would usually work for significantly less money. Congress became aware of these actions and decided that this was an unfair form of discrimination against people who had spent many years of their lives working for these same companies. The law that resulted was the ADEA.

Age discrimination complaints make up one-fifth to one-quarter of all actions filed with the EEOC, and these cases can be very costly. In one 2017 case, Texas Roadhouse agreed to pay $12 million and change its recruiting and hiring practices in order to settle an age discrimination lawsuit. The suit alleged that the company had refused to hire many older workers for front-of-the-house positions based on their age. The agreement also “includes an injunction preventing Texas Roadhouse from discriminating on the basis of age in the future and requires the company to establish a diversity director and pay for a decree compliance monitor.”28

Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA) This act again provides basically the same protection as the CRA does, but for Vietnam veterans. However, it applies only to federal contractors. Why was this law enacted? It was primarily due to the fact that after the war with Vietnam, military veterans came home to a public that was largely opposed to our participation in the war. As a result, some employers would discriminate against Vietnam veterans for taking part in a war that they personally had been opposed to. Congress decided that it was not acceptable for employers to single out veterans who had done only what the country had required of them, so they passed VEVRAA to prohibit such behaviors. The law requires that “employers with federal contracts or subcontracts of $100,000 or more provide equal opportunity and affirmative action for Vietnam era veterans, special disabled veterans, and veterans who served on active duty during a war or in a campaign or expedition for which a campaign badge has been authorized.”29

Pregnancy Discrimination Act of 1978 (PDA) The Pregnancy Discrimination Act requires that employers treat any woman who is preg- nant in the same manner as they would treat any other employee with a medical

APPLYING THE CONCEPT3-1 BFOQ

State if each of the following would or wouldn’t meet the test of a BFOQ:

a. It is a legal BFOQ

b. It is NOT a legal BFOQ

____ 1. For the job of modeling women’s clothing, applicants must be female.

____ 2. For a job of loading packages onto trucks to be deliv- ered, applicants must be able to lift 35 pounds.

____3. For the job of teaching business at a Catholic college, applicants must be practicing Catholics.

____4. For the job of attendant in a men’s locker facility at a gym, applicants must be male.

____5. For the job of a guard in a prison with male inmates, applicants must be men.

B:1 Age Discrimination in Employment Act of 1967

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B:4 Pregnancy Discrimination Act of 1978

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Chapter 3: The Legal Environment and Diversity Management 85

condition. It prohibits discrimination against women affected by pregnancy, childbirth, or related medical conditions as unlawful sex discrimination under Title VII and requires that they be treated as all other employees for employment-related purposes, including benefits.30

Here, too, one wonders why this law was, or is now, necessary. As health insurance costs started to rise in the 1970s, companies started to look for ways to lower those costs. One way they found was to exclude pregnancy from their health insurance poli- cies. By the mid-1970s, only a minority of employers covered pregnancy and related ill- nesses in their health policies, even though women made up about 45% of the workforce.31 Finally, in 1976, a Supreme Court decision ruled that denying benefits for pregnancy-related disability was not discrimination based on sex.32 This ruling outraged many women’s advocacy organizations that in turn put pressure on Congress, which passed the PDA in 1978. Again, this law is mandatory for companies with 15 or more employees, including employment agencies, labor organizations, and state and local governments.

We would like to think that companies are beyond this type of discrimination today. However, there continue to be many examples of such discrimination, such as a 2016 case of a Chipotle employee who was terminated when she became pregnant. Her supervisor initially required that she report to coworkers when she needed a bathroom break, and ultimately allegedly terminated her in front of employees and customers for “leaving work early to go to a prenatal doctor’s appointment”.33 The case was settled before trial for $550,000.

Americans with Disabilities Act of 1990 (ADA), as Amended in 2008 The first major federal law dealing with discrimination against disabled individuals was the Rehabilitation Act of 1973. This act stated that agencies of the federal government, federal contractors, and subcontractors with contracts exceeding $10,000 had to take affirmative action and could not discriminate on the basis of disabilities in any employ- ment actions.34 However, this act applied only to a relatively small number of companies in the United States. Conversely, the ADA is one of the most significant employment laws ever passed in the United States. It also prohibits discrimination based on disability in all employment practices, such as job application procedures, hiring, firing, promotions, compensation, and training. However, it applies to virtually all employers with 15 or more employees in the same basic ways as the CRA of 1964 does.

The ADA defines a disability as a physical or mental impairment that substantially limits one or more major life activities, a record of having such an impairment, or being regarded as having such an impairment.35 According to rulings on the law, conditions such as obesity, substance abuse, and left-handedness are not covered disabilities. (You may laugh, but it’s true!) However, something like obesity—if caused by a medical condi- tion that would qualify as a disability, or if the obesity causes other medical conditions that would be covered (e.g., high blood pressure or heart problems)—could be covered in some cases.

The definition of a disability is interesting because of the fact that anyone who has a record of having had an impairment covered by the ADA is considered in the same man- ner as someone who has a current disability. It is the same with someone who is regarded as having an impairment. How can someone be regarded as being impaired or disabled when they currently aren’t? Well, as an example, if you have ever seen someone who has been severely burned on the face and hands, you may have had some questions as to whether the individual was disabled or not. Under the ADA, you must treat that person as disabled because of your concerns that the person may have a disability.

WHAT DOES THE ADA REQUIRE OF EMPLOYERS? An organization must make “reasonable accommodations” to the physical or mental limitations of an individual with a disability who was otherwise qualified to perform the “essential functions” of the job, unless it would impose an “undue hardship” on the organization’s operation.36

B:2 Americans with Disabilities Act of 1990 and as amended in 2008

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B:10 Rehabilitation Act (1973)

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F:4 Individuals With Disabilities

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B:29 Reasonable Accommodation—ADA

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Disability A physical or mental impairment that substantially limits one or more major life activities, a record of having such an impairment, or being regarded as having such an impairment

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86 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

So, what is a reasonable accommodation? A reasonable accommodation is an accommo- dation made by an employer to allow someone who is disabled but otherwise qualified to do the essential functions of a job to be able to per- form that job. Reasonable accommodations are usually inexpensive and easy to implement. Here again, an example works best. If a job in a particular company requires that the employee use a computer keyboard and a blind individ- ual applies for that job, the organization can make a reasonable accommodation to the indi- vidual by purchasing a Braille keyboard. In this case, Braille keyboards are inexpensive and provide the blind individual with the ability to do the job based on the reasonable accommo- dation provided.

In defining reasonable accommodations, it is also necessary to distinguish between “essential” and “marginal” job functions. Although essential functions are noted in the ADA, they are not defined there. Our understanding of essential functions comes mainly from court decisions concerning ADA cases. Based on these court cases, essential func- tions are the fundamental duties of the position. A function can generally be considered essential if it meets one of the following criteria:

1. The function is something that is done routinely and frequently in the job.

2. The function is done only on occasion, but it is an important part of the job.

3. The function may never be performed by the employee; but if it were necessary, it would be critical that it be done right.

Marginal job functions, on the other hand, are those that may be performed on the job but need not be performed by all holders of the job. Individuals with disabilities can- not be denied employment if they cannot perform marginal job functions.37

What would be an example of a marginal job function? Let’s say that in a clerical job, one of the job holder’s duties is to file paperwork. However, the filing cabinet is a vertical five-drawer cabinet, and someone in a wheelchair would not be able to file papers in the upper drawers. The person in the job only spends about 5 minutes per day filing and only a portion of that filing in the upper two drawers of the filing cabinet. So would filing be an essential function in this job? No, it wouldn’t—for a couple of reasons. First, it takes up a very small part of the day, so it is not something that the employee would do a lot. Second, in most cases, the company could buy horizontal filing cabinets that the disabled individ- ual could reach, thus providing a reasonable accommodation to the disability. Finally, if for some reason, the company could not put horizontal filing cabinets into the area (e.g., if there were severe space limitations and no way to expand at a reasonable cost), then someone else could do the filing in the upper drawers for a couple of minutes per day. So in this case, filing would be a marginal job function.

Generally, though not always, we find a list of the essential functions of the job in the organization’s job descriptions and specifications (as discussed in Chapter 4). If the func- tion is not listed as essential in the job description and specifications, we may have diffi- culty using it as a defense in a disability case. Therefore, we generally want to ensure that we list all of the essential functions of the job in the job description and specification documents.

So we have to make reasonable accommodations, but do employers have to take the initiative to make every job disability friendly? No. Under the ADA, employers are38

• not required to make reasonable accommodations if the applicant or employee does not request it;

Reasonable accommodation An accommodation made by an employer to allow someone who is disabled but otherwise qualified to do the essential functions of a job to be able to perform that job

Essential functions The fundamental duties of the position

Marginal job functions Those functions that may be performed on the job but need not be performed by all holders of the job

HRM should focus on the ability to do the job and should not eliminate applicants based on non-job-related disabilities.

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Chapter 3: The Legal Environment and Diversity Management 87

• not required to make reasonable accommodations if applicants don’t meet required qualifications for a job;

• not required to lower quality standards or provide personal use items such as glasses or hearing aids to make reasonable accommodations; and

• not required to make reasonable accommodations if to do so would be an undue hardship.

An undue hardship exists when the level of difficulty for an organization to provide accommodations, determined by looking at the nature and cost of the accommodation and the overall financial resources of the facility, becomes a significant burden on the organization. In general, the Department of Labor notes that most accommodations are relatively easy and inexpensive (usually costing less than $500—think of the Braille key- board above, which costs about $25).39 However, we must note that an undue hardship may be different for different companies. For instance, a small company with only a few million dollars in revenue per year may have an undue burden based on a relatively low- cost accommodation to a disabled individual, while a larger company could not claim undue hardship for the same accommodation.

An example helps here, too. If we were the owners of a small company housed on the second floor in a downtown historic-district building, and if we had an applicant for a job who was wheelchair bound, would we be required to consider that applicant for a job and accommodate that individual by rebuilding the historic building? The answer is most likely no, because of the fact that the accommodation required in one of the historic houses in such a district would require a major rebuilding effort, since stairways and doors in such houses are typically very narrow. This effort would cost a significant amount of money—an amount that would be unreasonable for the organization to pay. However, if we were faced with the same disabled individual and we were a large com- pany headquartered in a modern building, then we would certainly be required to make the reasonable accommodations necessary to allow an individual in a wheelchair to work within the confines of our building.

The biggest problem that employers have with the ADA is the fact that it contains a number of words and phrases that can be interpreted in a wide variety of ways. Many of these were further defined in the 2008 ADA Amendments Act (ADAAA), but there still remains significant room for interpretation of many of these terms. For example, the term “reasonable accommodation” is open to broad interpretation because it is not defined very specifically in the ADA. “Essential function” is another term that can be defined in a wide variety of ways, although continuing court cases have narrowed it down some over the past 20 years. Because of these poorly defined terms, companies have had a difficult time in applying the ADA in a consistent manner, and as a result, they have quite likely been involved in more lawsuits per disabled employee than with any other protected group.40 Companies have worked for nearly 30 years to get clarification of the meaning of some of these words in the ADA, but without success to this point.

Civil Rights Act of 1991 The CRA of 1991 was enacted as an amendment designed to correct a few major omis- sions of the 1964 CRA as well as to overturn several US Court decisions.41 One of the major changes in the amendment was the addition of compensatory and punitive damages in cases of intentional discrimination under Title VII and the ADA, when intentional or reckless discrimination is proven.42 Compensatory damages are monetary damages awarded by the court that compensate the injured person for losses. Such losses can include future pecuniary loss (potential future monetary losses like loss of earnings capac- ity), emotional pain, suffering, and loss of enjoyment of life. Punitive damages are mone- tary damages awarded by the court that are designed to punish an injuring party that has intentionally inflicted harm on others. They are meant to discourage employers from intentionally discriminating, and they do this by providing for payments to the plaintiff beyond the actual damages suffered.

Undue hardship When the level of difficulty for an organization to provide accommodations, determined by looking at the nature and cost of the accommodation and the overall financial resources of the facility, becomes a significant burden on the organization

Compensatory damages Monetary damages awarded by the court that compensate the injured person for losses

Punitive damages Monetary damages awarded by the court that are designed to punish an injuring party that has intentionally inflicted harm on others

B:5 Title VII of the Civil Rights Act of 1964 and 1991

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FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

88 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Recognizing that one or a few discrimination cases could put an organization out of business, adversely affecting many innocent employees, the CRA of 1991 provides for a sliding scale of upper limits or “caps” on the combined amount of compensatory and punitive damages based on the number of employees employed by the employer. The lim- itations are shown in Exhibit 3-5.43

Another major area in which the 1991 Act changed the original CRA is in the applica- tion of quotas for protected group members. Many companies, after the 1964 CRA, cre- ated and used quotas for hiring and promotion. The quotas were made explicitly illegal by the 1991 act. In addition, the act prohibits “discriminatory use” of test scores, which is commonly called race norming. Race norming exists when different groups of people have different scores designated as “passing” grades on a test for employment. One group may have higher requirements for passing grades while another is allowed to pass at a lower level. The 1991 act basically equated this with quotas and, as such, made it illegal.44

Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) USERRA was passed to ensure the civilian reemployment rights of military members who were called away from their regular (nonmilitary) jobs by US government orders. Unlike other EEO laws, there is no minimum number of employees required for coverage by USERRA—all employers must comply with the law.45 Per the US Department of Labor website, “USERRA is intended to minimize the disadvantages to an individual that occur when that person needs to be absent from his or her civilian employment to serve in this country’s uniformed services. USERRA makes major improvements in protecting service member rights and benefits by clarifying the law and improving enforcement mechanisms.”46

USERRA covers virtually every individual in the country who serves or has served in the uniformed services, and it applies to all employers in the public and private sectors, including federal employers. It also provides protection for disabled veterans, requiring employers to make reasonable efforts to accommodate their disabilities.47 Under USERRA, the employee returning from military service is not only entitled to the job that they had when they left, but they are entitled to any “escalation,” or any job or pay/bene- fits increase they would have attained, if they had not been called away.48

Veterans Benefits Improvement Act of 2004 (VBIA) The VBIA was enacted as an amendment to USERRA. It made two significant changes to USERRA: it extended the requirement for employers to maintain health care coverage for employees who were serving on active duty in the military (originally, this period was 18 months, but the VBIA changed it to 2 years); and it required employers to post a notice of benefits, duties, and rights under USERRA/VBIA in a place where it would be visible to all employees who might be affected.49

B:15 Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

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B:32 Genetic Information Nondiscrimination Act (GINA)

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Race norming When different groups of people have different scores designated as “passing” grades on a test for employment

EXHIBIT 3-5 CAPS ON COMPENSATORY AND PUNITIVE DAMAGES

BY EMPLOYER SIZE

Employer Size Caps on Damages

15 to 100 employees $50,000

101 to 200 employees $100,000

201 to 500 employees $200,000

501 employees or more $300,000

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 89

Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA) Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA) “prohibits the use of genetic information in employment, prohibits the intentional acquisition of genetic information about applicants and employees, and imposes strict confidentiality requirements.”50

As with previously mentioned laws, some of you may be wondering why this law was enacted. GINA was created basically because of recent advances in genetic testing. We are now able to identify some genetic information that relates to a predisposition to contract certain diseases or disorders, such as Alzheimer’s and Huntington’s diseases. In order to prevent increases in medical premiums, some companies were starting to use these tests as a decision-making tool in hiring of employees, and some insurance companies were using such tests to determine health care coverage. There was some question about “preexisting conditions”—if you have the genetic marker for a disease, does that mean it is a preexist- ing condition and therefore not covered by some insurance policies?

Because companies were starting to use these tests to make employment and health care decisions, Congress decided to address their use. The result was GINA. The law pro- hibits discrimination based on genetic information and restricts acquisition and disclosure of such information. Congress enacted this law so that the general public would not fear adverse employment-related or health coverage–related consequences for having a genetic test or participating in research studies that examine genetic information.51

Lilly Ledbetter Fair Pay Act of 2009 (LLFPA) This law amended Title VII of the 1964 CRA, as follows: “(3)(A) For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in com- pensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensa- tion decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, ben- efits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.”52

So, what does this mean? In practical terms, the LLFPA extends the period of time in which an employee is allowed to file a lawsuit for compensation (pay) discrimination. The 1964 CRA only allowed 180 days from the time of the discriminatory action for an individual employee to file a lawsuit. The LLFPA allows an individual to file a lawsuit within 180 days after “any application” of that discriminatory compensation decision, including every time the individual gets paid, as long as the discrimination is continuing, which would usually be for the entire period of their employment.

One of the most significant aspects of the LLFPA is that the amendments to the time allowed to file a discrimination complaint could also be determined by the courts to apply to other antidiscrimination laws like the Age Discrimination in Employment Act and the Americans with Disabilities Act, which borrow Title VII’s limitations period.

Immigration Laws Relating to Employment and Equal Opportunity Immigration and the employment of immigrant workers are controlled by a series of fed- eral laws. In general, these laws are designed for two purposes: to require verification of

President Barack Obama with Lilly Ledbetter in 2016, on the seventh anniversary of his signing the Lilly Ledbetter Fair Pay Act into law.

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B:31 Lilly Ledbetter Fair Pay Act

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90 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

the legal right to work within the United States and to prevent potential discrimination against immigrant workers who are legally allowed to work in the country. The two major laws in this area are the Immigration and Nationality Act of 1952 (as amended) and the Immigration Reform and Control Act of 1986. While immigration law is extremely complex, for our purposes in an introductory HR text, we will discuss only the basic employment provisions of these two laws.

IMMIGRATION AND NATIONALITY ACT OF 1952 (INA). The INA was designed to take a variety of different immigration laws and combine them into a single act. Before INA, a number of federal laws governed immigration, but they were not consistent and were not organized in one location under one authority.53 INA allows companies in the United States to employ immigrant workers in certain specialty occupations through the use of an H-1B visa. For example, foreign workers such as engineers, teachers, computer programmers, medical doctors, and physical therapists may be employed under the H-1B program.54 However, specific requirements apply to such employment, and there are annual limits to the number of workers who can apply for work visas in these specialty occupations.

One company recently found out how expensive it can be to try to circumvent INA. Infosys paid the largest fine in history—$35 million—to the US government for visa fraud. The company intentionally used a B-1 visa, which is meant for short business visits, instead of the H1-B visa, which is the work visa that foreign individuals need in order to work legally in the United States.55 Make sure you heed this warning not to try to ignore work rules for immigrant employees—no matter what country you are in or where you source your employees.

Because Congress foresaw the potential for companies to discriminate against all alien workers to avoid any accusation of hiring undocumented workers, INA also has a

B:38 Immigration and Nationality Act (INA)

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APPLYING THE CONCEPT3-2 Employment Laws

Review the laws listed below and then write the letter corre- sponding to each law before the statement(s) describing a situa- tion where that law would apply.

a. Equal Pay Act b. Title VII CRA 1964 c. ADEA d. VEVRAA e. PDA f. ADA g. CRA 1991 h. USERRA i. VBIA j. GINA k. LLFPA l. Immigration laws

____ 6. I had to take a medical test, and the company found out that I am at high risk to get cancer. So it decided not to hire me so it could save money on medical insurance.

____ 7. Although I was the best qualified, I was intentionally not promoted because I am a woman.

____ 8. I can’t understand why this firm doesn’t want to hire me just because I served my country. I didn’t want to go and fight overseas, but I was drafted into the Army in 1969 and had no choice; I didn’t want to go to jail for draft evasion.

____ 9. My boss is laying me off because I serve in the National Guard and will be deployed overseas for six months. As a result, I will have to find a new job when I get back.

____10. The firm is laying me off to hire some younger person to save money. Is this what I deserve for my 20 years of dedication?

____11. The company I work for is in trouble with the INS because it never asked me any questions about my being legally eligible to work in America.

____12. I’m being paid less than the men who do the same jobs, just because I’m a woman.

____ 13. The firm hired this new guy and bought a special low desk because he is so short.

____ 14. I’m suing the firm for lost wages because they inten- tionally discriminated against me and fired me when I complained about it.

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Chapter 3: The Legal Environment and Diversity Management 91

nondiscrimination requirement when dealing with alien workers who have the right to work in the United States. Such workers become another protected class for the purposes of EEO.

IMMIGRATION REFORM AND CONTROL ACT OF 1986 (IRCA). Under IRCA, employers may hire only individuals who are authorized to legally work in the United States. IRCA has a provision that prohibits employers from knowingly hiring undocumented workers, and it requires employers to verify each employee’s eligibility for employment. The employer is required to verify the identity and employment eligibility of anyone it hires, through the use of a form called the Employment Eligibility Verification Form (I-9). However, the act also provides employers complying “in good faith” with the requirements of IRCA with what is called an affirmative defense to inadvertently hiring an unauthorized alien. An affirmative defense means basically that if we made a legitimate and complete effort to verify a person’s legal status and it turns out that person provided false documents, or that we were tricked or lied to in some other way, we won’t be held liable for any potential fines that would have otherwise been assessed for hiring undocumented workers.56

Reminder: State and Local EEO Laws May Be Different As with any introductory textbook, we can’t tell you all of the laws that would apply in the various locations across the United States, and we certainly can’t go into all the labor laws in other countries around the world. We can cover only the major laws that affect virtually everyone in each of the United States. Each state, as well as many cities, has its own equal opportunity laws that employers within that jurisdiction must follow. It’s up to the HR manager to keep up to date on the local and state laws and regulations concerning equal opportunity, as well as following federal laws.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (EEOC) The various federal equal employment opportunity (EEO) laws are enforced by the Equal Employment Opportunity Commission (EEOC). The EEOC was created by the 1964 CRA as an enforcement arm for the act. It is a federal agency that has significant power over employers in the process of investigating complaints of illegal discrimination based on “race, color, religion, sex (including pregnancy), national origin, age (40 or older), dis- ability, or genetic information.”57

What Does the EEOC Do? The EEOC is the federal agency primarily charged with enforcement of the federal equal employment opportunity laws. The EEOC has three significant responsibilities: (1) inves- tigating and resolving discrimination complaints through either conciliation or litigation, (2) gathering and compiling statistical information on such complaints, and (3) running education and outreach programs on what constitutes illegal discrimination.58 Addition- ally, every company with more than 100 employees or with more than 50 employees and with federal contracts totaling $50,000 or more must file an EEO-1 report with the EEOC each year.59 The EEO-1 identifies the company’s EEO compliance data based on protected classifications within federal law. In addition, the EEO-1 has started including require- ments for the reporting of compensation data from companies with more than 100 employees. This data will be used “to enable staff to assess pay disparities based on sex, ethnicity, or race.”60

Deadlines for filing complaints vary widely, but general EEO timelines for complaints are as follows: 61, 62

• Individuals must typically file a complaint within 180 days of the incident (or the last occurrence of the incident if it is ongoing).

• The complainant must give the EEOC as much as 180 additional days to investi- gate the complaint.

B:35 Immigration Reform and Control Act (IRCA)

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B:17 Enforcement Agencies—EEOC

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E:6 Compliance with Legal Requirements

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WORK APPLICATION 3-3

Give examples of how major

employment laws have affected

an organization where you work

or have worked, preferably as

the law relates directly to you.

Be sure to specify the law and

what the firm does or doesn’t

do because of the law.

LO 3-3 Briefly describe the EEOC’s

functions, employee rights, and employer responsibilities in conjunction with EEO laws.

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92 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

• Generally, if the complainant is dissatisfied with the outcome, or the EEOC has not acted within 180 additional days, legal charges may be filed by the individ- ual within an additional 90-day period. If not, the case likely cannot go forward in court. However, recall that the LLFPA increases the length of time that com- plainants have to file a lawsuit in at least those cases relating to pay or other compensation.

• The complainant has sole responsibility for ensuring that deadlines are met. If the individual does not file required items by their due dates, then the case is generally not able to be taken forward.

If the EEOC determines that discrimination has taken place, it will attempt to provide reconciliation between the parties. If the EEOC cannot come to an agreement with the organization, there are two options: 63

1. The agency may aid the alleged victim in bringing suit in federal court.

2. It can issue a “right-to-sue” letter to the alleged victim. A right-to-sue is a notice from the EEOC, issued if it elects not to prosecute an individual discrimination complaint within the agency, that gives the recipient the right to go directly to the courts with the complaint.

If the EEOC does not believe the complaint to be valid or fails to complete the inves- tigation, the complainant still may sue in federal court on their own. However, without a right-to-sue letter, it will generally be difficult for a complainant to succeed in getting a judgment against the employer.

Employee Rights Under the EEOC Employees have the right to bring discrimination complaints against their employer by fil- ing a complaint with the EEOC. They also have the right to participate in an EEOC inves- tigation, hearing, or other proceeding without threat of retaliation; rights related to the arbitration and settlement of the complaint; and the right to sue the employer directly in court over claims of illegal discrimination, even if the EEOC does not support their claim.

Employer Rights and Prohibitions The employer has a right to defend the organization using the defenses noted earlier: BFOQ, business necessity, and job relatedness. However, the employer does not have a right to retaliate against individuals who participate in an EEOC action, either through fil- ing charges or through participating in the above investigations, hearings, or proceed- ings.64 The employer also is prohibited from creating a work environment that would lead to charges of constructive discharge. Both of these items are prohibited in each employ- ment law that deals with discrimination.

RETALIATION. In addition to providing defenses against discrimination claims, the 1964 Civil Rights Act identifies a situation in which organizations can be held liable for harming the employee because of retaliation.65 Retaliation is a situation where the organization takes an “adverse employment action” against an employee because the employee brought discrimination charges against the organization or supported someone who brought discrimination charges against the company. An adverse employment action is any action such as firings, demotions, schedule reductions, or changes that would harm the individual employee.

Retaliation is a form of harassment based on an individual filing a discrimination claim. Each of the EEO laws identifies retaliation as illegal harassment based on the pro- tected class identified within that law. The EEOC is responsible for enforcing compliance with all EEO laws and has been cracking down on retaliation.66 As stated on the EEOC website, “All of the laws we enforce make it illegal to fire, demote, harass, or otherwise ‘retaliate’ against people (applicants or employees) because they filed a charge of

F:1 Equal Employment Opportunity (EEO)

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B:27 Unlawful Harassment

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B:28 Whistle-blowing/Retaliation

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Right-to-sue A notice from the EEOC, issued if it elects not to prosecute an individual discrimination complaint within the agency, that gives the recipient the right to go directly to the courts with the complaint

Retaliation A situation where the organization takes an “adverse employment action” against an employee because the employee brought discrimination charges against the organization or supported someone who brought discrimination charges against the company

Adverse employment action Any action such as firings, demotions, schedule reductions, or changes that would harm the individual employee

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 93

discrimination, because they complained to their employer or other covered entity about discrimination on the job, or because they participated in an employment discrimination proceeding (such as an investigation or lawsuit).”67

Managers need to be aware that there are severe penalties for engaging in retaliation against an employee or applicant for participating in protected activity. In 2013, over 40% of all EEOC complaints had a retaliation claim as at least a component of the com- plaint.68 Every manager needs to be aware of this concept in order to avoid actions that might be construed as retaliatory.

CONSTRUCTIVE DISCHARGE. The organization can also be accused of “constructive discharge” due to discriminatory actions on the job.

Constructive discharge exists when an employee is put under such extreme pressure by management that continued employment becomes intolerable and, as a result, the employee quits, or resigns from the organization. In a Supreme Court decision in 2004,69 the court noted that the US Court of Appeals had identified constructive discharge as the following: “(1) he or she suffered harassment or discrimination so intolerable that a rea- sonable person in the same position would have felt compelled to resign . . . ; and (2) the employee’s reaction to the workplace situation—that is, his or her decision to resign—was reasonable given the totality of circumstances.”

So if an individual can show that constructive discharge caused them to resign from the organization, then the individual would be eligible for all employee rights associated with being involuntarily terminated from the company. If, in fact, the individual suffered sexual harassment or discrimination that resulted in their constructive discharge, the organization would also suffer liability for those employment actions. The EEOC would be the agency charged with investigating and arbitrating the results of this conduct by the employer. The 2004 Supreme Court case set new standards for demonstrating construc- tive discharge from a company, and in so doing, it created a more difficult employment environment for employers. Every employer or manager needs to understand this concept.

EEO, AFFIRMATIVE ACTION, AND DIVERSITY: WHAT’S THE DIFFERENCE? As a manager, you need to understand the terms equal employment opportunity (EEO), affirmative action, and diversity. These are significantly different concepts, but many employees and employers, and even some educators, tend to use them interchangeably. EEO is the term that deals with a series of laws and regulations put in place at the federal and state government level over the last 45 years. As such, EEO is very specific and nar- rowly defined within federal and state laws.

On the other hand, affirmative action was created in the 1960s through a series of pol- icies at the presidential and legislative levels in the United States. Affirmative action, except in a few circumstances, does not have the effect of law.70 We will discuss those cir- cumstances in the next section. Therefore, affirmative action is a much broader concept based on policies and executive orders (orders from the president); EEO is more narrowly based on law.

Finally, diversity is not law, nor necessarily even policy within organizations. Diversity is a very broad set of concepts that deal with the differences among people within organi- zations. Today’s organizations view diversity as a valuable part of their human resources makeup. However, there are no specific laws that create requirements for diversity within organizations, beyond the EEO laws that specifically identify protected class members and require that organizations deal with those protected class members in an equal way when compared to all other members of the organization.

While this certainly creates some greater diversity in organizations, the concept of diversity goes much further than just EEO. We have already discussed many of the major

WORK APPLICATION 3-4

Has an organization where you

work or have worked had any

potential or actual cases brought

to the EEOC against it? If so,

explain the complaint(s). The HR

staff at your employer may not

be too eager to talk about this,

but you can do some research

on larger corporations.

Constructive discharge When an employee is put under such extreme pressure by management that continued employment becomes intolerable and, as a result, the employee quits, or resigns from the organization

LO 3-4 Discuss the differences among equal employment opportunity, affirmative action, and diversity.

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94 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

equal employment opportunity laws. Now, let’s take a look at affirmative action and the concept of diversity. Exhibit 3-6 provides a summary of these three concepts.

Affirmative Action (AA) Affirmative action is a series of policies, programs, and initiatives that have been instituted by various entities within both government and the private sector that are designed to pre- fer hiring of individuals from protected groups in certain circumstances, in an attempt to mitigate past discrimination. However, affirmative action policies and programs do not generally have the same effect as EEO laws. There are actually only two specific cases in which affirmative action can be mandated or required within an organization.71 In all other cases today, creation of an affirmative action program is strictly voluntary. The two situations where affirmative action is mandatory are as follows:

EXECUTIVE ORDER 11246. If the company is a contractor to the federal government and receives more than $10,000 per year, they are required by presidential order (Executive Order 11246) to maintain an affirmative action program. Exemptions from this order include the following:

• The order “shall not apply to a Government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work con- nected with the carrying on by such corporation, association, educational insti- tution, or society of its activities. Such contractors and subcontractors are not exempted or excused from complying with the other requirements contained in this Order.”72

• “The Secretary of Labor may also provide, by rule, regulation, or order, for the exemption of facilities of a contractor that are in all respects separate and distinct from activities of the contractor related to the performance of the contract: pro- vided, that such an exemption will not interfere with or impede the effectuation of the purposes of this Order: and provided further, that in the absence of such an exemption all facilities shall be covered by the provisions of this Order.”73

FEDERAL COURT ORDERS FOR AA PROGRAMS. If an organization is presented with a federal court order to create an affirmative action program to correct past discriminatory practices, it must comply. This is usually done only when there is an egregious history of past discriminatory practices in the organization.

The following web links do an excellent job of telling you about the current body of information on the concept of affirmative action and its history to date:

http://www.infoplease.com/spot/affirmative1.html

http://plato.stanford.edu/entries/affirmative-action/

B:6 Executive Order 11246 (1965)

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F:2 Affirmative Action (AA)

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Affirmative action A series of policies, programs, and initiatives that have been instituted by various entities within both government and the private sector that are designed to prefer hiring of individuals from protected groups in certain circumstances, in an attempt to mitigate past discrimination

EXHIBIT 3-6 EQUAL EMPLOYMENT OPPORTUNITY, AFFIRMATIVE ACTION,

AND DIVERSITY

Topic Governance Concept

EEO Federal (and state) law Narrow, specific requirements and prohibitions

Affirmative Action Executive orders, federal court orders, or voluntary

Policies that broadly define situations in which actions should be taken to balance a workforce with its surroundings

Diversity Organizational policies No legal requirement; designed to better serve a more diverse customer base

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 95

The Bakke decision of 1978, noted in the above Stanford University link, is the basis for the concept of reverse discrimination that we mentioned earlier in the chapter while discussing the OUCH Test.

There have been a number of recent affirmative action rulings in federal courts that have upheld limits to affirmative action. For example, the Supreme Court ordered a lower court to reconsider a “race-conscious” admissions plan at Texas state universities,74 and it also upheld a voter-backed affirmative action ban in Michigan’s universities.75 Addition- ally, other states are looking at possible partial or full bans on affirmative action. This will be an area to watch in HRM over the next few years.

The Office of Federal Contract Compliance Programs (OFCCP) The OFCCP is in charge of monitoring and enforcing Executive Order (EO) 11246, Sec- tion 503 of the 1973 Rehabilitation Act, and the 1974 VEVRAA.76 We have already dis- cussed VEVRAA above, so let’s take a look at EO 11246 and the Rehabilitation Act as they relate to the OFCCP.

The OFCCP is in charge of federal contract compliance, and both EO 11246 and the Rehab Act require that federal contractors who receive more than a certain dollar value per year in contracts from the federal government provide equal opportunity and take affirmative action toward protected class individuals. In the case of EO 11246, those groups are based on race, color, religion, sex, and national origin; and in the case of the Rehab Act, the designated group is disabled individuals. There is currently some discus- sion on merging the OFCCP into the EEOC, but it is considered unlikely to happen. Even so, anyone planning on becoming a manager should be aware that this is a possibility.77

Diversity in the Workforce Diversity is simply the existence of differences—in HRM, it deals with different types of people in an organization. This brings up a number of questions. Why do we want to have diversity in organizations? What are the advantages that we create by having a more diverse workforce? Are there any disadvantages to having a more diverse work group? What can we do about any disadvantages? Let’s discuss diversity, as it provides both opportunities and challenges.78

DEMOGRAPHIC DIVERSITY. Is diversity really all that important? The answer is yes.79 There is currently a shortage of skilled workers—and there will be for the foreseeable future, so to exclude a qualified person because that individual is different in some way is counterproductive to business success. Also, as we have already discussed, discrimination based on protected characteristics is against the law.

According to the United Nations, in late 2011, the world population hit 7 billion peo- ple.80 However, the world Caucasian population is shrinking as more whites die each year than are born. It takes about 2.1 children per woman (the fertility rate) to replace the cur- rent generation, but the estimated 2016 fertility rate in the European Union was 1.61, and in the United States it was 1.87–while worldwide, it is 2.42. 81

As of 2012, white births were also no longer a majority in the United States.82 White women are having fewer children than nonwhites, while the growth of mixed marriages has led to more multiracial births. Among Hispanics, there are roughly nine births for every one death, compared with about a one-to-one ratio for whites.83

It should be clear that increasing cultural diversity in the workforce poses one of the most challenging human resource and organizational issues of our time.84

WHY DO WE NEED DIVERSITY? Diversity is important and needed because as the white population continues to shrink and minority populations grow, interacting with a wide array of customers and suppliers increases sales, revenues, and profits—in other words, embracing diversity creates business opportunities.85 Organizations today have begun to value the diversity of their workforces simply due to the fact that as they become more

WORK APPLICATION 3-5

Has an organization where you

work or have worked had an

affirmative action program? If so,

describe it. Also, has there been any

reverse discrimination?

Diversity The existence of differences—in HRM, it deals with different types of people in an organization

F:6 Racial/Ethnic Diversity

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B:17 Enforcement Agencies—OFCCP

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96 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

diverse, they can serve a larger and more diverse customer base. Diverse employees allow us to see the diversity around us, in our customers and other stakeholders, much better than we would if our work groups were more homogenous. As a result, we are better able to provide products and services that will appeal to the larger and more diverse groups that we come into contact with during the course of doing business.86

WHAT ARE THE ADVANTAGES OF A DIVERSE WORKFORCE? The primary advantages of a diverse workforce come from the ability to stimulate and provide more creative and innovative solutions to organizational problems.87 How does a more diverse workforce add to the creativity and innovation in an organization? Creativity is a basic ability to think in unique and different ways and apply those thought processes to existing problems, and innovation is the act of creating useful processes or products based on creative thought processes.

Basically, if we look at a problem from different perspectives, we find out that there are more facets to the problem than we originally realized. Have you ever been in a situa- tion where you just couldn’t find something, you asked someone else to help you search for it, and they found it almost immediately? A diversified group looking at a problem will look at the problem from different directions and in different ways, and therefore, it will discover more of the aspects of the problem than would a single person or a more homo- geneous work group.88

But why is creativity necessary in a business today? Organizations in today’s fast- moving industries have to be able to innovate and change to adapt to their external environment— their competitors, their customers, and changes in technology. If an organization is unable to rapidly innovate, it will almost certainly die in today’s business world.

Also, creativity is a rare commodity in organizations. Why is it so hard to be creative? Most of us have learned not to be creative—we have been told over and over as we grow up that we should do things the way everyone else does them. In other words, we have been trained not to be innovative! Over time, this has the effect of causing most of us to give up on being very creative and just go along with the way that the majority of people do something. We lose the ability to think differently. This ability, called divergent think- ing, is necessary in order to come up with creative solutions to a problem.89 Divergent thinking is the ability to find many possible solutions to a particular problem, including unique, untested solutions.

By introducing diversity into our workforce, we assist the process of divergent think- ing. Different people think differently because they have different backgrounds and have solved problems differently in the past. We all bring this unique set of problem-solving skills to our work. Luckily, we don’t all have the same background, so this has the effect of increasing the creativity and innovation in the organization without the individual having to relearn the ability to be highly creative.

ARE THERE ANY CHALLENGES TO DIVERSITY? Of course there are. There are several things that can cause diversity to break down the organization instead of allowing it to become better and more creative.90 The first issue is conflict. Conflict is simply the act of being opposed to another. Conflict occurs in all interactions between individuals. There are many reasons for conflict. However, conflict is typically greater when people are significantly different from each other, which means that if we create a more diverse workforce, there’s a greater likelihood for more significant conflict.

Is conflict bad? Not necessarily. Conflict can basically be broken down into functional conflict and dysfunctional conflict.91 Functional conflict is how organizations go through the process of creating new things—the opposition itself drives the organization to change. If we don’t have conflicts, the organization never changes. However, dysfunc- tional conflict occurs when conflict gets to the point where creativity is stifled and, in fact, almost all work becomes difficult or impossible because of the conflict’s intensity. Dys- functional conflict breaks down the organization, while functional conflict allows it to grow.

F:12 Business Case for Diversity

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Creativity A basic ability to think in unique and different ways and apply those thought processes to existing problems

Innovation The act of creating useful processes or products based on creative thought processes

Divergent thinking The ability to find many possible solutions to a particular problem, including unique, untested solutions

Conflict The act of being opposed to another

Functional conflict How organizations go through the process of creating new things— the opposition itself drives the organization to change

Dysfunctional conflict When conflict gets to the point where creativity is stifled and, in fact, almost all work becomes difficult or impossible because of the conflict’s intensity

WORK APPLICATION 3-6 Discuss how demographic

diversity and the need for diversity

is affecting an organization you

work for or have worked for. What

are some of the advantages and

challenges faced by the firm? Also,

describe how diversity is managed

at the organization.

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 97

The second big issue is group cohesiveness. Cohesiveness is an intent and desire for group members to stick together in their actions. In organizations, we have learned that in order for a work group to become as good as it possibly can be, the group has to become cohesive. The members have to learn to want to be part of the group and want to interact with other members of the group in order for the group to perform at a high level. So we need high cohesiveness in order to get good performance out of a group. However, the more diversity there is within the group, the more difficult it is to create the cohesiveness necessary for high performance. So, more diverse groups tend to be less cohesive—not always, but as a general rule.92

A third significant issue in diversity is resistance to change. If organizations are used to being less diverse, then diversity can be something that is scary to the people in the organiza- tion. If they are uncomfortable with the change, they will resist. This resistance can be taken care of in several ways including the creation of a more participative decision- making envi- ronment, creating cognitive dissonance, coercion, and a number of other methods.

There are several other things that make diversity a challenge. The above items are some of the most significant; but if you are interested, you can always find out more by reading about the topic in the organizational management, psychology, or sociology literature.

MANAGING DIVERSITY. Diversity affects bottom-line profits, but so do some of the challenges associated with diversity, like conflict and reduced cohesiveness. In other words, if our diverse employees don’t work well together, the organization does not work well.93 Creating a cohesive, operational, and highly successful diverse workforce doesn’t just happen. Management has to work to create success with diversity. Managing diversity so that we gain the benefits available is one of the most critical jobs of a 21st century manager. Diversity can be managed successfully only in an organizational culture that values diversity.94 While the details of a diversity management program are a topic for discussion in another course, we can briefly review what managers need to be concerned with.

Exhibit 3-7 illustrates the process of managing diversity. Successfully managing diver- sity requires top management support and commitment.95 Senior managers have to “walk the talk” of the diversity program if it is going to succeed. Employees throughout an orga- nization look to top management to set an example. If the management is committed to maintaining a diverse workplace characterized by dignity, others at all levels of the organi- zation will be as well.

Managing diversity further requires leadership.96 Diversity leadership refers to having top-level managers who are responsible for managing diversity. The diversity leaders must also set policies and practices relating to maintaining diversity.

Cohesiveness An intent and desire for group members to stick together in their actions

Top Management Support

and Commitment

Diversity Leadership

Diversity Policies and Practices

Managing Diversity Diversity Training

EXHIBIT 3-7 MANAGING DIVERSITY

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98 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Finally and most importantly, employees must be provided with training so that they can work together as teams despite differences in race, gender, age, ability, and other fac- tors.97 Therefore, corporations are providing diversity training for their managers and employees.98 In fact, training is one of the most common activities included in diversity ini- tiatives.99 The primary goal of diversity training is to remove obstacles faced by members of the organizations that might prevent their professional and personal growth.100

Through managing diversity, affirmative action and diversity programs have been used to help women and minorities advance in organizations. Complete Self-Assessment 3-1 to determine your attitude toward women and minorities advancing at work.

Attitudes About Women and Minorities Advancing

Be honest in this self-assessment, as your assessment will not be accurate if you aren’t. Also, you should not be asked to share your score with others.

Each question below is actually two questions. It asks you about your attitude toward women, and it also asks you about your attitude toward minorities. Therefore, you should give two answers to each question: one regarding women and the other regarding minorities. Write the number corresponding to your answer (5 = agree, 3 = don’t know, 1 = disagree) about women in the Women column, and write the number corresponding to your answer about minorities in the Minorities column.

Agree Disagree

5 4 3 2 1 Women Minorities _____ 1. Women/Minorities lack motivation to get ahead. 1. ____ _____ 2. Women/Minorities lack the education necessary to get ahead. 2. ____ _____ 3. Women/Minorities working has caused rising unemployment among white men. 3. ____ _____ 4. Women/Minorities are not strong enough or emotionally stable enough to succeed in high-pressure jobs. 4. ____ _____ 5. Women/Minorities have a lower commitment to work than do white men. 5. ____ _____ 6. Women/Minorities are too emotional to be effective managers. 6. ____ _____ 7. Women/Minority managers have difficulty in situations calling for quick and precise decisions. 7. ____ _____ 8. Women/Minorities have a higher turnover rate than do white men. 8. ____ _____ 9. Women/Minorities are out of work more often than are white men. 9. ____ _____ 10. Women/Minorities have less interest in advancing than do white men. 10. ____ _____ Total Total ____

Women: To determine your attitude score toward women, add up the total of your 10 answers in the Women column and place the total on the Total line and on the following continuum. The higher your total score, the more negative your attitude.

10 ________________ 20 ________________ 30 __________________ 40 ________________________ 50

Positive attitude Negative attitude

Minorities: To determine your attitude score toward minorities, add up the total of your 10 answers from the Minorities column and place the total on the Total line and on the following continuum. The higher your total score, the more negative your attitude.

10 ________________ 20 ________________ 30 __________________ 40 ________________________ 50

Positive attitude Negative attitude

Each statement is a negative attitude about women and minorities at work. However, research has shown all of these statements to be false; they are considered myths. Such statements stereotype women and minorities unfairly and prevent them from advancing in orga- nizations through gaining salary increases and promotions. Thus, part of managing diversity and diversity training is to help overcome these negative attitudes to provide equal opportunities for ALL.

SELF-ASSESSMENT3-1

FOR THE USE OF STRAYER UNIVERSITY STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

Chapter 3: The Legal Environment and Diversity Management 99

SEXUAL HARASSMENT: A SPECIAL TYPE OF DISCRIMINATION Sexual harassment is a special type of discrimination identified as part of the 1964 CRA (the prohibition of discrimination based on sex), but it is one of the two items we men- tioned earlier in the chapter that was not specifically recognized as a separate type of dis- crimination until federal courts started hearing cases on the act. In the case of sexual harassment, it was a Supreme Court decision in the 1980s that finally identified such harassment as specifically violating the CRA. The case was Meritor Savings Bank v. Vinson,101 and it confirmed the intent of the 1964 CRA that sexual harassment was specif- ically prohibited by the act. Sexual harassment is a pervasive issue in organizations; and as managers, we need to understand what it is and how to avoid creating a situation where it can occur at work.

Types of Sexual Harassment Sexual harassment is defined by the EEOC as “unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work perfor- mance or creates an intimidating, hostile or offensive work environment.”102 There are two types of sexual harassment specifically delineated in the Vinson case: quid pro quo harassment and hostile work environment.103 Both are discussed below.

QUID PRO QUO HARASSMENT. Literally, quid pro quo means “This for that.” Quid pro quo harassment is harassment that occurs when some type of benefit or punishment is made contingent upon the employee submitting to sexual advances. “If you do something for me, I will do something for you; or conversely, if you refuse to do something for me, I will harm you.” Quid pro quo is a direct form of harassment aimed at an individual and is most commonly seen in supervisor-subordinate relationships, although this is not always the case. It is, however, based on the power of one individual over another. If the harasser has no power to reward or punish the individual who is the object of the harassment, then it is difficult for quid pro quo harassment to exist. In the case of coworkers where one is pressuring the other concerning a relationship, the situation would more likely be considered to be a hostile work environment. An excellent recent example of allegations of quid pro quo harassment was the case of Roger Ailes, the Chairman of Fox News. Ailes was accused of coercing a number of women who worked for–or wanted to work for–Fox to have sexual relationships with him. Just one of the claims was settled, with Fox News personality Gretchen Carlson receiving $20 million.104

HOSTILE WORK ENVIRONMENT. Hostile work environment is a very specific legal term in HRM meaning harassment that occurs when someone’s behavior at work creates an environment that is sexual in nature and that makes it difficult for someone of a particular sex to work in that environment. Hostile work environment sexual harassment happens when a “reasonable person” determines that the behavior in question goes beyond normal human interaction and the jokes and kidding that accompany such interaction, instead rising to a level that such a reasonable person would consider the act or acts to be both harassing and sexual in nature.105 For the purposes of the law, a reasonable person is the “average” person who would look at the situation and its intensity to determine whether the accused person was wrong in their actions.

What Constitutes Sexual Harassment? Can sexual harassment in any form occur between a female supervisor and a male subor- dinate? Can sexual harassment occur between two male employees or two female employ- ees? Absolutely! Sexual harassment does not have to occur between a male supervisor and female subordinates. For example, there is a famous Supreme Court case of male-on-male harassment on an offshore oil platform. In Oncale v. Sundowner Offshore Services,106 Joseph Oncale quit his job on an oil rig and filed a harassment suit against his employer

LO 3-5 Identify the two primary types

of sexual harassment and how to reduce company risk from

harassment lawsuits.

F:9 Sex/Gender Issues

SHRM

Sexual harassment As defined by the EEOC, “unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance or creates an intimidating, hostile or offensive work environment”

Quid pro quo harassment Harassment that occurs when some type of benefit or punishment is made contingent upon the employee submitting to sexual advances

Hostile work environment Harassment that occurs when someone’s behavior at work creates an environment that is sexual in nature and that makes it difficult for someone of a particular sex to work in that environment

Reasonable person The “average” person who would look at the situation and its intensity to determine whether the accused person was wrong in their actions

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100 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

for same-sex harassment. The Court ruled that he was harassed to the point that it met the standard where a reasonable person would have considered it sexual harassment.

As in other forms of illegal discrimination, the plaintiff has to show only a prima facie (literally “on the face of it,” meaning it looks like harassment to our reasonable person) case that harassment has occurred. To qualify as a prima facie case of sexual harassment, the work situation must include the following characteristics:107

1. The plaintiff is a member of a protected class;

2. The harassment was based on sex;

3. The person was subject to unwelcome sexual advances; or

4. The harassment was sufficiently severe enough to alter the terms, conditions, or privileges of employment.

In order for the organization to be considered for liability, two critical conditions must exist:108

1. The plaintiff did not solicit or incite the advances.

2. The harassment was undesirable and severe enough to alter the terms, conditions, and privileges of employment.

Some cases are clearly sexual harassment on the first offense, such as requesting sex as part of the job and any unwanted sexual touching. However, some offenses are not so obvious, such as touching on an arm or shoulder or asking a person to go on a date. In these gray areas, affected employees should tell the harasser that they find the behavior offensive and will report the person for sexual harassment if the behavior is repeated.

Reducing Organizational Risk From Sexual Harassment Lawsuits Once the plaintiff has shown a prima facie case for the accusation, and once it has been determined that the harassment was potentially severe enough to alter the terms, condi- tions, and privileges of work (and assuming that the organization can’t show the plaintiff

Inappropriate and unwelcome sexual advances are forms of sexual harassment. Organizations may be liable for harassment in the workplace and should take active steps to ensure that all employees are clear on what it is and what the consequences will be.

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Chapter 3: The Legal Environment and Diversity Management 101

invited or incited the advances, as in the case of quid pro quo harassment); then the courts will determine whether the organization is liable for the actions of its employee based on the answers to two primary questions:

1. Did the employer know about, or should the employer have known about, the harassment?

2. Did the employer act to stop the behavior?

In general, if the employer knew or should have known about the harassment and did nothing to stop the behavior, then the employer can be held liable. So how do you protect your organization from liability in case of a charge of sexual harassment, either quid pro quo or hostile work environment? Exhibit 3-8 shows five important steps to follow.109

In general, management in the organization should probably institute and communi- cate a zero-tolerance policy for sexual harassment. It should be a “one strike and you’re out” offense—a major disciplinary infraction for which a person should be terminated. Why should we have zero tolerance for this type of behavior? Well, consider if you had an employee who was guilty in the past of harassing another employee. You did the investi- gation, found that the harassment did occur, and disciplined but did not terminate the

APPLYING THE CONCEPT3-3 Sexual Harassment

Write the letter and number codes listed below before each statement to indicate the kind of behavior it describes.

a. sexual harassment: After the harassment letter, write in if it is (1) quid pro quo or (2) hostile work environment harassment (i.e., write a/1 or a/2).

b. not sexual harassment

____ 15. Karen tells her coworker Jim an explicitly sexual joke, even though twice before, Jim told her not to tell him any dirty jokes.

____ 16. Ricky-Joe typically puts his hand on his secretary’s shoulder as he talks to her, and she is comfortable with this behavior.

____ 17. José, the supervisor, tells his secretary, Latoya, that he’d like to take her out for the first time today.

____ 18. Cindy tells her assistant, Juan, that he will have to go to a motel with her if he wants to be recommended for a promotion.

____ 19. Jack and Jill have each hung up pictures of nude men and women on the walls near their desks, in view of other employees who walk by.

____ 20. As coworker Rachel talks to Carlos, he is surprised and uncomfortable because she gently rubbed his buttock.

WORK APPLICATION 3-7

A high percentage of people,

especially women, have been

sexually harassed. Have you or

anyone you know been sexually

harassed at work? Briefly

describe the situation, stating if

it was quid pro quo or a hostile

work environment.

1. Develop a policy statement making it clear that sexual harassment will not be tolerated. You have to delineate what is accept- able and what is not. The policy should also state that anyone participating in a sexual harassment complaint or investigation should not be retaliated against.

2. Communicate the policy by training all employees to identify inappropriate workplace behavior. Make sure that everyone is aware of the policy.

3. Develop a mechanism for reporting sexual harassment that encourages people to speak out. It is critical in this case to create a mechanism outside of the normal chain of command. The typical case of harassment is between an individual and the imme- diate supervisor. Because of this, if the organization does not have a way to report the behavior outside the normal supervisory chain of command, the courts will consider that the company does not have a mechanism for reporting.

4. Ensure that just cause procedures (we will talk about these in Chapter 9) are followed when investigating the complaint.

5. Prepare to carry out prompt disciplinary action against those who commit sexual harassment.

EXHIBIT 3-8 LIMITING ORGANIZATIONAL LIABILITY FOR SEXUAL HARASSMENT

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102 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

harasser. What if, months or even years later, the same employee acted in the same man- ner toward another individual in your organization? You might be put in the position where you would have to go to court and defend your earlier actions.

In a case such as this, it would be very difficult to claim that you and the organization did not know or could not have known that more harassment might occur. The result would quite likely be that your organization would lose this case in court and might have to pay a significant settlement to the aggrieved individual, as in the Ailes/Fox News case we noted above. Sexual harassment should be treated very seriously, because the consequences can be grave for the organization if it doesn’t do what it should to prevent the harassment.

RELIGIOUS DISCRIMINATION Religion-based discrimination and the ability of employers to create work rules that may affect religious freedom continue to be an issue in the workplace.110 For instance, the issue of standards of dress in a number of religions, most notably Islam’s standards for women’s attire in public (including the hijab or niqab), has become a point of con- tention in some workplaces. If an employer sees the niqab as a symbol of repression, can the employer deny the right to wear such head coverings and use the antidiscrimination statutes concerning gender as justification? Can an employer require drivers who work for them to deliver alcohol to customer warehouses when the drivers may have a reli- gious opposition to drinking alcohol?111 There are many religious freedom questions that we are dealing with in companies today, and there are certainly no easy answers.

Remember, the federal courts have determined that religious discrimination is a viola- tion of the 1964 CRA because it identifies religion as a protected class. Because religion was specifically identified in the CRA, we can’t use it as a factor in making “any employ- ment decision” with our employees. Religion is a less obvious characteristic than gender or race, so it is usually not a characteristic on which we base decisions. However, if a per- son’s religion requires a certain type of dress or observation of religious holidays or days of worship that is not in keeping with the normal workday practices of the organization, and if the individual requests accommodation for these religious beliefs, then we generally would need to make every reasonable effort to accommodate such requests.

Employers are required to provide such a “reasonable accommodation” for requests that are based on “employees’ sincerely held religious beliefs or practices, unless doing so would impose an ‘undue hardship’ on their business operations.”112 We have already defined reasonable accommodations and undue hardship earlier in this chapter, but the general result of a series of federal court rulings on religion and religious practices has been that if such practices can be accommodated by the organization without creating an exces- sive burden on the organization, then they must be accommodated, under penalty of law.

However, if the job description and specifications require employees to work specific days and hours of the day, or complete certain tasks that might violate some personal reli- gious beliefs, and if an applicant accepts the job, then the employer does not need to accommodate any employee requests not to work during those hours or days. For exam- ple, many health care workers are religious Christians and don’t want to work on Christ- mas, Good Friday, Easter, and other holy days; but they do because it is part of the job. On the other hand, if a Muslim wants to take a break at a certain time of the work day to pray, that would generally be a reasonable to accommodate unless they had been informed of the need to forgo such breaks in the job description. Some companies have even built quiet rooms for prayer, meditation, or simple relaxation.

TRENDS AND ISSUES IN HRM Again, we end this chapter with some significant trends and issues that are affecting HRM. In this section, we will cover two items that have been recent issues with employers— both large and small. These issues include a brief on using technology blindly when tak- ing employment actions, and information on sexual orientation discrimination.

WORK APPLICATION 3-8 Describe the sexual harassment

policy where you work or have

worked. If you are not sure, check

the company HR handbook or talk

to an HR department staff member

to get the answer.

F:7 Religion

SHRM

B:29 Reasonable Accommodation— Religious

SHRM

LO 3-6 Discuss the employer accommodations that are required to avoid unnecessary religious discrimination.

LO 3-7 Discuss trends in HRM including the role of technology in diversity management and sexual orientation and gender identity discrimination.

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Chapter 3: The Legal Environment and Diversity Management 103

Technology May Create New Dangers in Equal Opportunity and Diversity Management Many people in today’s workforce have grown up with the idea that technology will solve all of their problems. However, if this is the case, then why are virtually all of the major technology companies being criticized over their lack of diversity? A quick Internet search shows that Qualcomm settled a gender-bias lawsuit for $19.5 million in 2016113 while HP was accused of age-bias the same year.114 “Airbnb, Uber, and Lyft were all accused of dis- crimination against black customers trying to book lodging and hail rides.”115 Yahoo was accused of gender bias, against men, and Palantir of a bias against Asian engineers. And this is all just in 2016. In 2017, Google was accused of systematically underpaying female employees, as was Oracle. And Susan Fowler, an engineer for Uber, filed a rather lurid sexual harassment claim against the company.116

What is going on? Google, for example, is known for trying to take the bias out of hir- ing by creating algorithms to identify candidates for employment. But how do the algo- rithms get created? By looking at successful past hires that are overwhelmingly white males and trying to identify commonalities among those hiring successes. This method would almost have to create a bias, unless the researchers made a concerted effort to take any factors that correlated with gender, age, ethnicity, race, and multiple other bias cate- gories out of the equations. A reasonably new concept of “candidate personas” is being used in creating many of these algorithms. Notes one HR technology provider, “The easi- est way to begin a candidate persona is to research the people who have been hired before in the role.”117 However, such a beginning may knock out people who haven’t had the opportunity to walk a particular path at work and therefore can never meet the ideal can- didate requirements. Technology has a tendency to make these problems even more signif- icant than having a manager hire new employees based on their opinion, because biases are now built-in to the system that then throws out all of the candidates who are not ideal. In “Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy” author Cathy O’Neil says that these algorithms are “ticking time-bombs that are well-intended but ultimately reinforce harmful stereotypes.”118

What does an HR manager need to be aware of when using computer programs for recruiting or other employment actions? First, you need to understand that just because a candidate pool was generated by a computer does not mean that it is unbiased. Remember the “garbage-in, garbage-out” rule of computing. Second, analyze the inputs to the algo- rithm (assuming it was designed by your company or you can get the input information from the firm that did design it). Look for implicit biases in the input data. Finally, test the candidate pools that result from such algorithms against the OUCH test, and specifically against the Four-Fifths Rule to look for disparate impact.119

Sexual Orientation and Gender Identity Discrimination Is sexual orientation discrimination illegal? That depends on who you ask. As of early 2017, two federal appeals courts had provided rulings that said that sexual orientation discrimination was not explicitly prohibited under Title VII of the 1964 Civil Rights Act. In fact, “Federal courts have by an overwhelming margin refused to apply Title VII to claims of sexual orientation discrimination.”120 However, at the same time, the EEOC–the federal agency charged with investigating claims of discrimination–has stated that sexual orientation or gender identity discrimination is a form of sex discrimi- nation, and many experts in HR law are recommending to companies that they not par- ticipate in any discrimination based on sexual orientation or gender identity for solid business reasons.

It also appears as if business has listened and is willing to provide equity and fairness to all of their employees to the best of their collective abilities. According to the Corporate Equality Index from the Human Rights Campaign Foundation, as of 2017, 92% of the Fortune 500 firms include sexual orientation in their non-discrimination policies and 82% include gender identity.121 There are also other outside pressures on business that have increased the willingness of organizations to provide equity to all employees.

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104 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

Remember that states and even cities have the ability to make laws concerning equal opportunity and fairness in the workplace. According to SHRM:122

• 22 states and the District of Columbia prohibit discrimination relating to sexual orientation

• 19 states and the District of Columbia prohibit discrimination in private and public employment related to gender identity

• More than 255 local municipalities provide protections in private and public employ- ment against discrimination based on sexual orientation and/or gender identity

In this situation, as in so many other issues of potential bias in hiring, it just does not make sense to discriminate. Logic says that if we artificially remove the people of any group from consideration for employment (including promotion and all other employ- ment actions), we are almost certain to be removing some of the best qualified individuals from the candidate pool. With significant shortages of skilled employees in almost every area of work, this is simply foolish and will harm the organization in its ability to field the best talent on a daily basis. So even though the issue has not been determined in court or in Congress, it just makes sense to treat all individuals the same.

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DIGITAL RESOURCES

Religious Diversity and Management*

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Goals, Measures, and Beyond

Gender Discrimination*

Understanding, Designing, and Teaching LGBTQ issues

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Hostile Work Environment

* premium video only available in the interactive eBook

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Chapter 3: The Legal Environment and Diversity Management 105

CHAPTER SUMMARY 3-1 Describe the OUCH test and its four components,

and identify when it is useful in an organizational setting.

The OUCH Test is a rule of thumb you should use whenever you are contemplating any employment action. You use it to maintain fairness and equity for all of your employees or applicants. OUCH is an acronym that stands for Objective, Uniform in application, Consistent in effect, and Has job relatedness. An employment action should generally be objective instead of subjective; we should apply all employ- ment tests the same way, every time, with everyone, to the best of our ability; the employment action should not have an inconsistent effect on any protected groups; and the test must be directly related to the job to which we are applying it.

3-2 Identify the major equal employment opportunity (EEO) laws and the groups of people that each law protects.

The Equal Pay Act of 1963 requires that women be paid equal to men if they are doing the same work.

Title VII of the Civil Rights Act of 1964 prohibits discrimina- tion on the basis of race, color, religion, sex, or national ori- gin, in all areas of the employment relationship.

The Age Discrimination in Employment Act of 1967 pro- hibits age discrimination against people 40 years of age or older, and it restricts mandatory retirement.

The Vietnam Era Veterans Readjustment Assistance Act of 1974 prohibits discrimination against Vietnam veterans by all employers with federal contracts or subcontracts of $100,000 or more. It also requires that affirmative action be taken.

The Pregnancy Discrimination Act of 1978 prohibits dis- crimination against women affected by pregnancy, child- birth, or related medical conditions; and it treats such discrimination as unlawful sex discrimination.

The Americans with Disabilities Act of 1990 strengthened the Rehabilitation Act of 1973 to require employers to provide “reasonable accommodations” to allow disabled employees to work.

The Civil Rights Act of 1991 strengthened civil rights by providing for possible compensatory and punitive damages for discrimination.

The Uniform Services Employment and Reemployment Rights Act (USERRA) ensures the civilian reemployment rights of military members who were called away from their regular (nonmilitary) jobs by US government orders.

The Veterans Benefits Improvement Act of 2004 amends USERRA to extend health care coverage while away on duty; and it requires employers to post a notice of benefits, duties, and rights of reemployment.

The Genetic Information Nondiscrimination Act of 2008 prohibits the use of genetic information in employment, pro- hibits intentional acquisition of the same, and imposes confi- dentiality requirements.

The Lilly Ledbetter Fair Pay Act of 2009 amends the 1964 CRA to extend the period of time in which an employee is allowed to file a lawsuit alleging pay discrimination.

3-3 Briefly describe the EEOC’s functions, employee rights, and employer responsibilities in conjunc- tion with EEO laws.

The EEOC is a federal agency that investigates allegations of illegal discrimination based on race, color, religion, sex (including pregnancy), national origin, age (40 or older), dis- ability, or genetic information.

The EEOC has three significant functions: investigating and resolving discrimination complaints through either conciliation or litigation, gathering and compiling statistical information on such complaints, and running education and outreach programs on what constitutes illegal discrimination.

Employee rights include:

• Bring a discrimination complaint

• Participate in an EEOC investigation, hearing, or other pro- ceeding without threat of retaliation

• Rights related to arbitration and settlement of the complaint

• Right to sue employers directly for claims of illegal discrimination

Employer responsibilities include:

• Avoid retaliation for employees participating in their rights above

• Avoid creating a work environment that would lead to con- structive discharge

3-4 Discuss the differences among equal employment opportunity, affirmative action, and diversity.

Equal employment opportunity deals with a series of laws and regulations put in place at the federal and state govern- ment levels in the last 45 years. As such, equal employment opportunity is very specific and narrowly defined within US law and various state laws.

Affirmative action, except in a few circumstances, does not have the effect of law. Therefore, affirmative action is a much broader concept based on policy than is EEO, which is more narrowly based on law.

3-5 Identify the two primary types of sexual harass- ment and how to reduce company risk from harass- ment lawsuits.

Quid pro quo harassment occurs when some type of ben- efit or punishment is made contingent upon the employee submitting to sexual advances. In other words, if you do something for me, I will do something for you; or conversely, if you refuse to do something for me, I will harm you.

Hostile work environment harassment occurs when some- one’s behavior at work creates an environment that is sexual in nature and makes it difficult for someone of a particular sex to work in that environment. Hostile environment sexual

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106 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

harassment happens when a “reasonable person” would determine that the environment went beyond normal human interactions and rose to the level that such a reasonable person would consider the act or acts to be both harassing and sexual in nature.

Companies reduce their potential liability by doing five things:

1. Develop policies clearly stating that harassment will not be tolerated.

2. Communicate the policy routinely–make sure everyone is aware.

3. Develop a mechanism for reporting harassment that encourages people to speak out.

4. Ensure that just cause procedures are followed when inves- tigating complaints.

5. Prepare, and carry out disciplinary action against those who commit sexual harassment.

3-6 Discuss the employer accommodations that are required to avoid unnecessary religious discrimination.

As in other forms of discrimination, employers are required to provide reasonable accommodation for requests that are based on employees’ sincerely held religious beliefs or practices, unless doing so would impose an “undue hard- ship” on their business operations. However, if the job description and specifications require employees to work specific days and hours of the day, or to complete certain tasks that might violate some personal religious beliefs, and if an applicant accepts the job, then the employer does not need to accommodate employee requests not to work during those hours or days.

3-7 Discuss trends in HRM including the role of tech- nology in diversity management and sexual orien- tation and gender identity discrimination.

Recently, technology companies have faced scrutiny regarding discrimination by race, sexual orientation, and gender identity. As organizations work to increase diver- sity in their organizations, HR managers need to be aware of how technology can reinforce discrimination because of biases built-in to the systems and the data the managers work with.

KEY TERMS adverse employment action 92 affirmative action 94 bona fide occupational qualification

(BFOQ) 82 business necessity 83 cohesiveness 97 compensatory damages 87 conflict 96 constructive discharge 93 creativity 96 disability 85 discrimination 77 disparate impact 81

disparate treatment 81 divergent thinking 96 diversity 95 dysfunctional conflict 96 essential functions 86 Four-Fifths Rule 78 functional conflict 96 hostile work environment 99 illegal discrimination 77 innovation 96 job relatedness 83 marginal job functions 86 OUCH test 77

pattern or practice discrimination 82 punitive damages 87 quid pro quo harassment 99 race norming 88 reasonable accommodation 86 reasonable person 99 retaliation 92 reverse discrimination 79 right-to-sue 92 sexual harassment 99 undue hardship 87

KEY TERMS REVIEW Complete each of the following statements using one of this chap- ter’s key terms.

1. __________ is the act of making distinctions or choosing one thing over another—in HR, it is distinctions among people.

2. __________ is making distinctions that harm people by using a person’s membership in a protected class.

3. __________ is a rule of thumb used whenever you are con- templating any employment action, to maintain fairness and equity for all of your employees or applicants.

4. __________ is a test used by various federal courts, the Department of Labor, and the EEOC to determine whether disparate impact exists in an employment test.

5. __________ is discrimination against members of the majority employee group based on a legally protected factor, such as race or religion.

6. __________ exists when individuals in similar situations are intentionally treated differently and the different treatment is based on an individual’s membership in a protected class.

7. __________ occurs when an officially neutral employment practice disproportionately excludes the members of a pro- tected group; it is generally considered to be unintentional, but intent is irrelevant.

8. __________ occurs when, over a significant period of time, a person or group engages in a sequence of actions that is intended to deny the rights provided by Title VII (the 1964 CRA) to a member of a protected class.

9. __________ is a qualification that is absolutely required for an individual to successfully do a particular job.

10. __________ exists when a particular practice is necessary for the safe and efficient operation of the business, and when there is a specific business purpose for applying a particular standard that may, in fact, be discriminatory.

11. __________ exists when a test for employment is a legitimate measure of an individual’s ability to do the essential functions of a job.

12. __________ is a physical or mental impairment that substan- tially limits one more major life activities, a record of having

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Chapter 3: The Legal Environment and Diversity Management 107

such an impairment, or a condition of being regarded as hav- ing such an impairment.

13. __________ is an accommodation made by an employer to allow someone who is disabled but otherwise qualified to do the essential functions of a job to be able to perform that job.

14. __________ consist of the fundamental duties of the position.

15. __________ are those that may be performed on the job but need not be performed by all holders of the job.

16. __________ occurs when the level of difficulty for an organi- zation to provide accommodations, determined by looking at the nature and cost of the accommodation and the overall financial resources of the facility, becomes a significant bur- den on the organization.

17. __________ consists of monetary damages awarded by the court that compensate the person who was injured for their losses.

18. __________ consist of monetary damages awarded by the court that are designed to punish an injuring party that inten- tionally inflicted harm on others.

19. __________ occurs when different groups of people have dif- ferent scores designated as “passing” grades on a test for employment.

20. __________ is a notice from the EEOC, if they elect not to prosecute an individual discrimination complaint within the agency, that gives the recipient the right to go directly to the courts with a complaint.

21. __________ is a situation in which the organization takes an “adverse employment action” against an employee because the employee brought discrimination charges against the organization or supported someone who brought discrimina- tion charges against the company.

22. __________ consist of any action such as firings, demotions, schedule reductions, or changes that would harm the individ- ual employee.

23. __________ exists when an employee is put under such extreme pressure by management that continued employment becomes intolerable for the employee and, as a result of the intolerable conditions, the employee resigns from the organization.

24. __________ is a series of policies, programs, and initiatives that have been instituted by various entities within both gov- ernment and the private sector to create preferential hiring of individuals from protected groups in certain circumstances, in an attempt to mitigate past discrimination.

25. __________ is the existence of differences—in HRM, it deals with different types of people in an organization.

26. __________ is a basic ability to think in unique and different ways and apply those thought processes to existing problems.

27. __________ is the act of creating useful processes or prod- ucts based on creative thought processes.

28. __________ is the ability to find many possible solutions to a particular problem, including unique, untested solutions.

29. __________ is the act of being opposed to another.

30. __________ is how organizations go through the process of creating new things—the opposition itself drives the organiza- tion to change.

31. __________ occurs when conflict gets to the point where creativity is stifled and, in fact, almost all work becomes diffi- cult or impossible because of the conflict’s intensity.

32. __________ is an intent and desire for group members to stick together in their actions.

33. __________ consists of unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature; when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment; unrea- sonably interferes with an individual’s work performance; or creates an intimidating, hostile, or offensive work environment.

34. __________ is harassment that occurs when some type of benefit or punishment is made contingent upon the employee submitting to sexual advances.

35. __________ is harassment that occurs when someone’s behavior at work creates an environment that is sexual in nature and makes it difficult for someone of a particular sex to work in that environment.

36. __________ is the “average” person who would look at the situation and its intensity to determine whether the accused person was wrong in their actions.

1. Do you agree that applying the OUCH test to an employ- ment situation will minimize illegal discrimination? Why or why not?

2. Are there any groups of people in the United States that you think should be covered by federal laws as a protected group but are not currently covered? Why or why not?

3. In your opinion, is most discrimination in the United States unintentional (disparate impact), or is most discrimination intentional (disparate treatment)? Why do you think so?

4. What is your opinion of organizations using bona fide occu- pational qualifications (BFOQs) to limit who they will con- sider for a job?

5. Do we really need all of the laws that protect the equal employment opportunities of different groups (age, military veterans, pregnant women, etc.)? Why or why not?

6. Do you agree that most employers probably want to obey the Americans with Disabilities Act but don’t know exactly what they are required to do under the law? Do you think that most employers would rather not hire disabled people? Justify your answer.

7. How would you define the terms “reasonable accommoda- tion” and “undue hardship” if you were asked by one of your company managers?

8. Has affirmative action gone too far in creating a preference for historically underrepresented groups over other employ- ees and applicants instead of treating everyone equally?

9. Is illegal immigration really hurting this country, when most illegal immigrants take jobs that Americans don’t want to do anyway?

10. Do you think that sexual harassment in the workplace is over- reported or underreported? Justify your answer.

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108 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

CASE 3-1 YOU CAN’T GET THERE FROM HERE: UBER SLOW ON DIVERSITY Established in 2009, Uber provides an alternative to taxi cab ser- vice in 460 cities and nearly 60 countries worldwide. The trick? Their mobile application for smartphones allows riders to arrange for transportation with drivers who operate their personal vehi- cles. A dual rating system (drivers and customers rate each other) serves as a quality control device keeping Uber standards high.(1)

As an international technology firm, Uber has been challenged, along with other tech giants like Google and Twitter, to demon- strate that they are attuned to the specific needs of their employees, more specifically people of color and women. In Uber’s own words:

At Uber, we want to create a workplace that is inclusive and reflects the diversity of the cities we serve: where everyone can be their authentic self, and where that authenticity is celebrated as a strength. By creating an environment where people from every background can thrive, we’ll make Uber a better com- pany—not just for our employees but for our customers, too.(2)

Yet actions speak louder than words. Uber employees describe the firm’s work environment amid some managers as Machiavellian and merciless. Many blame Travis Kalanick, Uber’s founder and for- mer chief executive, for establishing such a negative culture. Uber’s fast growth approach to the market has rewarded employees and managers who have aggressively pushed for greater revenues and fatter profits at the seeming cost of human dignity.

For example, Uber has had its share of troubles addressing issues of sexual misconduct and workforce diversity. These issues came to light when a former employee, Susan Fowler, reported in her per- sonal blog that she was being sexually harassed by her manager and that human resources had been informed of these infractions. (3) Susan Fowler said in her blog:

On my first official day rotating on the team, my new manager sent me a string of messages over company chat. He was in an open relationship, he said, and his girlfriend was having an easy time finding new partners but he wasn’t. He was trying to stay out of trouble at work, he said, but he couldn’t help getting in trouble, because he was looking for women to have sex with. It was clear that he was trying to get me to have sex with him, and it was so clearly out of line that I immediately took screen- shots of these chat messages and reported him to HR.(4)

Uber’s first reaction was to call Ms. Fowler’s accusations as “abhorrent and against everything Uber stands for and believes in.”(5) Ms. Fowler purported that her manager was not punished because he “was a high performer”; yet other female employees reported similar incidents with the same manager, leading Ms. Fowler to believe that HR was covering up for her manager.

Uber was in trouble as more and more scandals emerged and they quickly took the following actions: (a) apologized for some of their managers’ actions, (b) had a board member and several female executives provide testimonials on the firm’s positive work environ- ment, and (c) began to probe workplace policies and procedures.

Arianna Huffington, a board member, repeatedly labeled new employees as “brilliant jerks.”(6) Huffington said that this investiga- tion would be different when Eric H. Holder Jr., the former United States Attorney General (as well as some others), were hired to conduct their investigation.

Uber released its first diversity report on March 28, 2017, one month after these allegations. This report indicated that women and nonwhite employees are underrepresented at the firm, not overly

dissimilar from other technology-based firms. Some of the most egre- gious statistics include: (a) racial configuration―6% Hispanic, 9% black, 50% white, and (b) 85% of all technology jobs are held by men, with a mere 36% of the total workforce comprised of women.(7)

Liane Hornsey, Uber’s chief human resource officer, acknowl- edged, “We need to do better and have much more work to do.”(8) Here are Uber’s next steps:

We’re dedicating $3 million over the next three years to sup- port organizations working to bring more women and under- represented people into tech. This year, our recruiting team is also embarking on a college tour to recruit talented students at colleges across the country, including a number of Historically Black Colleges and Universities (HBCUs) and Hispanic Serv- ing Institutions (HSIs). Our employee resource groups play a huge role in all our recruiting events that are focused on hiring women and people of color at Uber.

In recruiting, we’ve updated our job descriptions to remove potentially exclusionary language, and we are running inter- view training to make our hiring processes more inclusive for women in tech. We’re also rolling out training to educate and empower employees, covering topics like “why diversity and inclusion matters,” “how to be an ally,” and “building inclusive teams.” Training is not a panacea, but educating employees on the right behaviors is an important step in the right direction.

This is just the beginning of our efforts. Whether you’re a vet- eran returning from service or a person with a disability and regardless of your religious beliefs, your sexual orientation, your gender identity, or the country you call home, at Uber, we want to create an environment where you can be yourself. By deepening our commitment to diversity, we will strengthen our business and better serve our customers in over 450 cities in more than 70 countries.(9)

Only time will tell if this fast growth firm can manage its aggressive culture and diversity as it continues to expand into new market- places and those with differing cultures.

Questions 1. Susan Fowler’s complaint of being the target of sexual

harassment by her manager would be categorized as falling under which employment law?

2. Which type(s) of harassment was Ms. Fowler exposed to? 3. What actions, if any, has Uber taken to limit their liability rela-

tive to sexual harassment charges? 4. Uber’s diversity report indicates that 36 percent of Uber’s

workforce is made up of women (15% in technical jobs); 50% of Uber’s employees in the United States are white, while 9% are black and 6% are Hispanic. Are they in violation of any EEOC and Affirmative Action laws?

5. Why does diversity matter in general and more specifically to Uber?

6. What benefits and challenges does Uber derive from a more diverse workforce?

References (1) Anderson, A. (n.d.). Uber International C.V. Hoovers.

Retrieved April 4, 2017, from http://0-subscriber.hoovers .com.liucat.lib.liu.edu/H/company360/fulldescription.html?- companyId=163401000000000

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Chapter 3: The Legal Environment and Diversity Management 109

(2) Uber. (n.d.). How do we want Uber to look and feel? Retrieved April 4, 2017, from https://www.uber.com/diversity/

(3) Fowler, S. (2017, February 19). Reflecting on one very, very strange year at Uber. Retrieved April 12, 2017, from https:// www.susanjfowler.com/blog/2017/2/19/reflecting-on-one- very-strange-year-at-uber

(4) Ibid.

(5) Patnaik, S. (2017, February 21). Uber hires ex-US Attorney General Holder to probe sexual harassment. Reuters. Retrieved April 4, 2017, from http://www.reuters.com/article/us- uber-tech-sexual-harassment-idUSKBN160041

(6) Isaac, M. (2017, March 28). Uber releases diversity report and repudiates its “hard-charging attitude.” The New York Times. Retrieved April 4, 2017, from http://www.cnbc .com/2017/03/28/uber-releases-diversity-report-and- repudiates-its-hard-charging-attitude.html

(7) Ibid.

(8) Uber slow on diversity. (2017, March 29). AM New York, p. A2.

(9) Uber. (n.d.). How do we want Uber to look and feel? Retrieved April 4, 2017, from https://www.uber.com/diversity/

Case written by Herbert Sherman, Long Island University

CASE 3-2 WHEN RELIGION IS ON THE AGENDA The Loxedose Company near Chicago transfers computer models into hard physical copies. Computer programmers design the representa- tion, and machines sculpt the product line by line from the bottom to the top by adding levels of materials that adhere and are durable.

Two managers who founded the company celebrate individual and company successes. For example, Founders Day, August 25, fea- tures all 30 members of the company (or whoever is available) helping blow out the company birthday cake candles. Labor Day features a camping trip for those interested, at a manager’s cabin at the largest lake in the area. Halloween features most employees wearing a cos- tume, unless they are out on a sales or delivery run. Thanksgiving fea- tures a turkey lunch, whether vegetarians like it or not.

The managers believe that everyone should be working together and celebrating together. Accordingly, Christmas is not only a great year-end celebration but also a super holiday party. Traditionally, gifts are exchanged, Christmas carols are sung, and computer-designed trophies are given to the employees with bonus checks attached. Employees have to be present to receive the prizes made from Loxedose computer designs and materials.

This year, Loxedose hired a married couple, Omar and Judy, to be a part of the sales staff. Omar was from Saudi Arabia and also was studying in a university in Chicago. His wife was an American who was going to the same university.

Judy joined the Islamic faith when she married Omar. She was a Christian early in her life and then was unchurched through many years before she met Omar.

The upcoming Christmas party was a mandatory meeting and cel- ebration. Employees had to be there to pick up their trophy along with the $200 bonus check. Judy was OK with going to the cele- bration, but Omar was not because it was a Christian celebration. Judy decided to go to the Christmas party without Omar to pick up Omar’s statue along with hers.

The party started just fine, with an exchange of presents, a birth- day cake for Jesus, and a bunch of thank-yous from top manage- ment. When it came to giving out the celebratory statues and money, the managers stated you had to be there. Omar and Judy were mentioned together so Judy started picking up both statues when the company managers said Omar had to be there. Judy protested saying this was part of a Christmas celebration that was not part of his religion. Omar’s statue and money were forced to remain.

Judy and Omar protested to management that they were discrimi- nating based on religion because the bonus based on performance was distributed through the Christmas party and not offered if the

employee didn’t attend. All employees should have an equal right to get the bonus. Furthermore, not everyone will always be able to attend the parties because of illnesses, family matters, and other issues.

The managers proposed creating a new employee handbook pol- icy associated with celebrations, awards, and religion. The follow- ing choices were suggested in a company meeting:

1. Celebrations within the company are important because they bring the employees together beyond the basic job. Employees will be required to attend Christian celebrations during work hours because that is the dominant religion.

2. Celebrations within the company are important because they bring the employees together beyond the basic job. Employees will be required to attend celebrations unless there are religious reasons or other reasons approved by management.

3. Celebrations within the company are important because they bring the employees together beyond the basic job. However, no celebrations shall be related to any, or for any, religious holiday, in order to respect the beliefs of those who do not celebrate as such. Anyone missing any party needs prior approval from management.

4. Celebrations within the company are optional. However, rewards will be provided for performance at a December party. If no reward is received at the party, it will be delivered to the employee the next day.

5. No statues or awards will be given at company celebrations. They will be mailed to employees or added to payroll auto- matically.

Top management strongly opposes the last two proposals because they would actually destroy the effect of providing awards in front of everyone. They prefer the second proposal because everyone would need to contact management and management would have control of who would be at the celebration. Omar and Judy do not like the fact that they would be forced (in Proposal 2) to reject the Christmas party because it is Christian. They much prefer Proposal 3 that eliminates religion-related celebrations. Top management does not like the proposal because it thinks reli- gion-based celebrations are an important part of life.

Questions 1. Does the current policy pass the OUCH test?

2. Does management have a legal defense to discriminate by requiring attendance at religious based events? Which defense is management using for keeping the policy?

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110 PART I: 21ST CENTURY HUMAN RESOURCE MANAGEMENT STRATEGIC PLANNING AND LEGAL ISSUES

3. Which employment law or laws does this case involve? How would the law(s) that you identified apply in this case?

4. Which employee handbook proposal should the company incorporate (if any) and why?

5. How effective in the company’s culture is giving out awards in front of everyone else?

6. Should religious parties be optional? Mandatory? Offered? Not offered?

Case created by Gundars Kaupins of Boise State University

SKILL BUILDER 3-1 THE FOUR-FIFTHS RULE For this exercise, you will do some math.

Objective To develop your skill at understanding and calculating the Four- Fifths Rule

Skills The primary skills developed through this exercise are as follows:

1. HR management skill—Analytical and quantitative business skills

2. SHRM 2016 Curriculum Guidebook—G: Outcomes: Metrics and Measurement in HR

Complete the following Four-Fifths Problems

1: Males Females

Applicants 100 100

Selected 50 40

Selection rate 50% (50/100) 40% (40/100)

4/5 = _____ %.

The selection rate of _____% is equal to, less than, or greater than _____% or 4/5.

Therefore, the Four-Fifths Rule is or is not met. How many total females and how many more females should be hired? ___________

2: White Nonwhite

Applicants 120 75

Selected 80 25

Selection rate _____ _____

4/5 = _____ %.

The selection rate of _____% is equal to, less than, or greater than _____% or 4/5.

Therefore, the Four-Fifths Rule is or is not met. How many total and how many more nonwhites should be hired? ______ _____

3: White Females Nonwhite Females

Applicants 63 109

Selected 17 22

Selection rate _____ _____

4/5 = _____ %.

The selection rate of _____% is equal to, less than, or greater than _____% or 4/5.

Therefore, the Four-Fifths Rule is or is not met. How many total and how many more nonwhite females should be hired? ___________

SKILL BUILDER 3-2 DIVERSITY TRAINING Objective To become more aware of and sensitive to diversity

Skills The primary skills developed through this exercise are as follows:

1. HR management skill—Human relations skills

2. SHRM 2016 Curriculum Guidebook—L: Training and Development

Answer the following questions: Race and Ethnicity

1. My race (ethnicity) is ____.

2. My name, ____, is significant because it means ____. [or]

My name, ____, is significant because I was named after ____.

3. One positive thing about my racial/ethnic background is ____.

4. One difficult thing about my racial/ethnic background is ____.

Religion 5. My religion is ____.

6. One positive thing about my religious background is ____.

7. One difficult thing about my religious background is ____.

Gender 8. I am ____ (male/female).

9. One positive thing about being (male/female) is ____.

10. One difficult thing about being (male/female) is ____.

Age 11. I am ____ years old.

12. One positive thing about being this age is ____.

13. One difficult thing about being this age is ____.

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Chapter 3: The Legal Environment and Diversity Management 111

Other 14. One way in which I am different from other people is ____.

15. One positive thing about being different in this way is ____.

16. One negative thing about being different in this way is ____.

Prejudice, Stereotypes, and Discrimination 17. Describe an incident in which you were prejudged, stereo-

typed, or discriminated against. It could be something minor, such as having a comment made to you about your wearing the wrong type of clothes/sneakers or being the last one picked when selecting teams.

Apply It What did I learn from this experience? How will I use this knowl- edge in the future?

Your instructor may ask you to do this Skill Builder in class in a group. If so, the instructor will provide you with any necessary infor- mation or additional instructions.

_______________________________________________________

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