Who is able to complete this discussion?

Cascio, W. F., & Aguinis, H. (2019). Applied psychology in talent management (8th ed.). Retrieved from https://www.vitalsource.com

Chapter 1 Organizations, Work, and Applied Psychology

Wayne F. Cascio, Herman Aguinis

Learning Goals

By the end of this chapter, you will be able to do the following:

1.1 Describe what an organization is and how applied psychology can help organizations make the wisest use of the people who staff them

1.2 Define the terms applied psychology, talent management, human resource management, and personnel psychology and understand how they differ

1.3 Explain how demographic changes and diversity will affect recruitment and staffing

1.4 Understand the managerial implications of generational diversity

1.5 Illustrate how technology and globalization are changing work and organizations

1.6 Describe the difference between job security and employment security, as well as the implications of each one for individuals and organizations

1.7 Explain the changing roles of managers and workers as the structure and design of organizations continue to evolve

1.8 Describe how the digital revolution will affect the workplace of the future, and identify emerging research needs in that area

The Pervasiveness of Organizations

Throughout our lives, each of us is deeply touched by organizations of one form or another. In the normal course of events, a child will be exposed to a school organization, a church or a religious organization, and perhaps a Little League or a Boy or Girl Scouts organization, as well as the social organization of the local community. After leaving the school organization, the young person may choose to join a military, business, or government organization, and as his or her career unfolds, the person probably will move across several different organizations. The point is simply that our everyday lives are inseparably intertwined with organizational memberships of one form or another.

What common characteristics unite these various activities under the collective label organization? The question is not an easy one to answer. Many different definitions of the term have been suggested, and each definition reflects the background and theoretical point of view of its author with respect to what is relevant or important. Yet certain fundamental elements recur in these definitions.

In general, an organization is a collection of people working together in a division of labor to achieve a common purpose (Hitt, Miller, & Collela, 2014). Another useful concept views an organization as a system of inputs, throughputs, and outputs. Inputs (raw materials) are imported from the outside environment, transformed or modified (e.g., every day tons of steel are molded into automobile bodies), and finally exported or sold back into the environment as outputs (finished products). Although there are many inputs to organizations (energy, raw materials, information, etc.), people are the basic ingredients of all organizations, and social relationships are the cohesive bonds that tie them together (see Figure 1.1).

Differences in Jobs

In examining the world of work, one is immediately awed by the vast array of goods and services that have been and are being produced as a result of organized effort. This great variety ranges from the manufacture of tangible products—such as food, automobiles, plastics, paper, textiles, and glassware—to the provision of less tangible services—such as legal counsel, health care, police and fire protection, and education. Thousands of jobs are part of our work-a-day world, and the variety of tasks and human requirements necessary to carry out this work is staggering. Faced with such variability in jobs and their requirements on the one hand, and with people and their individual patterns of values, aspirations, interests, and abilities on the other, programs for the efficient use of human resources are essential.

Differences in Performance

People represent substantial investments by firms—as is immediately evident when one stops to consider the costs of recruiting, selecting, placing, and training as many people as there are organizational roles to fill. But psychology’s first law is that people are different. People differ in size, weight, and other physical dimensions, as well as in aptitudes, abilities, personality, interests, and myriad other psychological dimensions. People also differ greatly in the extent to which they are willing and able to commit their energies and resources to the attainment of organizational objectives.

If we observe a group of individuals doing the same kind of work, it will soon be evident that some are more effective workers than others. For example, if we observe a group of carpenters building cabinets, we will notice that some work faster than others, make fewer mistakes than others, and seem to enjoy their work more than others. These observations pose a question of psychological interest: Why? That is, what “people differences” cause these “work differences”? Perhaps these variations in effectiveness are due to differences in abilities. Some of the carpenters may be stronger, have keener eyesight, and have more finely developed motor coordination than others. Perhaps another reason for the observed differences in behavior is motivation. At any given point in time, the strength of forces impelling an individual to put forth effort on a given task, or to reach a certain goal, may vary dramatically. In other words, differences in individual performance on any task, or on any job, could be due to differences in ability, or to differences in motivation, or to both. This has clear implications for the optimal use of individual talents in our society.

A Utopian Ideal

In an idealized existence, our goal would be to assess each individual’s aptitudes, abilities, personality, and interests; to profile these characteristics; and then to place all individuals in jobs perfectly suited to them and to society. Each individual would make the best and wisest possible use of his or her talents, while in the aggregate, society would be making maximal use of its most precious resource.

Alas, this ideal falls far short in practice. The many, and often gross, mismatches between individual capabilities and organizational roles are glaringly obvious even to the most casual observer—history Ph.D.s driving taxicabs for lack of professional work, and young people full of enthusiasm, drive, and intelligence placed in monotonous, routine, dead-end jobs.

Point of View

In any presentation of issues, it is useful to make explicit underlying assumptions. The following assumptions have influenced the presentation of this book:

In a free society, every individual, regardless of race, age, gender, disability, religion, national origin, or other characteristics, has a fundamental and inalienable right to compete for any job for which he or she is qualified.

Society can and should do a better job of making the wisest and most humane use of its human resources.

Individuals working in the field of human resources and managers responsible for making employment decisions must be as technically competent and well informed as possible, since their decisions will materially affect the course of individual livelihoods and lives. Personnel psychology holds considerable potential for improving the caliber of HRM in organizations. Several recent developments have combined to stimulate this growing awareness. After first describing what personnel psychology is, we will consider the nature of some of these developments.

Personnel Psychology and Talent Management in Perspective

People have always been subjects of inquiry by psychologists, and the behavior of people at work has been the particular subject matter of industrial and organizational (I/O) psychology. Yet sciences and subdisciplines within sciences are distinguished not so much by the subject matter they study as by the questions they ask. Thus, both the social psychologist and the engineering psychologist are concerned with studying people. The engineering psychologist is concerned with the human aspects of the design of tools, machines, work spaces, information systems, and aspects of the work environment. The social psychologist studies power and influence, attitude change, communication in groups, and individual and group social behavior.

As noted earlier, personnel psychology is a subfield within I/O psychology. Some of the major areas of interest to personnel psychologists include job analysis and job evaluation; recruitment, screening, and selection; training and development; and performance management.

Personnel psychology and talent management overlap both psychology and the broader field of HRM. Both exclude, for example, such topics as labor and compensation law, organization theory, industrial medicine, collective bargaining, and employee benefits. Psychologists have already made substantial contributions to the field of HRM; in fact, most of the empirical knowledge available in such areas as motivation, leadership, and staffing is due to their work. Over the past decade, dramatic changes in markets, technology, demographics, organizational designs, the “psychological contract,” and the respective roles of managers and workers have inspired great emphasis on and interest in personnel psychology and talent management (Cascio, 2010; Cascio & Boudreau, 2016). The following sections consider each of these topics in more detail. Figure 1.2 illustrates them graphically.

Globalization of Product and Service Markets

Globalization—the ability of any individual or company to compete, connect, exchange, or collaborate globally—is exploding. The ability to digitize so many things, to send them anywhere and to pull them in from everywhere via our mobile phones and the Internet, has unleashed a torrent of global flows of information and knowledge. Global flows of commerce, finance, credit, social networks, and more are interlacing markets, media, central banks, companies, schools, communities, and individuals more tightly together than ever before (Cascio, 2018). That same connectivity is also making individuals and institutions more interdependent. As author Tom Friedman notes, “Everyone everywhere is now more vulnerable to the actions of anyone anywhere” (Friedman, 2016, p. 27). Product and service markets have truly become globalized.

Global labor markets are another feature of globalization, created by cheap labor and plentiful resources, combined with ease of travel and communication. This is fueling mobility as more companies expand abroad and people consider foreign postings as a natural part of their professional development. Beyond the positive effects that such circulation of talent brings to both developed and developing countries, it enables employment opportunities well beyond the borders of one’s home country (Dulebohn & Hoch, 2017). This means that competition for talent will come not only from the company down the street but also from the employer on the other side of the world (Economist Intelligence Unit, 2014).

Consider three other emerging trends spawned by globalization (Cascio, 2018). The first is increasing workforce flux as more roles are automated or outsourced and more workers are contract based, are mobile, or work flexible hours. This may allow companies to leverage global resources more efficiently, but it also will increase the complexity of management’s role. Second, expect more diversity as workers come from a greater range of backgrounds. Those with local knowledge of an emerging market, a global outlook, and an intuitive sense of the corporate culture will be particularly valued. Not surprisingly, talented young people will more frequently choose their employers based, at least in part, on opportunities to gain international experience. Finally, technical skills, although mandatory, will be less defining of the successful manager than the ability to work across cultures and to build relationships with many different constituents (Lublin, 2011; McGovern, 2017).

Why then, is there sometimes a backlash against globalization? It stems largely from a fear on the part of many people that globalization benefits big companies instead of average citizens, as stagnating wages and growing job insecurity in developed countries create rising disenchantment. In theory, less-developed countries win from globalization because they get jobs making low-cost products for rich countries. Rich countries win because, in addition to being able to buy inexpensive imports, they also can sell more sophisticated products, like financial services, to emerging economies. The problem, according to many experts, is that workers in the West are not equipped for today’s pace of change, in which jobs come and go and skills can quickly become redundant (Brynjolfsson & McAfee, 2014; Friedman, 2016).

Despite these concerns, economic interdependence among the world’s countries will continue. Global corporations will continue to be created through mergers and acquisitions of unparalleled scope. These mega-corporations will achieve immense economies of scale and compete for goods, capital, and labor on a global basis. As a result, prices will drop, and consumers will have more options than ever (Bhagwati, 2007; Ghemawat, 2017).

It takes more than trade agreements, technology, capital investment, and infrastructure, however, to deliver world-class products and services. It also takes the skills, ingenuity, and creativity of a competent, well-trained workforce. Workers with the most advanced skills create higher value products and services and reap the biggest rewards. Attracting, developing, and retaining talent in a culture that supports and nurtures ongoing learning is a continuing challenge for all organizations. Human resource professionals are at the epicenter of that effort.

Impact on Jobs and the Psychological Contract

The job churning that characterized the labor market in the 1990s and early twenty-first century has not let up. If anything, its pace accelerated during and after the Great Recession (Farber, 2011; Schwartz, 2009). Both white- and blue-collar jobs aren’t being lost temporarily because of a recession; rather, they are being wiped out permanently as a result of new technology, improved machinery, and new ways of organizing work (Friedman, 2016; Hamlin & Roberts, 2017). These changes have had, and will continue to have, dramatic effects on organizations and their people.

Corporate downsizing has become entrenched in American culture since the 1980s, but it was not always so. It was not until the final 20 years of the 20th century that such downsizing and the loss of the perceived “psychological contract” of lifelong employment with a single employer in the public and private sectors of the economy came to characterize many corporate cultures and the American workforce (Cascio, 1993b, 2002a, 2002b). The psychological contract refers to an unwritten agreement in which the employee and employer develop expectations about their mutual relationship (Payne, Culbertson, & Boswell, 2008; Rousseau, 1995). For example, absent just cause, the employee expects not to be terminated involuntarily, and the employer expects the employee to perform to the best of his or her ability.

Stability and predictability characterized the old psychological contract. In the 1970s, for example, workers held an average of three to four jobs during their working lives. Change and uncertainty, however, are hallmarks of the new psychological contract. Soon workers will hold 7–10 jobs during their working lives. Job-hopping no longer carries the stigma it once did. Indeed, the massive downsizing of employees has made job mobility the norm rather than the exception. This has led workers operating under the new psychological contract to expect more temporary employment relationships. Paternalism on the part of companies has given way to self-reliance on the part of employees, and also to a decrease in satisfaction, commitment, intentions to stay, and perceptions of an organization’s trustworthiness, honesty, and concern for its employees (Lester, Kickul, Bergmann, & De Meuse, 2003; Llopis, 2013). Indeed, our views of hard work, loyalty, and managing as a career will probably never be the same.

Effects of Technology on Organizations and People

We live in a global world where technology, especially information and communication technology, is changing the manner in which businesses create and capture value, how and where we work, and how we interact and communicate. Consider five technologies that are transforming the very foundations of global business and the organizations that drive it: cloud and mobile computing, big data and machine learning, sensors and intelligent manufacturing, advanced robotics and drones, and clean-energy technologies. These technologies are not just helping people to do things better and faster but also enabling profound changes in the ways that work is done in organizations (Cascio & Montealegre, 2016).

The new wave of technological innovation features the emerging general paradigm known as “ubiquitous computing,” or an environment where computational technology permeates almost everything, enabling new ways of connecting people, computers, and objects. The ubiquitous computing infrastructure also enables the collection of enormous amounts of structured and unstructured data, requiring the adjective big to distinguish this new paradigm of development. Ubiquitous computing also blurs the boundaries between industries, nations, companies, providers, partners, competitors, employees, freelancers, outsourcers, volunteers, and customers. These blurred boundaries yield opportunities to unify the physical space and the electronic space, which has implications for privacy and security, as well as how companies are organized and manage talent (Montealegre & Cascio, 2017).

As with other new developments, there are negatives as well as positives associated with new technology, and they need to be acknowledged. Workers may be bombarded with mass junk e-mail (spam), company computer networks may be attacked by hackers who can wreak havoc on an organization’s ability to function, and employees’ privacy may be compromised. A comprehensive review of literature in this area revealed three lessons about the effects of ubiquitous computing. One, the effects of ubiquitous computing on jobs is a process of creative destruction. Ubiquitous computing is not the first technology to affect jobs. From steam engines to robotic welders to ATMs, technology has long displaced humans, often creating new and higher skilled jobs in its wake. Two, ubiquitous computing can be used to enable or to constrain people at work. As an example, consider electronic monitoring systems. Evidence indicates that attitudes in general, and attitudes toward monitoring in particular, will be more positive when organizations monitor their employees within supportive organizational cultures (Alge & Hansen, 2014). Supportive cultures welcome employee input into the monitoring system’s design, focus on groups of employees rather than singling out individuals, and focus on performance-relevant activities. Three, ubiquitous computing is changing the nature of competition, work, and employment in ways that are profound and that need to be managed actively.

A caveat is in order here, however. It relates to the common assumption that since production and service processes have become more sophisticated, high tech can substitute for skill in managing a workforce. Beware of such a “logic trap.” When it comes to engaging and inspiring people to move in the same direction, empathizing with customers, and developing talent, humans will continue to enjoy a strong comparative advantage over machines. No computer will ever manage by walking around, but inspirational leadership will always be in demand (Cascio & Montealegre, 2016). At a broader level, to succeed and prosper in a world where nothing is constant except the increasingly rapid pace of change, companies need motivated, technically literate workers who are willing to retrain continually. However, organizations of the future will look very different from organizations of the past, as the next section illustrates.

Changes in the Structure and Design of Organizations

Many factors are driving change, but none is more important than the rise of Internet technologies. Like the steam engine or the assembly line, the Web has already become an advance with revolutionary consequences, most of which we have only begun to feel. The Web gives everyone in the organization, from the lowliest clerk to the chairperson of the board, the ability to access a mind-boggling array of information—instantaneously from anywhere. Instead of seeping out over months or years, ideas can be zapped around the globe in the blink of an eye. Organizations are adapting to management via the Web: premised on constant change, not stability; organized around networks, not rigid hierarchies; built on shifting partnerships and alliances, not self-sufficiency; and constructed on technological advantages, not bricks and mortar (Cascio, 2018; Friedman, 2016). Twenty-first-century organizations are global in orientation, and all about speed. They are characterized by terms such as virtual, boundaryless, and flexible, with no guarantees to workers or managers.

This approach to organizing is no short-term fad. The fact is that organizations are becoming leaner and leaner, with better and better trained “multi-specialists”—those who have in-depth knowledge about a number of different aspects of the business. Eschewing narrow specialists or broad generalists, organizations of the future will come to rely on cross-trained multi-specialists in order to get things done. One such group whose role is changing dramatically is that of managers.

Changing Roles of Managers and Workers

In the traditional hierarchy that once made up most bureaucratic organizations, rules were simple. Managers ruled by command from the top (essentially one-way communication), used rigid controls to ensure that fragmented tasks (grouped into clearly defined jobs) could be coordinated effectively, and partitioned information into neat compartments—departments, units, and functions. Information was (and is) power, and, at least in some cases, managers clung to power by hoarding information. This approach to organizing—that is, 3-C logic—was geared to achieve three objectives: stability, predictability, and efficiency.

In today’s unpredictable, hypercompetitive work environment, the autocratic, top-down command-and-control approach is out of step with the competitive realities that many organizations face. To survive, organizations have to be able to respond quickly to shifting market conditions. In this kind of an environment, a key task for all managers, especially top managers, is to articulate a vision of what their organizations stand for, what they are trying to accomplish, and how they compete for business in the marketplace. Managers need to be able to explain and communicate how their organizations create value. The next step is to translate that value-creation story into everything that is done, including the implications for employee knowledge and behavior, and to use it as a benchmark to assess progress over time.

Leadership in the digital age is not about control, but comfort with uncertainty. Companies need agility, that is, collaborative innovation to solve unstructured problems. In an attempt to derive a culture that employees wanted to see, GE crowdsourced input from employees and managers. The result was a renewed emphasis on acceleration, agility, and customer focus. IBM embraced a similar approach, known as agile management: a set of values and principles that emphasizes iterative, collaborative interactions among members of small teams working in a series of short cycles under conditions of full transparency. From the start, teams incorporate feedback and customer perspectives to deliver solutions that result from experimenting and learning from failure (Knowledge@Wharton, 2017).

The kinds of teams we are describing—intact, identifiable social systems (even if small or temporary) whose members have the authority to manage their own task and interpersonal processes as they carry out their work—go by a variety of names—autonomous work groups, process teams, self-managing work teams, and so on. The kinds of skills needed to succeed in this environment simply weren’t needed in organizations designed and structured under 3-C logic. Indeed, lack of management support, organizational resistance to change, and company cultures at odds with the values of agile management limit its innovative potential.

Does this imply that we are moving toward a universal model of organizational and leadership effectiveness? Hardly. Contingency theories of leadership such as path-goal theory (House & Mitchell, 1974), normative decision theory (Vroom & Yetton, 1973), and LPC contingency theory (Fiedler, 1967) suggest that an autocratic style is appropriate in some situations. More often, however, today’s networked, interdependent, culturally diverse organizations require transformational leadership (Bass & Riggio, 2006; Lord, Day, Zaccaro, Avolio, & Eagly, 2017). Leaders who transform followers to bring out their creativity, imagination, and best efforts require well-developed interpersonal skills, founded on an understanding of human behavior in organizations. Such strategic leadership is particularly effective under unstable or uncertain conditions (Colbert, Kristof-Brown, Bradley, & Barrick, 2008; Waldman, Ramirez, House, & Puranam, 2001). I/O psychologists and HR professionals are well positioned to help managers develop those kinds of skills.

An alternative approach is to engage talent as needed, thereby lowering overhead costs and improving response time. This is a talent-on-demand model and it is a central feature of the “gig” economy (Boudreau, Jesuthasan, & Creelman, 2015; Cascio & Boudreau, 2017; McGovern, 2017). More and more workers are operating outside the traditional confines of regular, full-time employment. They may be “free agents” or “e-lancers” (i.e., freelancers in the digital world) who work for themselves, or they may be employees of an organization a firm is allied with, employees of an outsourcing or temporary-help firm, or even volunteers. Two factors combine to make nonstandard work more feasible for organizations and workers. The first is technology. Internet-based communication tools, including collaborative workspaces and the opportunity for remote monitoring by companies, makes nonstandard work attractive to individuals as well as organizations (Cascio & Montealegre, 2016). Second, creativity and problem-solving skills play critically important roles in production and value creation in today’s knowledge-based economy, and those can originate either inside or outside organizational boundaries. For certain specialized skills, the best way to obtain and keep them current is through a freelance or nonstandard work ecosystem (Boudreau et al., 2015; Meyer, Somaya, & Williamson, 2012).

In this kind of an environment, the managerial roles of “controllers,” “planners,” and “inspectors” are being replaced by “coaches,” “facilitators,” and “mentors” (Lund, Ramaswamy, & Manyika, 2012; Srivastava, Bartol, & Locke, 2006). This doesn’t just happen—it requires well-developed interpersonal skills, continuous learning, and an organizational culture that supports and encourages both. Demographic diversity will characterize almost all organizations, as our next section illustrates.

Changing Demographics

Demographically, today’s organizations are more diverse than ever before. They comprise more women at all levels; more multiethnic, multicultural workers; older workers; younger workers; more workers with disabilities; robots; and contingent workers. Consider some of the contours of these changes.

Around the globe, the number as well as the mix of people available to work are changing rapidly. The U.S. labor force is aging, as the proportion of the labor force composed of people aged 55 and older rises from 19% in 2010 to 24% in 2050. As Figure 1.3 shows, by 2040 the non-Hispanic white population is projected to drop below 50%, with Hispanics making up more than a quarter of the population, and Asians, African Americans, and other ethnic groups constituting the rest. Immigration is projected to account for 88% of U.S. population growth over the next 50 years, such that by 2055 there will be no majority racial or ethnic group. Globally, the United Nations estimates that by 2060, for every 100 people of working age, there will be 30 people who are 65 and older. That is more than double the ratio of old to young people today. Because of low birth rates, the age wave is more acute in developed countries, increasing the cost of social programs and limiting economic growth. Younger migrants may ease that pain, however (“The first world is aging,” 2015; Jordan, 2015).

In developed economies, many employers are unable to find people with the skill sets they need. By 2020, that talent gap could reach 1.5 million people in the United States and as many as 23 million in China (Lund et al., 2012; Qi, 2017). These trends have two key implications: (1) The reduced supply of workers (at least in some fields) will make finding and keeping employees a top priority, and (2) the task of managing a diverse workforce, of harnessing the motivation and efforts of a wide variety of workers, will present a continuing challenge.

Earlier we noted that more women than ever are found at all levels of organizations. Women constitute 47% of the U.S. workforce, and they hold 52% of all managerial and professional positions. So much for the myth that women don’t hold high-level business jobs because they supposedly don’t aim high enough (Catalyst, 2016; U.S. Bureau of Labor Statistics, 2015). Age diversity is even more pronounced. At present, five generations comprise the U.S. workforce: The silent generation (born 1930–1945); the baby boom generation (born 1946–1964); Generation X (born 1965–1980); Generation Y, also known as millennials (born 1981–1995); and Generation Z (born 1996–2010).

Evidence from time-lag and cross-sectional studies suggests that, despite a number of similarities, the generations in today’s workplace differ in aspects of their personalities, work values and attitudes, leadership and teamwork preferences, leader behaviors, and career experiences (Lyons & Kuron, 2014; Twenge, 2010). Meta-analytic results, however, indicate that the relationships between generational membership and work-related outcomes (job satisfaction, organizational commitment, and intent to quit) are moderate to small, essentially zero in many cases. Differences that appear to exist are likely attributable to factors other than generational membership (Costanza, Badger, Fraser, Severt, & Gade, 2012). An overarching theme across studies, however, is that individualism characterizes all generations (Twenge, 2012). An open question is the extent to which observed differences will remain stable or shift over time as the generations move through their respective life courses and career stages.

Age-based stereotypes are common (Posthuma & Campion, 2009), particularly among older workers, but this is just as true for middle-aged and younger workers (Finkelstein, Ryan, & King, 2013). As those authors noted, supervisors can serve as powerful ambassadors of positive age-diverse interactions, both by embodying and facilitating positive views of outgroup members and by promoting open communication and treating people as individuals. To support an aging workforce, Truxillo, Cadiz, and Hammer (2015) outlined 11 possible interventions, from work redesign to optimizing total worker health.

What are the implications for leaders? First, individual differences are always bigger than generational differences (Schumpeter, 2015). Generational differences are manifestations of broader trends in society and work that continue to evolve as the generations move through their respective life courses. Leaders cannot simply assume that past management practices will work in the modern context and that today’s practices will work in the future (Lyons & Kuron, 2014). They should focus on finding qualified employees who best fit the organization’s values and HR practices rather than attempting to craft strategies to attract the average member of a generation. For example, an organization that emphasizes high commitment might emphasize work–life fit and flexible schedules, while looking for workers who are enthusiastic and hardworking, and who have the requisite skills and experience the organization needs.

It should be clear by now that we are in the midst of a revolution—a revolution at work. Twenty-first-century organizations, both large and small, differ dramatically in structure, design, and demographics from those of even a decade ago. Paternalism is out; self-reliance is in. There is constant pressure to do more with less and a steady emphasis on empowerment, cross-training, personal flexibility, self-managed work teams, and continuous learning. Workers today have to be able to adapt to changing circumstances and to be prepared for multiple careers. Job security (the belief that one will retain employment with the same organization until retirement) has become less important to workers than employment security (having the kinds of skills that employers in the labor market are willing to pay for). In our next section we consider some organizational responses to these new realities.

Implications for Organizations and Their People

In a world where virtually every factor that affects the production of goods or the delivery of services—capital, equipment, technology, and information—is available to every player in the global economy, the one factor that doesn’t routinely move across national borders is a nation’s workforce. Today the quality of a nation’s workforce is a crucial determinant of its ability to compete and win in world markets.

Human resources can be sources of sustained competitive advantage as long as they meet three basic requirements: (1) They add positive economic benefits to the process of producing goods or delivering services; (2) the skills of the workforce are distinguishable from those of competitors (e.g., through education and workplace learning); and (3) such skills are not easily duplicated (Barney, 1991). A human resource system (the set of interrelated processes designed to attract, develop, and maintain human resources) can either enhance or destroy this potential competitive advantage (Lado & Wilson, 1994).

Perhaps a quote attributed to Albert Einstein, the famous physicist, best captures the position of this book. After the first atomic reaction in 1942, Einstein remarked: “Everything has changed, except our way of thinking” (Workplace of the Future, 1993, p. 2). As I/O psychology in general, and talent management in particular, move deeper into the 21st century, our greatest challenge will be to change the way we think about organizations and their people. As just one example, consider how the digital revolution will affect the workplace of the future, and some emerging research needs in that area (Colbert, Yee, & George, 2016).

There is no doubt that the increasing prevalence of technology influences the way people approach work. We are in near-constant communication with one another, and our lives are chronicled for friends and followers in real time on social media. At the same time, people vary in their proficiency and comfort in achieving desired outcomes at work using technology, often referred to as “digital fluency” (Briggs & Makice, 2012). Clearly, research is needed to fully understand how digital fluency may influence job performance and career progression across a range of professions, as well as how it affects conflict and collaboration in diverse groups (Colbert et al., 2016).

Digitally fluent or not, the effects of technology at work may be both positive and negative. On the positive side, technology has facilitated leaps in productivity, collaboration, and connectivity with others that were unimaginable a few decades ago. At the same time, however, the ubiquitous presence of technology in our lives may limit opportunities to develop deep levels of self-awareness and to behave authentically, especially among those who spend lots of time in online worlds and working with avatars. Managers and organizations need to consider how to address the possibility of reduced self-awareness and authenticity among members of the digital workforce while also remaining aware of the ways that technology might be used to promote healthy identity development (Colbert et al., 2016). To be sure, the prevalence of technology in our daily lives may affect the quality of our interactions with others and may lead to a decline in our level of empathy (a cognitive understanding of another’s perspective and an affective response to another’s experiences). Meta-analysis revealed that dispositional empathy levels decreased between 1979 and 2009 among college students in the United States (Konrath, O’ Brien, & Hsing, 2011). A possible reason for this finding is that the kinds of fully present, face-to-face interactions that foster empathy have become less common in a world of digital communication. More research is needed to fully understand how digitally mediated communication may influence communication, relationship quality, and empathy, especially in the workplace (Colbert et al., 2016).

In our “always-on” society, technology has blurred boundaries between work and nonwork, sometimes to our detriment. Thus, in a study of the daily intrusions of e-mail in nonworking hours, Butts, Becker, and Boswell (2015) found that time required to respond to e-mail outside of work was associated with higher levels of anger, which in turn led to increased work–family conflict. Research is just beginning to provide guidance on how organizations can most effectively manage the digital workforce and leverage technology while avoiding potential downsides.

To be sure, the future world of work will not be a place for the timid, the insecure, or the low skilled. For those who thrive on challenge, responsibility, and risk taking, security will come from seizing opportunities to adapt and to develop new competencies (Gunz & Peiperl, 2007; Hall & Mirvis, 1995). The need for competent HR professionals with broad training in a variety of areas has never been greater.

Plan of the Book

In Chapter 2, we explore a pivotal issue in HRM today: legal requirements for fair employment practice. In particular, we emphasize employment protections in the U.S. Constitution, civil rights laws, and relevant case law. The remainder of the book focuses in greater depth on some of the major issues in contemporary personnel psychology. Each chapter outlines the nature of the topic under consideration, surveys past practice and research findings, describes present issues and procedures, and, where relevant, indicates future trends and new directions for research.

The goal of Chapters 3 through 5 is to provide the reader with a strategy for viewing the employment-decision process and an appreciation of the issues associated with assessing its outcomes. Chapter 3 presents an integrative model in which the major areas of personnel psychology are illustrated as a network of sequential, interdependent decisions. The model then provides a structure for the rest of the book, as well as a conceptual framework from which to view the complex process of matching individuals and jobs.

In Chapter 4, we focus on one of the most persistent and critical problems in the field of talent management, that of developing and applying adequate performance criteria. A thorough understanding and appreciation of the criterion problem is essential, for it is relevant to all other areas of HRM, especially to performance management.

In Chapter 5, we examine current methods, issues, and problems associated with the performance management process, of which performance appraisal is a key component. The objective of performance management is to improve performance at the level of the individual or team every day.

The first part of the book presents fundamental concepts in applied measurement that underlie all employment decisions. Chapters 6 and 7 represent the core of personnel psychology—measurement and validation of individual differences. After comparing and contrasting physical and psychological measurement, we consider the requirements of good measurement (reliability and validity) and the practical interpretation and evaluation of measurement procedures. As a capstone to this part of the text, Chapter 8 is devoted entirely to a consideration of the issue of fairness in employment decisions. Taken together, Chapters 2 through 8 provide a sound basis for a fuller appreciation of the topics covered in the remainder of the book.

To provide a job-relevant basis for employment decisions, information on jobs, work, and workforce planning is essential. This is the purpose of Chapters 9 and 10. In Chapter 9, we examine work analysis (the study of the work to be done, the skills needed, and the training required of the individual jobholder). It is the touchstone for all employment decisions. In Chapter 10, we consider strategic workforce planning. The goal of a strategic workforce-planning system is to anticipate an organization’s future staffing requirements and, based on an inventory of present employees, to establish action programs (e.g., in recruitment, training, and deployment) to prepare individuals for future jobs. The chapter emphasizes tying current strategic workforce-planning theory to practice.

Chapters 11 through 14 are concerned with staffing—specifically, recruitment and selection. In Chapter 11, we consider the theoretical and practical aspects of recruitment, emphasizing both traditional and Internet-based strategies. Chapter 12 is the first of two chapters on selection methods. Its particular focus is on nontest techniques such as personal-history data and employment interviews. Chapter 13 is the second chapter on selection methods, with particular emphasis on managerial selection. Chapter 14 demonstrates how material from the previous three chapters can be integrated into alternative strategies for making selection decisions.

Chapters 15 and 16 focus on the design, implementation, and evaluation of training and development activities for individuals and teams. These topics have drawn special attention in HRM, especially in light of the need to develop skills continually in a dynamic business environment.

The last part of the book comprises Chapters 17 and 18. Chapter 17, “International Dimensions of Talent Management,” examines the effects of culture on many topics considered earlier in the book. Globalization implies more, not less, contact with cultures other than one’s own. Personnel psychology has much to contribute, from identifying international management potential early on to selecting, training, developing, and managing the careers of expatriates.

Finally, Chapter 18 addresses organizational responsibility and ethical issues in talent management and HRM. Responsible organizations consider the expectations of multiple stakeholders as well as the triple bottom line of economic, social, and environmental performance. As for ethical questions in talent management and HRM, there are no easy answers but public discussion of these questions is essential if genuine progress is to be made. Now that we have considered the “big picture,” let’s begin our treatment in Chapter 2 by examining the legal environment within which employment decisions are made.

Evidence-Based Implications for Practice

Organizations are all around us, but how we think about them has changed dramatically over time. Consider just a few such changes:

Product and service markets are global, 24/7/365. New, Internet-based organizations are “born global,” and countries and companies in every region of the world now compete against each other for talent. The result: global labor markets.

The influence of factors such as technology, notably digitization and the Internet, has changed the work and personal lives of millions of people.

Given the massive downsizing that has occurred worldwide in the past few years, the stability and predictability of the old psychological contract have given way to uncertainty, change, and the need for self-reliance.

The ability to work in teams is more important than ever, but those teams may be spread geographically all over the world. Cultural diversity has been woven into the very fabric of workplaces everywhere, spawning the need for information sharing, tolerance, and cultural understanding in order to prosper.

Massive demographic changes are taking place as populations age in developed countries and birth rates drop. This has led to gaps between the kinds of talent needed and the kinds of talent available.

High tech will never substitute for skill in managing a workforce. Inspirational leadership will always be in demand.

Leadership in the digital age is not about control, but comfort with uncertainty.

2 The Law and Talent Management

Wayne F. Cascio, Herman Aguinis

Learning Goals

By the end of this chapter, you will be able to do the following:

2.1 Describe the framework of the U.S. legal system

2.2 Describe alternative legal routes for complaints against an employer’s employment practices

2.3 Explain the two major legal theories of unfair employment discrimination

2.4 Understand the major legal principles that define key civil rights laws

2.5 Identify the six exemptions to Title VII coverage

2.6 Define sexual harassment and identify preventive steps employers should take

2.7 Know when you can and cannot justify “English-only” rules in the workplace

2.8 Understand how to prevent age-discrimination claims when downsizing or terminating workers for cause

Comprehensive employment-related legislation, combined with increased motivation on the part of individuals to rectify unfair employment practices, makes the legal aspects of employment among the most dominant issues in human resource management today. All three branches of the federal government have been actively involved in ongoing efforts to guarantee equal employment opportunity (EEO) as a fundamental individual right, regardless of race, color, age, gender, religion, national origin, or disability.

All aspects of the employment relationship, including initial screening, recruitment, selection, placement, compensation, training, promotion, and performance management, have been addressed by legislative and executive pronouncements and by legal interpretations from the courts. With growing regularity, I/O psychologists and HR professionals are being called on to work with attorneys, the courts, and federal regulatory agencies. It is imperative, therefore, to understand thoroughly the rights as well as obligations of individuals and employers under the law and to ensure that these are translated into everyday practice in accordance with legal guidelines promulgated by federal regulatory agencies. Affirmative action involves a proactive examination of whether equality of opportunity exists. If it does not, a plan is implemented for taking concrete measures to eliminate the barriers and to establish true equality (Society for Human Resource Management, 2016b). Affirmative action has become a fact of modern organizational life. To ignore it is to risk serious economic, human, and social costs.

Every public opinion poll based on representative national samples drawn between 1950 and the present shows that a majority of Americans—black, brown, and white—support EEO and reject differential treatment based on race, regardless of its alleged purposes or results. There is agreement about the ends to be achieved, but there is disagreement about the means to be used (Von Drehle, 2003). EEO has been, and is still, an emotionally charged issue. Congress has provided sound legal bases for effecting changes in EEO through sweeping civil rights legislation. Subsequently, thousands of dissatisfied groups and individuals have won substantial redress on many issues by availing themselves of their legal rights. The combination of the motivation to rectify perceived inequities and an easily available legal framework for doing so has made the legal aspects of the employment relationship a dominant issue in HRM today.

It is imperative, therefore, that I/O psychologists and HR professionals understand the rights and obligations of individuals and employers in this most delicate area. They must be able to work with attorneys (and vice versa), for neither can succeed alone. Each group has a great deal to contribute in order to identify vulnerable employment policies and practices, to make required adjustments in them, and thus to minimize the likelihood of time-consuming and expensive litigation. Let’s begin, therefore, with an overview of the legal system, legal terminology, important laws and court decisions, and underlying legal and scientific issues.

The U.S. Legal System

Above the complicated network of local, state, and federal laws, the U.S. Constitution stands as the supreme law of the land. Certain powers and limitations are prescribed to the federal government by the Constitution; those powers not given to the federal government are considered to be reserved for the states. The states, in turn, have their own constitutions that are subject to, and must remain consistent with, the U.S. Constitution.

Whereas certain activities are regulated exclusively by the federal government (e.g., interstate commerce), other areas are subject to concurrent regulation by federal and state governments (e.g., equal employment opportunity). It should be emphasized, however, that in the event of a conflict between a state law and the U.S. Constitution (or the laws enacted by Congress in accordance with it), the federal requirements take precedence. Thus, any state or local law that violates the Constitution or federal law is, in effect, unconstitutional. Therefore, it is no defense to argue that one is acting according to such a state or local law.

The legislative branch of government (Congress) enacts laws, called statutes, which are considered primary authority. Court decisions and the decisions and guidelines of regulatory agencies are not laws, but interpretations of laws for given situations in which the law is not specific. Nevertheless, these interpretations form a complex fabric of legal opinion and precedent that must be given great deference by the public.

Let’s consider the judicial system, one of the three main branches of government (along with the executive and legislative branches), more closely. The judicial power of the United States is vested “in one Supreme Court and in such inferior courts as Congress may from time to time ordain and establish” according to Article III of the Constitution. The system of “inferior” (i.e., lower) courts includes the U.S. district courts, the federal trial courts in each state. These courts hear cases that fall under federal jurisdiction, usually either cases between citizens of different states or cases relevant to the Constitution or federal law.

Decisions of these lower federal courts may be appealed to 1 of 12 U.S. courts of appeals, corresponding to the geographic region or “circuit” in which the case arose (see Figure 2.1). In turn, these courts’ decisions may be appealed to the U.S. Supreme Court—not as a matter of right, but only when the Supreme Court feels that the case warrants a decision at the highest level. Generally, the Supreme Court will grant certiorari (review) when two or more circuit courts have reached different conclusions on the same point of law or when a major question of constitutional interpretation is involved. If the Supreme Court denies a petition for a writ of certiorari, then the lower court’s decision is binding.

Legal Systems Outside the United States

It is beyond the scope of this chapter to examine comparative legal systems or comparative employment law. At the same time, I/O psychologists and HR professionals might find useful perspectives from 22 countries on the legal environment for staffing (Myors et al., 2008a, 2008b). Those perspectives address issues such as (a) whether racial, ethnic, or religious subgroups are viewed as “disadvantaged,” (b) whether research supports mean differences between groups on individual difference measures relevant to job performance, (c) whether there are laws prohibiting discrimination against specific groups, (d) the evidence required to make and refute a claim of discrimination, (e) the consequences of violation of the laws, (f) whether particular selection methods are limited or banned, (g) whether preferential treatment of members of disadvantaged groups is permitted, and (h) whether the practice of I/O psychology has been affected by the legal environment. Of course, it is always wise to seek professional legal advice on specific questions relevant to any given country.

Unfair Discrimination: What Is It?

No law has ever attempted to define precisely the term discrimination. However, in the employment context, it can be viewed broadly as the giving of an unfair advantage (or disadvantage) to the members of a particular group in comparison to the members of other groups. The disadvantage usually results in a denial or restriction of employment opportunities or in an inequality in the terms or benefits of employment.

Whenever there are more candidates than available positions, it is necessary to select some candidates in preference to others. Selection implies exclusion. As long as the exclusion is based on what can be demonstrated to be job-related criteria, however, that kind of discrimination is entirely proper. It is only when candidates are excluded on a prohibited basis not related to the job (e.g., age, race, gender, or disability) that unlawful and unfair discrimination exists. Despite federal and state laws on these issues, they represent the basis of an enormous volume of court cases, indicating that stereotypes and prejudices do not die quickly or easily. Discrimination is a subtle and complex phenomenon that may assume two broad forms (see Figure 2.3):

Unequal (disparate) treatment is based on an intention to discriminate, including the intention to retaliate against a person who opposes discrimination, who has brought charges, or who has participated in an investigation or hearing. There are three major subtheories of discrimination within the disparate treatment theory:

(a) Cases that rely on direct evidence of the intention to discriminate. Such cases are proven with direct evidence of pure bias based on an open expression of hatred, disrespect, or inequality, knowingly directed against members of a particular group. For example, a blanket exclusionary policy might deliberately exclude from employment an individual whose disability (e.g., an impairment of her ability to walk) has nothing to do with the requirements of the job she is applying for (financial analyst).

(b) Cases that are proved through circumstantial evidence of the intention to discriminate (see Schwager v. Sun Oil Co. of Pa., 1979), including those that rely on statistical evidence as a method of circumstantially proving the intention to discriminate systematically against classes of individuals.

(c) Mixed-motive cases (a hybrid theory) that often rely on both direct evidence of the intention to discriminate on some impermissible basis (e.g., gender, race, or disability) and proof that the employer’s stated legitimate basis for its employment decision is just a pretext for illegal discrimination.

Adverse impact (unintentional) discrimination occurs when identical standards or procedures are applied to everyone, even though they lead to a substantial difference in employment outcomes (e.g., selection, promotion, and layoffs) for the members of a particular group and they are unrelated to success on a job. An example is the use of a minimum height requirement of 5 feet, 8 inches for police cadets. This requirement would have an adverse impact on Asians, Hispanics, and women. The policy is neutral on its face, but it has an adverse impact. To use it, an employer would need to show that applicants must meet the height requirement in order to be able to perform the job.

Legal Framework for Civil Rights Requirements

Employers in the public and private sectors, employment agencies, unions, and joint labor–management committees controlling apprentice programs are subject to the various nondiscrimination laws. Government contractors and subcontractors are subject to executive orders. Presidential executive orders have the force of law even though they are issued unilaterally by the president, without congressional approval. They can be altered unilaterally as well. Many business organizations are employers as well as government contractors and, therefore, are directly subject both to nondiscrimination laws and to executive orders. It is beyond the scope of this chapter to analyze all the legal requirements pertaining to EEO, but HR professionals should at least understand the major legal principles as articulated in the following federal laws of broad scope:

The U.S. Constitution—Thirteenth and Fourteenth Amendments

Civil Rights Acts of 1866 and 1871

Equal Pay Act of 1963

Title VII of the Civil Rights Act of 1964 (as amended by the Equal Employment Opportunity Act of 1972)

Age Discrimination in Employment Act of 1967 (as amended in 1986)

Immigration Reform and Control Act of 1986

Americans with Disabilities Act of 1990 (as amended in 2008)

Civil Rights Act of 1991

Family and Medical Leave Act of 1993

Uniformed Services Employment and Reemployment Rights Act of 1994

The U.S. Constitution—Thirteenth and Fourteenth Amendments

The Thirteenth Amendment prohibits slavery and involuntary servitude. Any form of discrimination may be considered an incident of slavery or involuntary servitude, and thus liable to legal action under this amendment. The Fourteenth Amendment guarantees equal protection of the law for all citizens. Both the Thirteenth and Fourteenth Amendments granted Congress the constitutional power to enact legislation to enforce their provisions. It is from this source of constitutional power that all subsequent civil rights legislation originates.

Civil Rights Acts of 1866 and 1871

These laws were enacted based on the provisions of the Thirteenth and Fourteenth Amendments. The Civil Rights Act of 1866 grants all citizens the right to make and enforce contracts for employment, and the Civil Rights Act of 1871 grants all citizens the right to sue in federal court if they feel they have been deprived of any rights or privileges guaranteed by the Constitution and laws. It applies only to “persons within the jurisdiction of the United States” and does not extend to discriminatory conduct occurring overseas (Peikes & Mitchell, 2006).

Until recently, both of these laws were viewed narrowly as tools for Reconstruction-era racial problems. This is no longer so. In Johnson v. Railway Express Agency (1975), the Supreme Court held that although Section 1981 of the Civil Rights Act of 1866 on its face relates primarily to racial discrimination in the making and enforcement of contracts, it also provides a federal remedy against discrimination in private employment on the basis of race. It is a powerful remedy. The Civil Rights Act of 1991 amended the Civil Rights Act of 1866 so that workers are protected from intentional discrimination in all aspects of employment, not just hiring and promotion. The Civil Rights Act of 1866 allows for jury trials and for compensatory and punitive damages1 for victims of intentional racial and ethnic discrimination, and it covers both large and small employers, even those with fewer than 15 employees. The Supreme Court has ruled that employees are permitted to sue for retaliation under this law (Smith, 2008).

1 Punitive damages are awarded in civil cases to punish or deter a defendant’s conduct. They are separate from compensatory damages, which are intended to reimburse a plaintiff for injuries or harm.

The 1866 law also has been used to broaden the definition of racial discrimination originally applied to blacks. In a unanimous decision, the Supreme Court ruled in 1987 that race was equated with ethnicity during the legislative debate after the Civil War, and, therefore, Arabs, Jews, and other ethnic groups thought of as “white” are not barred from suing under the 1866 law. The Court held that Congress intended to protect identifiable classes of persons who are subjected to intentional discrimination solely because of their ancestry or ethnic characteristics. Under the law, therefore, race involves more than just skin pigment (“Civil Rights Statutes Extended,” 1987).

Equal Pay for Equal Work Regardless of Sex

Equal Pay Act of 1963

This Act was passed as an amendment to the Fair Labor Standards Act (FLSA) of 1938. For those employers already subject to the FLSA, the Equal Pay Act requires that men and women working for the same establishment be paid the same rate of pay for work that is substantially equal in skill, effort, responsibility, and working conditions. Pay differentials are legal and appropriate if they are based on seniority, merit, systems that measure the quality or quantity of work, or any factor other than sex (e.g., shift differentials, completion of a job-related training program).

The Equal Employment Opportunity Commission (EEOC) administers the Equal Pay Act, the first in a series of federal civil rights laws passed during the 1960s. Wages withheld in violation of its provisions are viewed as unpaid minimum wages or unpaid overtime compensation under the FLSA. The EEOC receives about 1,000 equal-pay complaints per year, and, in 2016, it won $8.1 million for aggrieved individuals, excluding monetary benefits obtained through litigation (EEOC, 2017d). For individual companies, the price can be quite high, because in correcting any inequity under the act, a company must ordinarily raise the lower rate. In 2011, for example, Novartis Pharmaceutical Corporation settled a sex-discrimination lawsuit for $152.5 million (Society for Human Resource Management, 2011).

Equal Pay for Jobs of Comparable Worth

When women dominate an occupational field (such as nursing or secretarial work), the rate of pay for jobs in that field tends to be lower than the pay that men receive when they are the dominant incumbents (e.g., in construction or skilled trades). Is the market biased against jobs held mostly by women? Should jobs dominated by women and jobs dominated by men be paid equally if they are of “comparable” worth to an employer? Answering the latter question involves the knotty problem of how to make valid and accurate comparisons of the relative worth of unlike jobs. The key difference between the Equal Pay Act and the comparable-worth standard is this: The Equal Pay Act requires equal pay for men and women who do work that is substantially equal. Comparable worth would require equal pay for work of equal value to an employer (e.g., librarian and electrician).

Here is the crux of the issue: Are women underpaid for their work, or do they merely hold those jobs that are worth relatively less? Existing federal laws do not support the comparable-worth standard. However, several states and cities have enacted laws that require a comparable-worth standard for public employees (Newman, Gerhart, & Milkovich, 2016).

It shall be an unlawful employment practice for an employer—(1) to fail or to 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 individual’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.

Note that race and color are not synonymous. Under federal law discriminating against people because of the shade of their skin—so-called intra-race or appearance discrimination—is distinct from, but just as illegal as, racial discrimination. For example, whites can be guilty of color discrimination, but not racial discrimination, if they favor hiring light-skinned over dark-skinned blacks. This issue is growing in importance as the sheer number of racial blends increases (EEOC, 2017e).

Retaliation, and Employment Advertising

Title VII, Section 704(a), prohibits discrimination against an employee or applicant because he or she has opposed an unlawful employment practice or made a charge, testified, assisted, or participated in a Title VII investigation, proceeding, or hearing. This is retaliation. As defined by the EEOC in 2016: Federal EEO laws prohibit employers, employment agencies, or unions from punishing applicants or employees for asserting their rights to be free from employment discrimination, including harassment. Asserting EEO rights is called “protected activity” (EEOC, 2016b).

Retaliation claims, which account for more than two of every five claims filed with the EEOC, have now surpassed racial discrimination as the most common type of claim made. According to the EEOC, the vast majority of retaliation claims generally involve actions such as discharge and suspension (Smith, 2016a).

Finally, Section 704(b) prohibits notices or advertisements relating to employment from indicating any preference, limitation, specification, or discrimination on any of the prohibited factors unless it is in relation to a bona fide occupational qualification (see the “Exemptions to Title VII Coverage” section).

In 1973, the Equal Employment Opportunity Act expanded Title VII’s coverage to public and private employers (including state and local governments and public and private educational institutions) with 15 or more employees, labor organizations with 15 or more members, and both public and private employment agencies. These amendments provide broad coverage under Title VII, with the following exceptions: (a) private clubs, (b) places of employment connected with an Indian reservation, and (c) religious organizations (which are allowed to discriminate because of religion) (Title VII, Sections 701[a], 702, and 703[i]). The U.S. Office of Personnel Management and the Merit Systems Protection Board, rather than the EEOC, monitor nondiscrimination and affirmative action programs of the federal government.

Suspension of Government Contracts and Back-Pay Awards

Two other provisions of the 1973 law are noteworthy. First, denial, termination, or suspension of government contracts is proscribed (without a special hearing) if an employer has and is following an affirmative action plan accepted by the federal government for the same facility within the past 12 months. Second, back-pay awards in Title VII cases are limited to two years prior to the filing of a charge. Thus, if a woman filed a Title VII charge in 2014, but the matter continued through investigation, conciliation, trial, and appeal until 2018, she might be entitled to as much as six years of back pay, from 2012 (two years prior to the filing of her charge) to 2018 (assuming the matter was resolved in her favor).

Exemptions to Title VII Coverage

In addition to its basic objective of protecting the members of various subgroups against discrimination in employment, Title VII extends the prohibition against sex discrimination to all aspects of the employment relationship. At the same time, it contains several specific exemptions (see Figure 2.4), described in the sections that follow. Initially it appeared that these exemptions would significantly blunt the overall impact of the law. However, it soon became clear that they would be interpreted very narrowly both by the EEOC and by the courts.