Module 4 Assignment: Performance Diagnosis


Managing Human Resources

18th Edition

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

SCOTT A. SNELL SHAD S. MORRIS Professor of Business Administration, Associate Professor of Management, University of Virginia Brigham Young University

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Managing Human Resources, Eighteenth Edition Scott Snell and Shad Morris

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Brief Contents

Part 1 Human Resources Management in Perspective 1 The Rewards and Challenges of Human Resources Management 1

2 Strategy and Human Resources Planning 38

Part 2 Meeting Human Resources Requirements 3 Equal Employment Opportunity and Human Resources Management 84

4 Job Analysis and Job Design 121

Part 3 Developing Effectiveness in Human Resources 5 Expanding the Talent Pool: Recruitment and Careers 152

6 Employee Selection 205

7 Training and Development 241

8 Performance Management 279

Part 4 Implementing Compensation and Security 9 Managing Compensation 318

10 Pay-for-Performance: Incentive Rewards 356

11 Employee Benefits 385

12 Promoting Safety and Health 416

Part 5 Enhancing Employee-Management Relations 13 Employees Rights and Discipline 448

14 The Dynamics of Labor Relations 481

Part 6 Expanding Human Resources Management Horizons 15 International Human Resources Management 515

16 Implementing HR Strategy: High-Performance Work Systems 556

Integrative Cases 585

Glossary 611

Name Index 622

Organization Index 624

Subject Index 627

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Part 1 Human Resources Management in Perspective Chapter 1 The Rewards and Challenges of

Human Resources Management 1 1.1 Why Should You Study Human Resources Management? Will It Pay Off? 2

1.1a Human Capital and Organizational Culture 3

1.2 Strategic and Global Challenges 5 1.2a Responding Strategically to Changes and Disruptions in the Marketplace 5 1.2b Competing, Recruiting, and Staffing Globally 7 1.2c Setting and Achieving Corporate Social Responsibility and Sustainability Goals 9

1.3 Technology Challenges 10

Highlights in HRM 1: Factors to Consider When Evaluating a Human Resources Information System 14

1.4 Productivity and Cost Challenges 15 1.4a Maximizing Productivity 15 1.4b Managing the Size of the Workforce 15 1.4c Managing Pay and Benefits 16

1.5 Employee Challenges 18 1.5a Responding to the Demographic and Diversity Challenges

of the Workforce 18 1.5b Educational Shifts Affecting the Workforce 23 1.5c Adapting to Cultural and Societal Changes

Affecting the Workforce 24

1.6 The Role HR Managers Play and Their Partnership with Other Managers 27 1.6a Responsibilities of Human Resource Managers 28 1.6b Competencies Human Resource Managers Require 29

Highlights in HRM 2: SHRM Code of Ethical and Professional Standards in Human Resource Management 30

Summary 32

Key Terms 33

Discussion Questions 33

Case Study 1: New HR Strategy Makes Lloyd’s a “Best Company” 34

Case Study 2: Shell’s Top Recruiter Takes His Cues from Marketing 34

Notes and References 36


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Chapter 2 Strategy and Human Resources Planning 38 2.1 Strategic Planning and Human Resources Planning 39

2.1a Strategic Planning and HR Planning: Linking the Processes 40

2.2 Step One: Mission, Vision, and Values 42 2.2a Developing a Mission Statement 42 2.2b HR’s Role in Establishing and Reinforcing a Firm’s Mission,

Vision, and Values 43

2.3 Step Two: External Analysis 43 2.3a The Business Environment 44 2.3b The Competitive Environment 45 2.3c HR’s External Analysis 48

Highlights in HRM 1: HRM Metrics 50

2.4 Step Three: Internal Analysis 50 2.4a Core Capabilities 51 2.4b Sustaining a Competitive Advantage

Through People 52 2.4c Types of Talent and Their Composition

in the Workforce 52 2.4d Corporate Culture 54 2.4e Forecasting 56

Highlights in HRM 2: HR Planning and Strategy Questions to Ask Business Managers 58

2.4f Assessing a Firm’s Human Capital Readiness: Gap Analysis 61

Highlights in HRM 3: Succession-Planning Checklist 62

2.5 Step Four: Formulating a Strategy 64 2.5a Corporate Strategy 64 2.5b Business Strategy 66 2.5c HR Strategy 67

2.6 Step Five: Executing a Firm’s Strategy 67 2.6a HR’s Role in Strategy Execution 69

2.7 Step Six: Evaluation 70 2.7a Evaluating a Firm’s Strategic Alignment 70

Summary 73

Key Terms 74

Discussion Questions 74

HRM Experience: Customizing HR for Different Types of Human Capital 75

Case Study 1: How a Strategy Change Led to Nike’s Formation 75

Case Study 2: Domino’s Tries to Get Its Strategic Recipe Right 76

Notes and References 78

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vi Contents

Appendix: Calculating Employee Turnover and Absenteeism 80

A.1 Employee Turnover Rates 80 A.1a Computing the Turnover Rate 80 A.1b Determining the Costs of Turnover 81

A.2 Employee Absenteeism Rates 81 A.2a Computing Absenteeism Rates 81

Highlights in HRM 4: Costs Associated with the Turnover of One Computer Programmer 82 A.2b Comparing Absenteeism Data 82 A.2c Costs of Absenteeism 83 A.2d Absenteeism and HR Planning 83

Part 2 Meeting Human Resources Requirements Chapter 3 Equal Employment Opportunity

and Human Resources Management 84 3.1 Historical Perspective of EEO Legislation 86

3.1a Changing National Values 86 3.1b Early Legal Developments 87

3.2 Government Regulation of Equal Employment Opportunity 88

Highlights in HRM 1: Test Your Knowledge of Equal Employment Opportunity Law 89 3.2a Major Federal Laws 89 3.2b Other Federal Laws and Executive Orders 97 3.2c Fair Employment Practice Laws 98

3.3 Other Equal Employment Opportunity Issues 98 3.3a Sexual Harassment 98

Highlights in HRM 2: Questions Used to Audit Sexual Harassment in the Workplace 100

3.3b Sexual Orientation 100 3.3c Immigration Reform and Control 102 3.3d Emerging Employment Discrimination Issues 102

3.4 Uniform Guidelines on Employee Selection Procedures 104

3.5 Enforcing Equal Employment Opportunity Legislation 106 3.5a Record-Keeping and Posting Requirements 106 3.5b Processing Discrimination Charges 106

Highlights in HRM 3: EEOC Poster Supplement for 2016 107 3.5c Preventing Discrimination Charges 109

3.6 Affirmative Action and Diversity Management 109 3.6a Court Decisions 110

Highlights in HRM 4: Basic Steps in Developing an Effective Affirmative Action Program 111

3.6b Beyond Affirmative Action: Leveraging Diversity 112

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Highlights in HRM 5: Embracing Diversity and Leveraging Employee Differences 113

Summary 113

Key Terms 114

Discussion Questions 114

Case Study 1: Going to the Dogs 115

HRM Experience: Sexual Harassment: A Frank Discussion 116

Case Study 2: Misplaced Affections: Discharge for Sexual Harassment 116

Notes and References 118

Appendix: Determining Adverse Impact 120 A.1 The Four-Fifths Rule 120

Chapter 4 Job Analysis and Job Design 121 4.1 What Is a Job Analysis and How Does It Affect

Human Resources Management? 123 4.1a Major Parts of the Job Analysis 125

4.2 Sources of Job Analysis Information 126 4.2a Controlling the Accuracy of the Job Data Collected 126 4.2b Other Sources of Job Analysis Information 126

Highlights in HRM 1: Job Analysis Interview Questions 127 4.2c Parts of a Job Description 130

Highlights in HRM 2: An Example of a Job Description 132 4.2d Writing Clear and Specific Job Descriptions 133

4.3 Job Design 133 4.3a Ergonomics 134 4.3b Enrichment 135

Highlights in HRM 3: Empowered Employees Achieve Results 138

4.4 Employee Teams and Flexible Work Schedules 139 4.4a Employee Teams 139 4.4b Flexible Work Schedules 143

Summary 146

Key Terms 146

HRM Experience: Establishing Ground Rules for a Team’s Success 147

Discussion Questions 147

Case Study 1: The Zappos Experiment 148

Case Study 2: Are Firms Moving Away from Telecommuting? 149

Notes and References 150

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viii Contents

Part 3 Developing Effectiveness in Human Resources Chapter 5 Expanding the Talent Pool: Recruitment and Careers 152

5.1 Business Strategies and Their Link to Strategic Recruiting 153 5.1a Elements of a Recruiting Strategy 153

Highlights in HRM 1: Marriott’s Recruitment Principles: Living Up to the Employment Brand 156

5.2 External and Internal Recruiting Methods 159 5.2a External Recruiting Methods 159

Highlights in HRM 2: Making Employee Referral Programs Work 164

Highlights in HRM 3: Making Your Internship Program a Success 166 5.2b Internal Recruiting Methods 168

Highlights in HRM 4: Is a Worker an Independent Contractor—or Not? 169

5.3 Improving the Effectiveness of Recruiting 171 5.3a Using Realistic Job Previews 171 5.3b Surveys and Employee Profiles 172 5.3c Recruiting Metrics 172 5.3d Retention: How Do We Keep Our Talent? 175

5.4 Career Management: Developing Talent over Time 176 5.4a The Goal: Matching the Needs of the Organization to the Needs of Employees 176 5.4b Identifying Career Opportunities and Requirements 178

Highlights in HRM Box 5: Career Path of Jeff Bezos, Founder of 180 5.4c Career Development Initiatives 183

Highlights in HRM 6: Myths about Mentors 184

Highlights in HRM 7: Establishing a Relationship with a Mentor 185

5.5 Developing a Diverse Talent Pool 186 5.5a Women 187 5.5b Minorities 189 5.5c People Who Are Disabled 189

Highlights in HRM 8: Tips for Enhancing a Firm’s Diversity 190 5.5d Veterans 191 5.5e Older Employees 191

Summary 192

Key Terms 193

Discussion Questions 193

HRM Experience: Career Management 194

Case Study 1: A Lifecycle Approach to Talent 194

Case Study 2: Homegrown Talent: Mary Barra Rises to GM’s Top Post 195

Notes and References 196

Appendix: Personal Career Development 199 A.1 Developing Personal Skills and Competencies 199

A.2 Choosing a Career 199

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A.3 Self-Evaluation 199

Highlights in HRM 9: “Must Have” Career Competencies 200 A.3a Interest Inventories 200 A.3b Informational Interviews, Job Shadowing, and Internships 201

A.4 Choosing an Employer 202

A.5 Consider the Boundaryless Career 202

A.6 Keeping Your Career in Perspective 202

Highlights in HRM 10: Questions to Ask Yourself Before You Accept a Job 203

A.6a Developing Off-the-Job Interests 203 A.6b Balancing Marital and/or Family Life 203 A.6c Planning for Retirement 204

Key Terms 204

Notes and References 204

Chapter 6: Employee Selection 205 6.1 Overview of the Selection Process 206

6.1a Begin with a Job Analysis 207 6.1b Steps in the Selection Process 207 6.1c Obtaining Reliable and Valid Information 207

6.2 Initial Screening 208 6.2a Initial Screening Methods 208

Highlights in HRM 1: What to Include—and Not to Include—on a Job Application Form 212

6.3 Employment Interviews 212 6.3a Types of Interviews 213 6.3b Methods for Administering Interviews 214

Highlights in HRM 2: Sample Situational Interview Question 215

Highlights in HRM 3: Hiring Managers Reveal Mistakes Candidates Make during Job Interviews 216

6.3c Diversity Management: Could Your Questions Get You into Legal Trouble? 217

6.4 Post-Interview Screening 217 6.4a Reference Checks 217

Highlights in HRM 4: Appropriate and Inappropriate Interview Questions 218 6.4b Background Checks 218

Highlights in HRM 5: Sample Reference-Checking Questions 219

6.5 Preemployment Tests 220 6.5a Types of Tests 221 6.5b Determining the Validity of Tests 227

6.6 Reaching a Selection Decision 229 6.6a Summarizing Information about Applicants 229 6.6b Decision-Making Strategy 231 6.6c Final Decision 233

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Summary 234

Key Terms 235

Discussion Questions 235

HRM Experience: Designing Selection Criteria and Methods 236

Case Study 1: Job Candidate Assessment Tests Go Virtual 236

Case Study 2: Pros and Cons of Cleaning Up the “Resu-mess” 237

Notes and References 238

Chapter 7 Training and Development 241 7.1 The Scope of Training 242

7.1a A Strategic Approach to Training 243

7.2 Phase 1: Conducting the Needs Assessment 244 7.2a Organization Analysis 245 7.2b Task Analysis 246 7.2c Person Analysis 247

7.3 Phase 2: Designing the Training Program 247 7.3a Developing Instructional Objectives 247

Highlights in HRM 1: A Competency Assessment for a Managerial Position 248 7.3b Assessing the Readiness and Motivation of Trainees 248 7.3c Incorporating the Principles of Learning 249 7.3d Characteristics of Instructors 252

7.4 Phase 3: Implementing the Training Program—Training Delivery Methods 253

7.5 Additional Training and Development Programs 262 7.5a Orientation and Onboarding 262

Highlights in HRM 2: Checklist for Orienting New Employees 263 7.5b Basic Skills Training 264 7.5c Team Training 264 7.5d Cross-Training 266 7.5e Ethics Training 267 7.5f Diversity and Inclusion Training 267

7.6 Phase 4: Evaluating the Training Program 268 7.6a Criterion 1: Reactions 269 7.6b Criterion 2: Learning 269 7.6c Criterion 3: Behavior 269 7.6d Criterion 4: Results, or Return on Investment (ROI) 270

Highlights in HRM 3: Benchmarking HR Training 271

Summary 271

Key Terms 272

Discussion Questions 272

HRM Experience: Training and Learning Principles 273

Case Study 1: Whirlpool Mixes Up Its Managerial Training: Closed-Looped Method Brings Learning Full Circle 273

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Case Study 2: Loews Hotels: Training for Four-Diamond Service and More 274

Notes and References 275

Chapter 8 Performance Management 279 8.1 Performance Management Systems 280

8.1a The Purposes of Performance Management 280 8.1b Why Performance Management Systems Sometimes Fail 282

8.2 Developing an Effective Performance Management System 284 8.2a What Are the Performance Standards? 284 8.2b Do Your Performance Reviews Comply with the Law? 287 8.2c Sources of Performance Review Information 288 8.2d Putting It All Together: 360-Degree Evaluations 290 8.2e Training Appraisers 291

8.3 Performance Review Methods 295

Highlights in HRM 1: Supervisor’s Checklist for a Formal Performance Review Meeting 296 8.3a Trait Methods 296

Highlights in HRM 2: A Graphic Rating Scale with Comments 297

Highlights in HRM 3: Example of a Mixed-Standard Scale 298 8.3b Behavioral Methods 298 8.3c Results Methods 299

Highlights in HRM 4: BARS and BOS Examples 300

Highlights in HRM 5: A Balanced Scorecard that Translates to a Personal Scorecard 302 8.3d Which Performance Review Method Should You Use? 302

8.4 Performance Review Meetings and Feedback Sessions 303 8.4a Types of Performance Review Meetings and Feedback Sessions 304 8.4b Conducting the Performance Review Meeting

or Feedback Session 304 8.4c Improving Performance 307

Summary 309

Key Terms 310

Discussion Questions 310

HRM Experience: Performance Diagnosis 311

Case Study 1: Adobe Ditches Formal Performance Reviews—And Wants to Help Other Companies Do So Too 311

Case Study 2: “Project Oxygen” Resuscitates Google’s Poor-Performing Bosses 313

Notes and References 314

Part 4 Implementing Compensation and Security Chapter 9 Managing Compensation 318

9.1 What Is Compensation? 319

9.2 Strategic Compensation 320

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9.2a Linking Compensation to Organizational Objectives 321 9.2b The Pay-for-Performance Standard 323 9.2c The Bases for Compensation 326

9.3 Compensation Design—The Pay Mix 326 9.3a Internal Factors 327

Highlights in HRM 1: Comparison of Compensation Strategies 330 9.3b External Factors 330

9.4 Job Evaluation Systems 333 9.4a Job Ranking System 333 9.4b Job Classification System 333 9.4c Point System 334 9.4d Work Valuation 335 9.4e Job Evaluation for Management Positions 335

9.5 Compensation Implementation—Pay Tools 336 9.5a Wage and Salary Surveys 336

Highlights in HRM 2: Bureau of Labor Statistics National Compensation Survey 337 9.5b The Wage Curve 340 9.5c Pay Grades 340 9.5d Rate Ranges 341 9.5e Competence-Based Pay 343

9.6 Government Regulation of Compensation 344

Highlights in HRM 3: Minimum Wage Laws in the States 345

Highlights in HRM 4: Worldwide Minimum Wages 346

Highlights in HRM 5: The Federal Wage Poster 347

9.7 Compensation Assessment 348

Summary 350

Key Terms 350

HRM Experience: Why This Salary? 351

Discussion Questions 351

Case Study 1: Pay Decisions at Performance Sports 352

Case Study 2: An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay 352

Notes and References 353

Chapter 10 Pay-for-Performance: Incentive Rewards 356 10.1 Strategic Reasons for Incentive Plans 357

10.1a Incentive Plans as Links to Organizational Objectives 358 10.1b Requirements for a Successful Incentive Plan 359

10.2 Setting Performance Measures 360

Highlights in HRM 1: Setting Performance Measures—The Keys 361

10.3 Administering Incentive Plans 361

10.4 Individual Incentive Plans 362 10.4a Piecework 362

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10.4b Standard Hour Plan 363 10.4c Bonuses 363 10.4d Merit Pay 364 10.4e Incentive Awards and Recognition 365

Highlights in HRM 2: Lessons Learned: Designing Effective Team Incentives 367 10.4f Sales Incentives 368

10.5 Group Incentive Plans 369 10.5a Team Compensation 370 10.5b Gainsharing Incentive Plans 370

10.6 Enterprise Incentive Plans 372 10.6a Profit Sharing Plans 372 10.6b Stock Options 373 10.6c Employee Stock Ownership Plans 373

Highlights in HRM 3: How Stock Option Plans Work 374

10.7 Incentives for Professional Employees 375

10.8 Incentives for Executives 376 10.8a The Executive Pay Package 376 10.8b Executive Compensation: Ethics and Accountability 378 10.8c Executive Compensation Reform 379

Summary 379

Key Terms 380

Discussion Questions 380

HRM Experience: Awarding Salary Increases 381

Case Study 1: United States Auto Industry Back on Top … of CEO Pay 381

Case Study 2: Team-Based Incentives: Not Your Usual Office 382

Notes and References 383

Chapter 11 Employee Benefits 385 11.1 Elements of a Successful Benefits Program 386

11.1a Selecting Benefits 387 11.1b Administering Benefits 388 11.1c Communicating Employee Benefits 388

11.2 Employee Benefits Required by Law 394 11.2a Social Security Insurance 394

Highlights in HRM 1: A Personalized Statement of Benefits Costs 395

Highlights in HRM 2: Who Is Eligible to Collect Disability Payments under the Social Security Act? 397

11.2b Unemployment Insurance 397 11.2c Workers’ Compensation Insurance 398 11.2d COBRA Insurance 398 11.2e Benefits Provided by the Patient Protection

and Affordable Care Act 399

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11.2f Benefits Provided under the Family and Medical Leave Act 399

Highlights in HRM 3: Your Rights under the Family and Medical Leave Act 401

11.3 Work-Life Discretionary Benefits 402 11.3a Child and Elder Care 402 11.3b Payment for Time Not Worked 403 11.3c Life Insurance 405 11.3d Long-Term Care Insurance 406 11.3e Other Benefits and Services 406 11.3f Pension Plans 407 11.3g Domestic Partner Benefits 410

Summary 410

Key Terms 411

Discussion Questions 411

HRM Experience: Understanding Employer Benefit Programs 412

Case Study 1: Adobe’s Family-Friendly Benefits: An Unexpected Backlash 412

Case Study 2: Evaluate the Work-Life Climate in Your Company 413

Notes and References 414

Chapter 12 Promoting Safety and Health 416 12.1 Safety and Health: It’s the Law 417

12.1a OSHA’s Coverage 417 12.1b OSHA Standards 417 12.1c Enforcing OSHA Standards 420 12.1d OSHA Consultation Assistance 422 12.1e Responsibilities and Rights under OSHA 422

Highlights in HRM 1: What Are My Responsibilities under the OSH Act? 424

12.2 Promoting a Safe Work Environment 425 12.2a Creating a Culture of Safety 425 12.2b Enforcing Safety Rules 426 12.2c Investigating and Recording Accidents 426

Highlights in HRM 2: Test Your Safety Smarts 427 12.2d Safety Hazards and Issues 427

Highlights in HRM 3: Emergency Readiness Checklist 432

12.3 Creating a Healthy Work Environment 433 12.3a Ergonomics 433 12.3b Health Hazards and Issues 433

Highlights in HRM 4: Job Safety and Health Protection Poster 434 12.3c Building Better Physical and Emotional

Health among Employees 438

Summary 442

Key Terms 443

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Discussion Questions 443

Case Study 1: Rambo Goes Violent 444

Case Study 2: Too Much Fatigue and Stress? You Decide 444

Notes and References 445

Part 5 Enhancing Employee-Management Relations Chapter 13 Employees Rights and Discipline 448

13.1 Employee Rights and Privacy 449 13.1a Employee Rights versus Employer Responsibilities 449 13.1b Negligent Hiring 450 13.1c Job Protection Rights 450

Highlights in HRM 1: Examples of Employment-at-Will Statements 456 13.1d Privacy Rights 457 13.1e Digital Surveillance 459

13.2 Disciplinary Policies and Procedures 466 13.2a The Result of Inaction 466 13.2b Setting Organizational Rules 467 13.2c Investigating a Disciplinary Problem 467 13.2d Approaches to Disciplinary Action 469 13.2e Discharging Employees 470 13.2f Alternative Dispute Resolution Procedures 472

13.3 Managerial Ethics in Employee Relations 475

Summary 475

Key Terms 476

Discussion Questions 476

Case Study 1: Discharged for Off-Duty Behavior 476

Case Study 2: You Can’t Fire Me! Check Your Policy 477

Notes and References 478

Chapter 14 The Dynamics of Labor Relations 481 14.1 The Labor Relations Process 482

14.1a Why Employees Unionize 484 14.1b Challenges of Unions to Management 486 14.1c Union Avoidance Practices 486 14.1d Organizing Campaigns 487

Highlights in HRM 1: Test Your Labor Relations Know-How 490

Highlights in HRM 2: What Happened to the American Labor Union? 491 14.1e Employer Tactics Opposing Unionization 492

Highlights in HRM 3: United Food and Commercial Workers International Union Authorization Card 493

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14.1f How Employees Become Unionized 493 14.1g NLRB Representation Election 493

Highlights in HRM 4: Employer “Don’ts” during Union Organizing Campaigns 494

Highlights in HRM 5: NLRB Election Poster 496

14.2 The Bargaining Process 497 14.2a Preparing for Negotiations 497 14.2b Gathering Bargaining Data 498 14.2c Developing Bargaining Strategies and Tactics 498 14.2d Negotiating the Labor Agreement 499 14.2e Good-Faith Bargaining 499 14.2f Interest-Based Bargaining 499 14.2g Management and Union Power in Collective Bargaining 500 14.2h Resolving Bargaining Deadlocks 502

14.3 The Labor Agreement 502 14.3a The Issue of Management Rights 502

Highlights in HRM 6: Items in a Labor Agreement 503 14.3b Union Security Agreements 504

14.4 Administration of the Labor Agreement 504 14.4a Negotiated Grievance Procedures 504 14.4b Grievance Arbitration 504

14.5 Contemporary Challenges to Labor Organizations 506 14.5a Decrease in Union Membership 506 14.5b Globalization and Technological Change 507

Summary 508

Key Terms 509

Discussion Questions 509

HRM Experience: Learn about Unions 510

Case Study 1: The New Union Battles: Public Unions vs. Rich World Governments 510

Case Study 2: The Arbitration Case of Jesse Stansky 511

Notes and References 513

Part 6 Expanding Human Resources Management Horizons Chapter 15 International Human Resources Management 515

15.1 Analyzing Your International Environment 516 15.1a Political Factors 517 15.1b Economic Factors 517 15.1c Sociocultural Factors 518 15.1d Technological Factors 519 15.1e Analyzing Your International Operations 520

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15.2 Managing Your International Operations 522 15.2a Recruiting Internationally 524 15.2b Selecting Employees Internationally 527

Highlights in HRM 1: Skills of Expatriate Managers 529 15.2c Training and Development 530 15.2d Content of Training Programs 531

Highlights in HRM 2: Nonverbal Communications in Different Cultures 533

Highlights in HRM 3: Repatriation Checklist 537

15.3 Compensation 538 15.3a Compensation of Host-Country Employees 538 15.3b Compensation of Host-Country Managers 540 15.3c Compensation of Expatriate Managers 541 15.3d Performance Appraisal 542

15.4 Analyzing the International Labor Environment 545 15.4a Collective Bargaining in Other Countries 546 15.4b International Labor Organizations 547 15.4c Labor Participation in Management 548

Summary 548

Key Terms 549

Discussion Questions 549

HRM Experience: An American (Expatriate) in Paris 550

Case Study 1: How about a 900 Percent Raise? 550

Case Study 2: A “Turnaround” Repatriate Plan: U.S. Company Moves Indian Workers Back Home 551

Notes and References 552

Chapter 16 Implementing HR Strategy: High-Performance Work Systems 556

16.1 Fundamental Principles 558 16.1a Egalitarianism and Engagement 559 16.1b Shared Information and Trust 560 16.1c Knowledge Development 561 16.1d Performance-Reward Linkage 561

16.2 Designing High-Performance Work Systems 562 16.2a Work-Flow Design and Teamwork 562 16.2b Complementary Human Resources Policies and Practices 563 16.2c Supportive Information Technologies 566

16.3 Strategic Alignment 567 16.3a Ensuring Horizontal Fit 567 16.3b Establishing Vertical Fit 568 16.3c Assessing Strategic Alignment: The HR Scorecard 568

16.4 Implementing the System 568

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Highlights in HRM 1A: Diagnosing Horizontal Fit 569 16.4a Building a Business Case for Change and Engaging Stakeholders 569

Highlights in HRM 1B: Testing the Alignment of the HR System with HR Deliverables 570

Highlights in HRM 1C: Testing the Alignment of HR Deliverables 570 16.4b Establishing a Communications Plan 572 16.4c Evaluating and Sustaining the Success of the System 573

16.5 Outcomes of High-Performance Work Systems 575 16.5a Employee Outcomes and Quality of Work Life 575 16.5b Organizational Outcomes and Competitive Advantage 575

Summary 577

Key Terms 577

Discussion Questions 577

HRM Experience: Assessing the Strategic Fit of High-Performance Work Systems 578

Case Study 1: How Implementing an HPWS Fortified the Snack-Food Maker Snyder’s-Lance 579

Case Study 2: Whole Foods Market Faces Whole New Challenge 580

Notes and References 581

Integrative Cases 585

Glossary 611

Name Index 622

Organization Index 624

Subject Index 627

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The 18th edition of Managing Human Resources will place your students at the fore- front of understanding how organizations can gain a sustainable competitive advantage through people. Today’s HR managers play an active role in the strategic planning and decision making within their organizations. Those managers who are good at it have a major impact on the success of their firms and elevate human resources in terms of its importance in the C-suites of their organizations. But human resources management is not limited to the HR staff. The best organizations recognize that managing people is the job of every manager, working in partnership with HR.

Each edition of the book highlights the changes human resources management is undergoing but reveals that the goal of utilizing an organization’s talent in the best way possible never changes. Consequently, the purpose of this book is always twofold: (1) to equip students with the tools and practices of HR management and give them an appreciation for the changes they can make by understanding how best to manage people, and (2) to present the most current challenges and opportunities graduating students will face when it comes to today’s human resources management environment. These challenges exist both for those who will become HR managers and those who will go on to become other types of managers.

Toward that end, the first chapter of the book lays out in broad terms the key challenges in HRM today. It includes a discussion of the HR strategies pursued by firms and the importance of retaining and motivating employees in the process. Other aspects broached include the strategies companies are using to continue to try to control health care costs; how social media is affecting hiring, human resources management, and employees’ privacy rights; and how good human resources practices can help a firm achieve its corporate social responsibility and sustainability goals and make it an employer of choice. The chapter also discusses the important partnership with line managers and the competencies required of HR management. The textbook contin- ues with the introduction, explanation, and discussion of the individual practices and policies that make up HRM. We recognize the manager’s changing role and emphasize current issues and real-world problems and the policies and practices of HRM used to meet them.

Strategy and talent have become such central concerns of HR today that we con- tinue to emphasize the topic in this edition of the book in Chapter 2. Chapter 5 focuses on expanding and managing the talent pool in organizations. Employee diversity and inclusion, and how firms can leverage all types of differences among their workers to their strategic advantage, are examined.

Organizations in today’s competitive world are discovering that it is how the individual HR topics are combined that makes all the difference. Managers typically


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xx Preface

don’t focus on HR issues such as staffing, training, and compensation in isolation from one another. Each of these HR practices should be combined into an overall system—one that furthers a firm’s strategy by enhancing employee involvement and productivity. Managing Human Resources ends with a final chapter that focuses on how high-performance work systems (HPWSs) are used to implement these strate- gies. We outline the strategic processes used to implement HPWSs, including work- flow design, HR practices, management processes, and supporting technologies as well as the outcomes of an HPWS that benefit both the employee and the organiza- tion as a whole.

Streamlined Coverage Today’s students are extremely busy. They want to know what they need to learn and be able to learn it as quickly as possible. Instructors also want to be able to cover all of the material they want to teach during a semester. To help both groups, we made a special effort to streamline our coverage in this edition. We did so without sacrific- ing key material but by shortening the copy to make it readable and deleting extra- neous information reviewers have indicated may be “TMI” (too much information) for their students. Students and instructors will find that the copy is briefer, clearer, and more engaging.

New Cutting-Edge Content As with other editions, a great deal of new information is provided in this revision to accurately reflect HRM in today’s business world and help the reader understand today’s HRM issues more effectively. Examples include the concerns of Millennial and Generation Z employees, and how Big Data, HR analytics, mobile technology, and social media are profoundly affecting the field, and the effects artificial intelligence and automation are having. Ever-changing international HR concerns are covered, including the work-visa challenges facing U.S. firms, immigration, human rights issues, global rights issues such as data protection, and intellectual property rights. The International Labor Organization’s “Agenda 2030 for Sustainable Development,” which places decent work for all at the heart of the ILO’s current initiatives, resulted in numerous updates. Of course, the 18th edition also includes a complete update of all laws, administrative rulings and guidelines, and court decisions governing HRM. We also show a recent shift in the interest of Millennials who are seeing collective action through unions as much more aligned with their interests than previous generations.

Lastly, in addition to the changes we have already mentioned, to help instructors incorporate the new material discussed into their courses, the following is a list of chapter-by-chapter additions:

Chapter 1 • Updated discussion on international trade, Brexit, and the H-1B visa debate. • The loss of middle-class jobs in the United States and new technology affecting

HR, such as robotics and automation. • New coverage on the employee experience. • New coverage on Generation Z. • Updated information on workforce demographic trends and the progress of

women and minorities in the workplace.

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Chapter 2 • Updated information on U.S. labor supply statistics. • New section on a firm’s primary and secondary stakeholders. • New section and figure on the 4As model (Alignment, Agility, Architecture, and

Ability). • New case study on how a strategy change led to the formation of Nike.

Chapter 3 • New legal interpretations on what reasonable accommodation means for employ-

ees with disabilities. • Updated information on how Title VII is being interpreted to prohibit discrimi-

nation based on gender identity or sexual orientation. • A list of specific examples of unlawful discrimination against LGBTQ

communities. • New research showing how states that enact the federal Employment

Non- Discrimination Act (ENDA) achieve higher levels of innovation than states that do not enact the act.

• We expand upon the term “disparate treatment.” • New material on how students in universities react to affirmative action.

Chapter 4 • New coverage of workflow analysis prior to job analysis. • New discussion on how a firm’s strategy affects its workflows and job design. • New discussion of how companies are using fitness trackers, standing desks, and

other devices to improve the ergonomics in their workplaces. • New discussion on workplace democracy, and the work-life balance Millennials

and the members of Generation Z are demanding. • New case study on how Zappos eliminated all managerial positions and moved to

a self-management model.

Chapter 5 • New section on retaining talent. • New coverage on the use of games to attract applicants. • New information on writing job postings to attract more candidates and the use

of technology to detect biased job postings. • New information on the virtual-assistant type technology some companies are

beginning to use to automate the process of posting jobs, searching for candidates online, scheduling interviews with them, and notifying them of where they stand in the job hiring process.

• New case study on Scripps Health’s lifecycle approach to training and retaining talent.

Chapter 6 • Updated information on the practice of using the Internet to prescreen candi-

dates and the legal hazards of doing so. • Updated information on the “ban the box” movement.

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xxii Preface

• New coverage on the use of technology and other best practices to eliminate bias when screening résumés and ranking candidates based on their interviews.

• New information on the use of Big Data and gamification in preemployment testing.

Chapter 7 • Updated coverage on how MOOCs are affecting corporate training. • New coverage on experiential learning and the gamification of employee training. • Updated information on social media’s role in training.

Chapter 8 • New coverage reflecting the growing role of coaching rather than formal perfor-

mance appraisals in organizations. • New coverage of SMART goals. • New coverage on how some firms are using technology to detect biased perfor-

mance appraisals and get a better picture of how well employees are performing. • New case study on why Adobe ended formal appraisals and what the company

replaced them with.

Chapter 9 • How some companies like Zappos are moving from a traditional management

structure to a system where work is organized around roles rather than titles and teams report to teams rather than supervisors.

• The movement by tech companies to using objectives and key results (OKR) systems to tie compensation to objectives.

• The push for health care professionals to be evaluated based on quality of care instead of a production model where it is more about quantity of care.

• New research that shows how competition and recessions can reduce employee wages.

• New coverage of locations, such as Glassdoor, to collect salary and other related data.

• A list of the highest paying jobs for 2017 in the United States. • An updated discussion of minimum age required for employment. • Salary rates for the fastest growing jobs in the United States.

Chapter 10 • Discussion of the new presidential administration’s support for policies that

reward government employees for merit, not just tenure. • New discussion of how companies are gamifying incentives and rewards to

improve performance. • Updated research on how to design rewards to provide (1) autonomy, (2) oppor-

tunity, and (3) purpose. • New research on public sentiment toward CEO pay.

Chapter 11 • Updated information on the current status of the Patient Protection and Afford-

able Care Act (PPACA).

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• New discussion of workers’ lack of awareness of the employer costs of their benefits.

• Updated information on employee leave programs as they relate to the Family Medical Leave Act.

• Expanded discussion on how companies can better meet the needs of Millennials by providing work-life benefits.

Chapter 12 • Updated research on the financial benefits of health and safety programs. • Updated information on U.S. employee injury and safety statistics today. • Updated information on how to enforce safety rules. • Updated information on workplace violence and antibullying legislation.

Chapter 13 • Updated information on employee privacy rights at their place of employment. • New figures on employer versus employee rights. • New information on how employees are protected for blowing the whistle. • New discussions and statistics of social media and how it is used and abused by


Chapter 14 • A clearer introduction to the chapter that includes current sentiments in the

United States toward unions. • Discussion of how the last presidential election impacted unions and their tradi-

tional allegiance to the Democratic Party and U.S. sentiment toward international trade.

• New research showing how Millennials relate to collective action—where they agree and disagree with unions.

• Some evidence that more professionals are seeing unionization as a viable way to stabilize employment. A look at recent union movements that aren’t just limited to companies but more related to social movements (e.g., Fight for 15 and Occupy Wall Street).

• Reorganized material to help with chapter flow.

Chapter 15 • Updated discussions on sentiments about globalization and free trade. • Discussion surrounding the new gig economy where many workers are finding

work globally online as independent contractors. • Updated discussions of how companies like Microsoft are creating globally

dispersed teams that must work virtually. • Updated immigration and foreign worker discussions as they relate to H-1B visas.

Chapter 16 • New discussion on why higher compensation is generally required when imple-

menting an HPWS. • Updated case study on Whole Foods’ HPWS and the challenges the company

faces sustaining it and regaining a competitive advantage.

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xxiv Preface

Features of the Book Designed to facilitate understanding and retention of the material presented, each chapter contains the following pedagogical features:

• Learning Outcomes listed at the beginning of each chapter provide the basis for the Integrated Learning System. Each outcome is also listed in the margin of the chapter in which it appears, along with a thought-provoking question designed to get students thinking about how the related content applies to them personally. The outcomes are revisited in the chapter summary and discussion questions and in all of the book’s ancillaries.

• Small Business Application Boxes. The boxes are designed to help entrepre- neurs, small business owners, and managers think about how to organize, imple- ment, and leverage talent and to draw attention to resources designed especially for them to do so. We feel the coverage is very important because many students today are very interested in entrepreneurship and will go on to found their own businesses. Moreover, small businesses provide most of America’s jobs to workers.

• Highlights in HRM. This popular boxed feature provides real-world examples of how organizations perform HR functions. The highlights are introduced in the text discussion and include topics such as small businesses and international issues.

• Key Terms appear in boldface and are defined in margin notes next to the text discussion. The Key Terms are also listed at the end of the chapter and appear in the glossary at the end of the book.

• Figures. An abundance of graphic materials and flowcharts provides a visual, dynamic presentation of concepts and HR activities. All figures are systematically referenced in the text discussion.

• Summary. A paragraph or two for each Learning Outcome provides a brief and focused review of the chapter.

• Discussion Questions following the chapter summary offer an opportu- nity to focus on each of the Learning Outcomes in the chapter and stimulate critical thinking. Many of these questions allow for group analysis and class discussion.

• HRM Experience. An experiential activity designed to simulate HR activities is included in each chapter.

• End-of-Chapter Cases. Two case studies per chapter present current HRM issues in real-life settings that allow for student consideration and critical analysis.

• Extended Cases. Eleven extended cases are provided at the end of the main text. These cases use material covered in more than one chapter and provide capstone opportunities.

MindTap Managing Human Resources, 18th edition, includes a brand new MindTap learning experience, powered by a rich array of online resources designed to deliver an all-in-one solution for learning and retaining the course topics. The following items are included in the MindTap learning path:

• An engagement activity designed to stimulate student interest and launch your classroom discussion.

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• A media-rich e-version of the text enhanced with interactive versions of several figures in the text as additional video content for extra concept coverage and engagement.

• A comprehensive auto-graded homework assignment designed to guide stu- dents from basic comprehension to real-world application of concepts. Robust feedback is provided within each question to help reinforce understanding as stu- dents navigate through the new concepts of each chapter.

• Assignable version of Integrated Case assignments found at the end of the book. The assignments utilize the power of digital to engage students and grade open- ended question submissions easier with MindTap.

• Brand new video “You Make the Decision” exercises designed to enable students to think like HR managers and teach students to apply concepts taught within the classroom to real-world scenarios.

• Quiz assignment that delivers a myriad of question types to measure overall com- prehension of chapter learning objectives.

• New Study App that helps students quiz themselves and prepare for upcoming exams. Practice questions are based on learning objectives within the course, and correlated to the test bank to provide students with a robust bank to utilize in their test preparation. Student have the flexibility to decide what chapters to study, and how many questions they will answer making on-the-go studying easier, quicker, and exactly what they need.

Instructor Materials The following instructor support materials are available to adopters online at www.

• Instructor’s Resource Guide. The Instructor’s Resource Guide contains a chapter synopsis and learning objectives; a very detailed lecture outline; answers to the end-of-chapter discussion questions, notes for decision activities, and end-of- chapter case studies; solutions to the extended cases in the textbook; and “Flip Tips” activities to provide ideas for the flipped classroom.

• Test Bank. Cengage Learning Testing powered by Cognero is a flexible, online sys- tem that allows you to:

• Author, edit, and manage test bank content from multiple Cengage Learning solutions.

• Create multiple test versions in an instant. • Deliver tests from your LMS, your classroom, or wherever you want.

Each test bank chapter provides more than 100 questions, all tagged by learning objective, AACSB standards, and Bloom’s taxonomy. There are true/false, multiple- choice, and essay items for each chapter.

• PowerPoint™ Presentation Slides. These presentation slides will add color and interest to lectures. Lecture slides also include engagement items such as video  links and discussion questions to enhance the classroom learning experience.

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xxvi Preface

Acknowledgments Because preparation of manuscript for a project as large as Managing Human Resources is a continuing process, we would like to acknowledge the work of those colleagues who provided thoughtful feedback, and invaluable content expertise for this and the previous editions of the text. Our appreciation and thanks go to:

Ryan Hall, Chatfield College Loren Kuzuhara, University of Wisconsin Kim Fox-Marchetti, Lone Star College Dale King, Lenoir-Rhyne University Carol Decker, Tennessee Wesleyan University Christie Hovey, Lincoln Land Community College Tony Hunnicutt, College of the Ouachitas Debra Moody, Virginia Commonwealth University Dave Quirk, Northwest Christian University Greg Berezewski, Robert Morris University of Illinois Avan Jassawalla, SUNY Geneseo School of Business Jeffrey Moser, Valley City State University Jonathan Biggane, Fresno State University Niesha Geoffroy, Golden Gate University Julia Levashina, Kent State University Jaime Simmons, Marlboro College Graduate School Zhaoquong Qin, Langston University Justin Wareham, Oklahoma City University Kiristen Jefferson, Southern New Hampshire University LaSondra Banks, Triton Community College Misty Resendez, Ivy Tech Neeley Shaw, Waynesburg University Rimjhim Banerjee-Batist, Schenectady County Community College Rhoda Sautner, University of Mary Robin Sawyer, University of Maryland Sandra Obilade, Bresica University Shirley Rijkse, Central Carolina Community College Weichu Xu, East Stroudsburg University Steve Ash, University of Akron Michael Bedell, California State University, Bakersfield Brad Bell, Cornell University Katherine Clyde, Pitt Community College Mary Connerley, Virginia Tech University Susie Cox, McNeese State University Paula S. Daly, James Madison University Sharon Davis, Central Texas College Douglas Dierking, University of Texas, Austin Suzanne Dyer-Gear, Carroll Community College Joe J. Eassa, Jr., Palm Beach Atlantic University Summer Zwanziger Elsinger, Upper Iowa University Robert E. Ettl, SUNY Stony Brook Diane Fagan, Webster University Angela L. Farrar, University of Nevada, Las Vegas

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Lou Firenze, Northwood University Olene L. Fuller, San Jacinto College Judith Gordon, Boston College Rita G. Greer, Spalding University Mike Griffith, Cascade College Daniel Grundmann, Indiana University Adrian Guardia, Texas A&M University, San Antonio Xuguang Guo, University of Wisconsin, Whitewater Sally Hackman, Central Methodist College Kevin Hale, Lonestar College Mike Hashek, Gateway Technical College Rich Havranek, SUNY Institute of Technology Kim Hester, Arkansas State University Stephen Hiatt, Catawba College Alyce Hochhalter, St. Mary Woods College Madison Holloway, Metropolitan State College of Denver David J. Hudson, Spalding University Karen Jacobs, LeTourneau University Avan Jassawalla, SUNY at Geneseo Michelle Jetzer, Madison College Nancy M. Johnson, Madison Area Technical College Jeffrey Johnston, Alpena Community College Pravin Kamdar, Cardinal Stritch University Cheryl L. Kane, University of North Carolina, Charlotte Jordan J. Kaplan, Long Island University Steve Karau, Southern Illinois University at Carbondale Joseph Kavanaugh, Sam Houston State University John Kelley, Villanova University Dennis Lee Kovach, Community College of Allegheny County Kenneth Kovach, University of Maryland Trudy Kroeger, Wisconsin Indianhead Technical College Chalmer E. Labig, Jr., Oklahoma State University Alecia N. Lawrence, Williamsburg Technical College Scott W. Lester, University of Wisconsin, Eau Claire J. Jonathan Lewis, Texas Southern University Corinne Livesay, Bryan College Beverly Loach, Central Piedmont Community College L. M. Lockhart, Penn State Greater Allegheny Gloria Lopez, New Mexico Highlands University Barbara Luck, Jackson Community College Larry Maes, Davenport University Jennifer Malfitano, Delaware County Community College Michael Matukonis, SUNY Oneonta Doug McCabe, Georgetown University Lee McCain, Seminole Community College Marjorie L. McInerney, Marshall University Veronica Meyers, San Diego State University Robert T. Mooney, Texas State University Julia Morrison, Bloomfield College

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xxviii Preface

Jim Nichols, Crown College Harold Nolan, Georgian Court University Sue Norton, University of Wisconsin Parkside David Nye, Kennedy-Western University Paul Olsen, Saint Michael’s College Donald Otto, Lindenwood University Charles Parsons, Georgia Institute of Technology Dane Partridge, University of Southern Indiana Bryan J. Pesta, Cleveland State University Theodore Peters, Hartwick College David Pitts, Delaware Technical and Community College Amy Pogue, Valencia College Alex Pomnichowski, Ferris State University Victor Prosper, University of the Incarnate Word Michael Raphael, Central Connecticut State University Charles Rarick, Barry University Eladio D. Reid, University of Houston Downtown June Roux, Salem Community College Robert Rustic, University of Findlay Laura L. Sankovich, Capella University Machelle Schroeder, University of Wisconsin–Platteville Kelli Schutte, Calvin College Mike Sciarini, Michigan State University Tom Sedwick, Indiana University of Pennsylvania Jim Sethi, University of Montana Western Patricia Setlik, William Rainey Harper College William L. Smith, Emporia State University Norman Solomon, Fairfield University Emeric Solymossy, Western Illinois University Carol Spector, University of North Florida Howard Stanger, Canisius College Scott L. Stevens, Detroit College of Business Michael Sturman, Cornell University Nanette Swarthout, Fontbonne College Michael T. Korns, Indiana University of Pennsylvania Karen Ann Tarnoff, East Tennessee State University Thomas Taveggia, University of Arizona Donna Testa, Herkimer County Community College Alan Tillquist, West Virginia State College Sue Toombs, Weatherford College Richard Trotter, University of Baltimore William Turnley, Kansas State University Catherine L. Tyler, Oakland University Melissa Waite, The College at Brockport, SUNY Harvell Walker, Texas Tech University Barbara Warschawski, Schenectady County Community College Steve Werner, University of Houston Liesl Wesson, Texas A&M University JoAnn Wiggins, Walla Walla University

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Jim Wilkinson, Stark State College L. A. Witt, University of New Orleans Evelyn Zent, University of Washington, Tacoma Ryan Zimmerman, Texas A&M University

In the manuscript for this edition, we have drawn not only on the current litera- ture but also on the current practices of organizations that furnished information and illustrations relating to their HR programs. We are indebted to the leaders in the field who have developed the available heritage of information and practices of HRM and who have influenced us through their writings and personal associations. We have also been aided by students in our classes; by research assistants like Natalie Stoker, Kenne- rley Roper, and Ashley Fife; by former students; by the participants in the management development programs with whom we have been associated; by HR managers; and by our colleagues. In particular, we would like to express our appreciation to Amy Ray for her helpful insights, research, and editorial support for this edition of the text. She is a wonderful partner. We appreciate the efforts of everyone at Cengage who helped develop and produce this text and its supplements. They include: Bryan Gambrel, Product Director; Jamie Mack, Content Developer; Stephanie Hall, Learning Design Author; Carol Moore, Digital Content Designer; Michelle Kunkler, Sr. Art Director; and Rhett Ransom, Product Assistant.

We are also so grateful to our wives—Marybeth Snell and Mindi Morris—who have contributed in so many ways to this book. They are always sources of invaluable guidance and assistance. Furthermore, by their continued enthusiasm and support, they have made the process a more pleasant and rewarding experience. We are most grateful to them for their many contributions to this publication, to our lives, and to our families.

Lastly, we would like to say farewell and thank you to long-time coauthor, George Bohlander, who has been a valued partner for decades and the intellectual backbone of the franchise. With his departure from the author team, George leaves an enduring legacy. His experience and insight have given this book its voice for many editions, and his guidance, counsel, and leadership have proved invaluable. His passion for the field, his students, and the profession have been inspirational. He is a great mentor, and friend. And a wonderfully decent man. Thank you, George.

Scott A. Snell University of Virginia

Shad S. Morris Brigham Young University

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Scott A. Snell Scott Snell is the E. Thayer Bigelow Research Chair of business administration and former senior associate dean for executive education at the University of Virginia’s Darden Graduate School of Business. Scott teaches courses in leadership and strategic management and works with management teams on aligning their human resource investments to better execute their strategies. Scott is the author of four books and was recently listed among the top one hundred most-cited authors in scholarly journals of management. He currently serves on the board of HR People + Strategy (SHRM), and previously has served on the boards of the Strategic Management Society’s Hu- man Capital Group, the Society for Human Resource Management Foundation, the Academy of Management’s Human Resource Division, the Academy of Management Journal, and the Academy of Management Review.

Prior to joining the Darden faculty in 2007, Scott was professor and director of executive education at Cornell University’s Center for Advanced Human Resource Studies and a professor of management in the Smeal College of Business at Pennsylvania State University. He received a BA from Miami University, as well as an MBA and PhD in business from Michigan State University. Originally from Ohio, Scott now lives in Charlottesville, Virginia.

Shad S. Morris Shad Morris is the Georgia White Fellow and associate professor of management at the Marriott School of Business at Brigham Young University. He teaches courses in the areas of human resources management and international business. Prior to joining the Marriott School in 2013, Shad was an assistant professor of management and human resources at The Ohio State University and has held appointments at the Sloan School of Management at MIT, Copenhagen Business School in Denmark, China Europe International Business School (CEIBS) in China, and SKK Graduate School of Business in South Korea.

Shad’s research focuses on strategic human resource management in a global environment. His research has been published in a number of journals, such as the Harvard Business Review, MIT Sloan Management Review, Academy of Management Review, Journal of International Business Studies, Strategic Management Journal, Journal of Management, and Human Resource Management. He has worked for the World Bank, Management Systems International, and Alcoa. He has consulted with numerous companies on their HR and knowledge practices. He is the recipient of the

About the Authors

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xxxiAbout the Authors

International HRM Scholarly Research Award from the Academy of Management and is currently a faculty fellow at Cambridge University’s Centre for International Human Resource Management. In addition, Shad currently serves on the board of the Interna- tional Journal of Human Resources Management and is a founding editor of the Journal of Microfinance. He received a BS in psychology and a masters in organizational behavior from Brigham Young University, as well as a PhD in human resources man- agement from Cornell University.

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The Rewards and Challenges of Human Resources Management

Learning Outcomes After studying this chapter, you should be able to

Explain how human resource managers and other managers can have rewarding careers by helping their firms gain a sustainable competitive advan- tage through the strategic utilization of people.

Explain how good human resource practices can help a firm’s globalization, corporate social responsibility, and sustainability efforts.

Describe how technology can improve how people perform and how they are managed.

LO 1

LO 2

LO 3

Explain the dual goals HR managers have in terms of increasing productivity and controlling costs.

Discuss how firms can leverage employee differences to their strategic advantage and how educational and cultural changes in the workforce are affecting how human resource managers engage employees.

Provide examples of the roles and competencies of today’s HR managers and their relationship with other managers.

LO 4

LO 5

LO 6

Ra w

pi xe

l/ G

et ty

Im ag


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2 Part 1 Human Resources Management in Perspective

W e use a lot of words to describe how important people are to organizations. The terms human resources, human capital, intellectual assets, and talent manage- ment imply that it’s people who drive the performance of their organizations

(along with other resources such as money, materials, and information). Successful orga- nizations are particularly adept at bringing together different kinds of people to achieve a common purpose. This is the essence of human resources management (HRM). Human resources management involves a wide variety of activities, including analyz- ing a company’s competitive environment and designing jobs and teams so a firm’s strategy can be successfully implemented to beat the competition. This, in turn, requires identifying, recruiting, and selecting the right people for those jobs and teams; train- ing, motivating, and appraising these people; developing competitive compensation policies to retain them; grooming them to lead the organization in the future—and the list goes on.

1.1 Why Should You Study Human Resources Management? Will It Pay Off?

Which of these activities would you like to engage in your career:

• Establishing the strategic direction your firm should take • Attracting top-notch people to come to work for you and your firm • Determining the right people to hire so your team and company are a success • Helping and coaching people so they become top-notch performers

If you answered yes to these questions, a job managing people might be a reward- ing career for you and an excellent reason why you should study human resources management. Having a good understanding of human resources management is important for managers and entrepreneurs of all types—not just human resources (HR) personnel. All managers are responsible for at least some of the activities that fall into the category of management. Managers play a key role in selecting employees, training and motivating them, appraising them, promoting them, and so forth. It’s a job that can be incredibly rewarding—like a gardener helping his or her crops to grow. But what if you do a poor job of these activities? Believe it or not, many businesspeople with great business strategies, business plans, and products and services fail because they do not fully grasp the importance of human resources management. Laments one entrepreneur:

My first year after investing in a small business that was failing, I tripled the amount of business the company did and made a lot of money. But I didn’t pay my personnel enough or motivate them. They eventually abandoned me, and a larger competitor muscled me out of the marketplace. I now understand the important role personnel play in a business. They can make or break it.

In addition, great business plans and products and services can easily be copied by your competitors. Great personnel cannot. Their knowledge and abilities are among the

human resources management (HRM) The process of managing human talent to achieve an organization’s objectives.

Think of a firm you do business with that is facing dramatic changes in order to survive. (Retailers such as Target and Macy’s, which are facing stiff competition from online retailers are an example.) How do you think the firm’s person- nel can help it adapt? What role will the com- pany’s HR staff play in helping with that goal?

LO 1

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3Chapter 1 The Rewards and Challenges of Human Resources Management

most distinctive and renewable resources upon which a company can draw. As Thomas J. Watson, founder of IBM, said, “You can get capital and erect buildings, but it takes people to build a business.”1

Lastly, even if you never become a manager, understanding human resources management can help you understand your responsibilities and rights as an employee. For example, what if your employer asks for your passwords to Facebook or other social media sites? Do you need to provide the manager with that information? This textbook can help you answer questions such as these.

1.1a Human Capital and Organizational Culture The idea that organizations “compete through people” highlights the fact that achieving success increasingly depends on an organization’s ability to manage its human capital. The term human capital describes the employees’ knowledge, skills, abilities, and other attributes (KSAOs) that have economic value to the firm. Although the value of these assets might not show up directly on a company’s balance sheet, it nevertheless has tremendous impact on an organization’s performance. The following quotations from notable CEOs and former CEOs illustrate this point2:

• “The key for us, number one, has always been hiring very smart people.” (Bill Gates, Microsoft)

• “Human resources isn’t a thing we do. It’s the thing that runs our business.” (Steve Wynn, Wynn Las Vegas)

• “You gotta build a team that is so talented, they almost make you uncomfortable.” (Brian Chesky, AirBnB)

human capital The knowledge, skills, and capabilities of individuals that have economic value to an organization.

If an employer requested your Face-

book login credentials, what would you do?

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4 Part 1 Human Resources Management in Perspective

Companies that do “win” because of the talent they find, hire, and manage include:

• Publix, which empowers its employees to make decisions—decisions that are good for an individual store, its customers, area growers, community, and the firm as a whole.

• Nordstrom’s, which empowers its employees to go through near-heroics to satisfy customers.

• The Martin Agency, a Virginia-based advertising agency whose talented and creative personnel generate award-winning advertising campaigns like those for insurer Geico and cable-TV network Nickelodeon.

However, unlike physical capital and resources, human capital is intangible and cannot be managed the way organizations manage jobs, products, and technologies. One reason why this is so is because employees, not the organization, own their own human capital. If valued employees leave a company, they take their human capital with them, and any investment the company has made in training and developing these people is lost.

To build human capital in organizations, managers must continue to develop supe- rior knowledge, skills, and experience within their workforces and retain and promote top performers.3 Beyond the need to invest in employee development, organizations have to find ways to better utilize the knowledge of their workers. Too often employees have knowledge that goes unused. Human resource managers and programs are often the conduit through which knowledge is developed and transferred among employees. As Dave Ulrich, a noted expert in human resources, notes: “Learning capability is g times g—a business’s ability to generate new ideas multiplied by its adeptness at general- izing them throughout the company.”4

Why does knowledge go unshared and unused in organizations? Oftentimes it’s because of a firm’s organizational culture. Organizational culture refers to the shared values, beliefs, and assumptions people in an organization have. Organizational cul- ture affects how people in an organization work and treat each other and customers. A negative organizational culture stifles employees and leads to lower productivity and morale. In contrast, a positive organizational culture helps employees not only acquire knowledge and skills, but also helps foster curiosity among employees, allows them to grow and thrive, and creates mission-driven teams that actually achieve success.

You probably understand organizational culture more than you realize. Are there businesses you like to shop with because they perform better and you enjoy the atmo- sphere and people? Are there other businesses that are similar but that you don’t like to shop with? The difference is likely due to organizational culture. Marriott’s culture is critical to its success. The hotel chain takes care of its employees. They, in turn, take care of the customers, who come back time and again.

Although “competing through people” and “organizational culture” are major themes of human resources management, on a day-to-day basis, managers of all types have to carry out the specific activities for a company to effectively do so. Figure 1.1 provides an overall framework of these activities.

What do you think are the biggest human resource–related challenges you would have to face as a manager or team leader? Professional organizations such as the Society for Human Resource Management (SHRM) conduct ongoing studies of the most press- ing competitive issues facing firms. The top trends, or challenges, firms name today include those outlined in the sections that follow.

organizational culture The shared values, beliefs, and assumptions people in an organiza- tion have.

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5Chapter 1 The Rewards and Challenges of Human Resources Management

1.2 Strategic and Global Challenges Organizations can rarely stand still for long. Being able to adapt has become the key to capturing opportunities and overcoming obstacles both domestically and abroad. In fact, it is often the key to the very survival of organizations. Many of the biggest 500 companies in the world 50 years ago (GE and GM included) are still in business. How- ever, many others, such as Esmark Steel, are not. In fact, you may never have even heard of Esmark Steel. As a corollary, think about the species that populate our planet today. It’s not necessarily the biggest and the strongest species, such as the dinosaurs, that have survived but those best able to adapt. This is true for not only species but individual employees and companies as well.

1.2a Responding Strategically to Changes and Disruptions in the Marketplace

Products and markets are evolving at a breakneck pace, disrupting what businesses pro- duce, how they produce, and for whom. Changes in the stock market, world economic conditions, labor markets, and technology are making “business as usual” a thing of the past. So how do HR managers help their firms cope with ever-changing business condi- tions? One way is by helping redesign their firms to achieve agility.

Agility is a firm’s ability make quick changes to gain a competitive advantage. Achieving agility often involves eliminating managerial layers that can slow down deci- sion making and make an organization less nimble. Instead, project teams that can gear up fast, make their own decisions, and disband quickly are utilized to develop and get new products out the door while they’re “hot.” Many tech companies operate this way, and other firms are finding that the model can work for them.

agility A firm’s ability make quick changes to gain a competitive advantage.

• Changes in the marketplace and economy • Globalization • Sustainability • Technology • Productivity and cost challenges • Leveraging employee differences

• Planning • Job design • Recruitment • Staffing • Training and development • Appraisal • Communications • Compensation • Benefits • Labor relations • International HR

• Job security • Health care • Diversity issues • Age, gender, and generational issues • Retirement issues • Education levels • Employee rights and privacy • Work attitudes and employee engagement • Work-life balance




Overall Framework for Human Resources ManagementFigure 1.1

Does a company’s HRM function need to be an integral part of its sustainability and cor- porate social respon- sibility efforts? Why or why not?

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6 Part 1 Human Resources Management in Perspective

The online shoe company Zappos has gone so far as to eliminate all of its managers. Employees aren’t told how to work. Instead, they “self-manage” and belong to voluntary employee teams. Employees are motivated to develop new skills and capabilities so they can join multiple teams and work on new projects at a moment’s notice. Successful companies, says Harvard Business School professor Rosabeth Moss Kanter, develop a culture that just keeps moving all the time.5 It’s been said that “No change means no chance.” The change applies to HR managers, too.

Human Resources Managers and Business Strategies In decades past, HR departments were often focused on performing administrative tasks, dealing with unions, and complying with labor laws. But HR management is vastly different today. Astute executives know that human resource professionals can help them improve, to comply with the law and help the bottom line by streamlining employment costs. HR professionals can improve the top line by redesigning work to foster innovation, by forecasting labor trends, by recruiting and motivating employees, and by measuring their effectiveness. HR managers also help their firms with business strategies, as well as mergers, acquisitions, and ways to enter new and global markets. “If you look at the evolution going back to when we called HR ‘personnel,’ it’s come a long way as a function,” says Art Mazor, with Deloitte Consulting. New HR tools and technologies are allowing the HR function to look outside the tactical, administrative reporting and data gathering to bring insights and to drive business strategy and results.6 Mazor says.6

Sometimes changing a firm’s strategy requires adjusting the labor force via downsiz- ing, outsourcing, and offshoring. Downsizing is the planned elimination of jobs, and outsourcing simply means hiring someone outside the company to perform business processes that were previously done within the firm. Offshoring, also referred to as “global sourcing,” involves shifting work to locations abroad.

A common denominator of all these strategies is that they require companies to engage in bringing about and managing both organizational changes and changes on the individual level. Although most employees understand that change is continuous—responsibilities, job assignments, and work processes change—people often resist it because it requires them to modify or abandon ways of working that have been successful or at least familiar to them. Successful change rarely occurs naturally or easily.

Some of the strategic changes companies pursue are reactive changes that result when external forces, such as the competition, a recession, a law change, or an ethi- cal crisis (such as the backlash Volkswagen experienced in 2016 for cheating on its vehicles’ emissions tests) have already affected an organization’s performance. Other strategic changes are proactive changes, initiated by managers to take advantage of tar- geted opportunities, particularly in fast-changing industries in which followers are not successful.

Good HR managers know that they can be key players when it comes to driving the business strategies of their organizations to make changes. That is why forward- looking CEOs, including those of Southwest Airlines, Starbucks, and GE, make certain their top HR executives report directly to them and help them address key issues.

A rapidly growing number of companies, including Ford, Intel, United Technolo- gies, and the gamemaker Electronic Arts, are assigning HR representatives to their core business teams to make certain they are knowledgeable about core business issues. In

downsizing The planned elimination of jobs.

outsourcing Contracting outside the organization to have work done that formerly was done by internal employees.

offshoring The business practice of sending jobs to other countries.

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7Chapter 1 The Rewards and Challenges of Human Resources Management

addition, companies are increasingly rotating non-HR managers into HR positions and vice versa to give them exposure to different areas of the organization. Rather than emphasizing the administrative aspects of HR, these companies develop and promote their HR personnel and provide them with key business statistics and numbers they can use to measure the effectiveness of the workforce.

We will discuss more about competitive HR strategies and HR in Chapter 2. Mean- while, keep in mind that HR’s role is not all about providing advice to CEOs and super- visors. In addition to serving as a strategic partner to management, HR managers are also responsible for listening to and advocating on behalf of employees to make sure their interests are aligned with those of the firm and vice versa. A good deal of evidence suggests that this is one of the toughest parts of an HR manager’s job. We will discuss more about this aspect of the job later in the chapter.

1.2b Competing, Recruiting, and Staffing Globally Have you ever thought about working abroad or learning a second (or third) language? Doing so could give you a big advantage in today’s workplace. Why? Because the strate- gies companies are pursing today increasingly involve one or more elements of global- ization. The integration of world economies and markets has sent businesses abroad to look for opportunities, fend off foreign competitors domestically, and find the right kind of employees to help them do so. Consumers around the world today want to be able to buy “anything, anytime, anywhere,” and companies are making it possible for them to do so. Want to buy a Coke in Pakistan? No problem. Coca-Cola has an elaborate delivery system designed to transport its products to some of the remotest places on the planet. In fact, the company has long generated more of its revenues abroad than it does in the United States

Some changes are reactive, such as those

experienced by Volk- swagen when it was

revealed the company had cheated on its

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8 Part 1 Human Resources Management in Perspective

Importing and exporting goods and services is the easiest way to “go global.” India has the world’s second-largest population (1.2 billion people) and a growing middle class, so firms are increasingly trying to expand their exports to that country.7 Apple is one of those companies. Although the iPhone dominates the U.S. market, only 5 percent of smartphones in India are iPhones. Partnerships, mergers, and takeovers are other ways companies are preparing for globalization.

Many American and foreign firms have partnered with Chinese firms to expand in China, which is the world’s most populous country, with 1.3 billion people. In turn, Chinese and other foreign companies are merging with American firms, sometimes in industries you wouldn’t expect. For example, in 2016, the Chinese firm Dalian Wanda Group bought U.S. film company Legendary, which produced The Dark Knight, Jurassic World, and Straight Outta Compton.8

As a result of globalization, the national identities of products are blurring, too. BMW is a German brand, but the automaker builds cars in the United States, China, and elsewhere. Likewise, you probably think of Budweiser as an American beer, but its maker (Anheuser-Busch) is owned by a Belgian company called InBev. Like many other companies, Anheuser-Busch InBev has been purchasing or partnering with factories and brands in other countries such China and Mexico to expand its sales.9 After buying Legendary, Dalian Wanda Group produced The Great Wall starring Matt Damon, which was released in both China and the United States.

Numerous free-trade agreements forged between nations in the last half century have helped quicken the pace of globalization. The first major trade agreement of the twentieth century was made in 1948, following World War II. Called the General Agree- ment on Tariffs and Trade (GATT), it established rules and guidelines for global com- merce between nations and groups of nations. Since GATT began, the growth in world trade has far outpaced the growth in the world’s overall output. GATT paved the way for the formation of many major trade agreements and institutions, including the Euro- pean Union in 1986 and the North American Free Trade Agreement (NAFTA) in 1994, encompassing the United States, Canada, and Mexico.

Although they have come under fire from people and politicians around the world, new free-trade agreements continue to be forged. The United Kingdom left (“Brexited”) the European Union in 2016. Nonetheless, even the country’s most vocal opponents of global trade are anxious to complete a new free-trade deal with India to do more busi- ness with that nation.10

How Globalization Affects HRM Due to globalization, firms have to balance a complicated set of issues related to differ- ent geographies, including different cultures, employment laws, and business practices, and the safety of employees and facilities abroad. Human resource issues underlie each of these concerns. They include such things as dealing with employees today who, via the Internet and social media, are better informed about global job opportunities and are willing to pursue them, even if it means working for competing companies or foreign companies. Gauging the knowledge and skill base of workers worldwide and figuring out how best to hire and train them (sometimes with materials that must be translated into a number of different languages) is also an issue for firms. Relocating managers and training foreign managers abroad to direct the efforts of an international workforce is a challenge as well. In Chapter 15, we will explain how these challenges are tackled.

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9Chapter 1 The Rewards and Challenges of Human Resources Management

1.2c Setting and Achieving Corporate Social Responsibility and Sustainability Goals

Globalization has led to an improvement in people’s living standards in the last half century. As a result of free trade, Americans are able to buy products made abroad more cheaply. Conversely people in low-wage countries that make those goods and services are becoming wealthier and are beginning to buy American-made products. Nonetheless, globalization stirs fierce debate—especially when it comes to jobs. Since the turn of the century, millions of U.S. jobs—both white collar and blue collar—have been exported to low-wage nations all around the world. Other people worry that free trade is creating a “have/have not” world economy, in which the people in developing economies and the world’s environment are being exploited by companies in richer, more developed countries. This has sparked anti-free-trade protests in many nations.

Concerns such as these, coupled with corporate scandals over the years, including the use of sweatshop labor in third-world countries, have led to a new focus on corporate social responsibility, or good corporate citizenship. Many firms and professional asso- ciations also have ethics codes, or codes of conduct. The codes are written guidelines that clarify right and wrong behaviors an organization endorses or prohibits. Highlights in HRM 2 shows the codes of ethics adopted by the Society for Human Resources Manage- ment. Other firms have gone so far as to appoint “chief ethics officers” to try to ensure that ethical breaches by employees don’t adversely affect their companies. Chief ethics officers and ethics are discussed in more detail in Chapters 7 and 13.

Companies are learning (sometimes the hard way) that being ethical and socially responsible both domestically and abroad can not only help them avoid lawsuits but also improve their earnings. For example, researchers at Boston College’s Center for Corpo- rate Citizenship found that as a company’s reputation improved, so did the percentage increase in the number of people who would recommend that firm. Nearly two-thirds of

corporate social responsibility The responsibility of the firm to act in the best interests of the people and communities affected by its activities.

After an unsafe fac- tory collapsed, killing

hundreds of textiles workers in Bangladesh in 2013, approximately

70 retailers, mostly European, signed an

agreement to inspect factories they offshore

work to and finance safety upgrades for








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10 Part 1 Human Resources Management in Perspective

the members of the 80-million-strong millennial generation (people born in the 1980s and 1990s) consider a company’s social reputation when deciding where to shop, and 9 of 10 say they would switch brands based on their perceptions of a company’s com- mitment to social responsibility.11 Moreover, prospective workers are saying corporate responsibility is now more important to their job selection. They want to work for companies that are concerned not only with profits but also making the world a better place for everyone, both rich and poor.

Sustainability is closely related to corporate social responsibility. Sustainability refers to a company’s ability to produce goods or services without depleting the world’s resources and doing the least amount of harm to the environment as possible. Achieving complete sustainability is nearly impossible, but companies are making strides to reduce their “carbon footprints.” Those that are not are finding themselves under pressure from consumers and groups determined that they do.

Consider what happened to Hewlett-Packard (HP). After HP broke a promise to eliminate toxic materials in its computers, Greenpeace activists painted the words “Hazardous Products” on the roof of the company’s headquarters in Palo Alto, Cali- fornia. Meanwhile, a voicemail message from Star Trek actor William Shatner was delivered to all of the phones in the building. “Please ask your leader [HP’s CEO] to make computers that are toxin free like Apple has done,” Shatner said in the recording. The stunt and publicity it generated worked. HP got the message and later delivered on its promise.12

One of HR’s leadership roles is to spearhead the development and implementation of corporate citizenship throughout their organizations, especially the fair treatment of workers.13

1.3 Technology Challenges Advancements in information technology have enabled organizations to take advantage of the information explosion. Computer networks and “cloud computing” (Internet computer services and data storage) have made it possible for nearly unlimited amounts of data to be stored, retrieved, and used in a wide variety of ways anywhere and at any time. Software that allows workers to work with and share information with one another electronically anywhere, any time—social media, wikis, document-sharing platforms such as Google Docs, online chat and instant messaging, and web- and videoconferenc- ing—have changed how and where people and companies do business. For example, BNSF Railway uses the social media site Yammer to help employees collaborate on ideas and provide each other with praise and feedback.

Social media networking has also become the way workers find jobs and employ- ers recruit candidates and screen them today. Companies are hiring firms such as Social Intelligence, which combs through Facebook, LinkedIn, Twitter, Instagram, YouTube, and “thousands of other sources” to create reports about the “real you”—not the “you” you have presented in your resume.14 (Care to change your Facebook page, anyone?)

HR managers are often responsible for developing Internet and social media poli- cies for employees, including how much time employees should be allowed to spend online, the sites they should be allowed to visit, and whether or not an employee can use his or her own electronic devices (mobile phones, tablets, etc.) for work purposes. Other

sustainability Doing business in a way that does as little harm to the environment and depletes as few natural resources as possible.

In what ways can the HR managers and employees of small firms facilitate their competitiveness rela- tive to firms with supe- rior technology? Why are employees still key?

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11Chapter 1 The Rewards and Challenges of Human Resources Management

issues include what apps employees can use. Deutsche Bank doesn’t allow its employees to use unapproved apps such as Google Talk and What’s App for business purposes on either their work or personal phones.15

From Touch Labor to Knowledge Workers Technology—and automation in particular—have reduced the number of jobs that require routine tasks and little skill and have increased the number of jobs that require considerable skill. In 1979, approximately 40 percent of Americans held routine-task- type jobs. Today, only about 30 percent do as a result of automation and robotics.16 This change has been referred to as a shift from “touch labor” to knowledge workers, in which employee responsibilities expand to include a richer array of nonroutine activities that involve analyzing information and problem-solving.17 Fewer good “middle class” type jobs are available to U.S. workers today as a result, disrupting the labor market. “One of our retail utility customers in the U.K. has about 300 robots doing 600 people’s worth of work,” says Alistair, the CEO of Blue Prism, a company that helps automate business functions. “Before you needed a building to house 600 people, but all that gets crushed down to one cabinet in the corner of a data center.”18

But it’s not just routine jobs and blue-collar jobs that are affected by automation. News organizations are using web robots (“bots”) to gather information and write basic stories about corporate earnings and sports recaps. Many of the entries on Wikipedia aren’t written by people but by bots that comb the Web for information and compile the information you see on the site. Or consider the IBM robot Jill Watson. In 2016, Georgia Institute of Technology used Jill as an online teaching assistant in an experiment with an artificial intelligence class. Most students never figured out Jill wasn’t human—although some of them said they were suspicious she was because she seemed to answer their ques- tions way too fast.19

knowledge workers Workers whose respon- sibilities extend beyond the physical execution of work to include plan- ning, decision-making, and problem-solving.

Ordering kiosks like this one in a New York City store are likely to

replace some workers.

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12 Part 1 Human Resources Management in Perspective

Clearly, no one is immune to the changes automation and technology bring. But that doesn’t mean that all jobs are going away because of it. A recent study found that about 50 percent of workers’ tasks today could be eliminated with current technology and technology being developed. However, only 5 percent of jobs could be.20 More likely, humans will work with the help of virtual assistants similar to Siri, Cortana, and Amazon’s Echo device.

Knowledge-based training is critical to the business model of Manpower, the largest employment agency in the United States. Manpower offers free information technol- ogy training to its employees through its online university. The site features thousands of hours of instruction in technology applications, along with professional develop- ment, business skills, and telecommunications courses, seminars, and chat rooms with mentors. “Just-in-time” learning is delivered via the Internet to Manpower’s employees’ mobile phones, tablets, and computers.

Firms and their employees are also utilizing massive open online courses (MOOCs) created by colleges and educational firms. A MOOC is a noncredit, often free course anyone can take online, and enrollment is unlimited. MOOCs can help employees get training quickly as well as stretch a company’s training budget.

Virtual learning is taking place as well. IBM, Cisco, Kelly Services, and Manpower are among the many companies that have built training facilities, offices, and meeting rooms inside the online reality game Second Life. The spaces these companies build online enable them to do certain things more easily and cheaply than they can in the real world—for example, bringing people from several continents into one room for training or new hires for orientation.21 Augmented reality devices such as Google Glass and “wearables” such as the Apple Watch are helping employees get information when and where they need it, too. At AGCO, a manufacturer of agricultural equipment, fac- tory workers wear augmented reality glasses, which display diagrams and instructions to help them conduct quality checks.22

Technology’s Effect on HRM Perhaps the most central use of technology in HRM is an organization’s human resources information system (HRIS). HR affects the entire workforce— everyone who works for the company must be hired, trained, paid, and promoted, usually through HR. Human resources information systems are used for everything from automating payroll processing to administering benefits programs. The systems allow managers to access employee records for administrative purposes and employees to access and change their own benefits and other personal information on either an intranet or a secure website.

Firms use human resources information systems to recruit, screen, and pretest applicants online before hiring them as well as to train, track, and promote employees once they have been hired. The drugmaker Merck’s HRIS captures information from job recruiting sites and social network sites like LinkedIn, scans applicants’ resumes, and makes the information immediately accessible to managers so they can search system- atically for the people whose skills they want. Managers can search online for internal and external talent by running searches of candidates who have been categorized by skill set.23 The HRIS system of the consumer-products maker Procter and Gamble (P&G) makes good internal candidates visible to managers instead of the managers having to scour the company to find them. The system contains information about its 100,000-plus

human resources information system (HRIS) A computerized system that provides current and accurate HR-related data for the purposes of con- trol and decision-making.

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13Chapter 1 The Rewards and Challenges of Human Resources Management

employees worldwide for promotion purposes at the country, business category, and regional levels.

Corning Inc. uses HR software, among other things, to set the developmental goals of its employees once they have been hired and to gauge how well they are meeting them. Employees can look online to see their own goals and mark their progress as well as see everyone else’s goals in the command chain, from the CEO down to their immediate supervisors. This “cascading” of goals has helped Corning’s employees align their per- sonal goals with the organization’s overall objectives, to reach higher levels. “Like any large company, we tended to get ‘silo-ed’ and fragmented the more we grew,” said one vice president at a company using a system similar to Corning’s. “We needed a better way to pull our global team together and get people focused on what the priorities are for our business.”24

One of the newer HRIS applications is the use of big data. Big data is a buzzword that describes the massive amounts data available online and offline today that can be “crunched” to make decisions. Marketing departments have very successfully used big data to detect people’s buying patterns. By analyzing its customers’ buying habits, Target was able to predict which of them were pregnant, sometimes before they had even told their families. The company then sent the customers ads and coupons for baby products.

Now companies are doing the same thing to analyze HR information, a process that’s referred to as workforce (HR) analytics. Using HR data, such as employee demographic information, performance ratings, pay, employee surveys, academic history, years of service, and so on, a firm can definitely answer questions like the following:

• Do employees with degrees from Ivy League schools perform better—or not? • Exactly how much more do top performers need to be paid to stay with our firm? • Which job applicants are likely to perform better? • Which employees are most likely to quit?

Traditionally, questions such as these have been answered based on anecdotal evi- dence or the “gut” feelings of HR professionals. But workforce analytics can provide more definitive answers. For example, a major customer service provider analyzed more than 7,000 of its employees and found that “relevant job experience” in the customer service area had no impact on how well they performed and stayed with the company. As a result, the company altered its hiring criteria.25 Gathering and analyzing HR data may sound like a daunting task, but HR software providers are including data analysis tools in their programs that make it easier to gather and visualize HR data in a meaningful way.

So what sort of HRIS should HR professionals choose among the many options available to them? One of the first steps in choosing a HRIS is for HR personnel to eval- uate the biggest “headaches” they experience, or the most time-consuming tasks, and then choose the applications that can have the strongest impact on the firm’s financial measures—that is, the ones that get the “biggest bang for the buck.” Off-the-shelf HR Web-based solutions are as commonly used as custom-designed systems. Free open- source HRIS software is also available on the Web. OrangeHRM is an example. Open- source software can be a good solution for startup and small businesses looking for a low-cost HRIS solution. Highlights in HRM 1 shows the other factors that need to be evaluated.

workforce (HR) analytics The process of gathering and analyzing data to improve a firm’s human resources management.

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Factors to Consider When Evaluating a Human Resources Information System

�� Fit of the application to the firm’s employee base. If many of the firm’s employees work on a factory floor, is the system appropriate, or does HR need to install kiosks in employee areas? Will employees be able to access the HRIS offsite on the Internet or on their mobile phones? How will the information be secured? Will employees need to be assigned passwords?

�� Ability to upgrade or customize the application. What sorts of costs will be involved to upgrade the applica- tion in the coming years?

�� Compatibility with current systems. Does the HRIS link into existing, or planned, information systems easily and inexpensively?

�� User friendliness. Does the application provide addi- tional features such as links to learning resources or help for managers or employees who might need it?

�� Collaboration. Does the system connect employees and allow them to collaborate on solutions to prob- lems and projects?

�� Workforce analytics. Does the system make it easy to gather HR data and visualize its implications?

�� Survey capabilities. Does the system have an app that allows employees to be surveyed electronically?

�� Recruiting and applicant tracking. Does the system make it easy to find, recruit, and track applicants and a company’s current employees for hiring purposes?

�� Scheduling. Does the system have scheduling ability to ensure employees are in the right places, working the right times, and on the right projects?

�� Availability of technical support. Should the HRIS sys- tem be supported internally, or should the vendor host it? Will it be cloud based?

�� Time required to implement and train staff members to use the HRIS, including HR and payroll personnel, man- agers, and employees. Who is responsible for training employees, and how will it be done?

�� Initial costs and annual maintenance costs. Is a “suite” of apps needed or just a few key apps? Experts advise HR managers to price each application separately and then ask vendors for a “bundled” price.26

Highlights in HRM1

HRweb (shown here) is an example of one of the many HRIS systems available for firms to manage HR-related tasks.


eb .c


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15Chapter 1 The Rewards and Challenges of Human Resources Management

Ultimately, however, an HRIS should provide HR personnel with analytical information—statistics, metrics, and so forth—that helps them analyze, refine, and better implement a firm’s strategic direction. This can include forecasting personnel needs (especially for firms planning to expand, contract, or merge), planning for career and employee promotions, and evaluating the impact of the firm’s policies—both those related to HR functions and other functions.

1.4 Productivity and Cost Challenges Labor costs are often the largest expenditures companies make, particularly in service- and knowledge-intensive firms. How can companies actually spend more money on employees and still drive overall costs lower? The answer: via higher employee pro- ductivity. Employee productivity is the result of a combination of employees’  abilities, motivation, and work environment, and the technology they use to work.

1.4a Maximizing Productivity Productivity can be defined as “the output gained from a fixed amount of inputs.” Organizations can increase their productivity either by reducing their inputs (the cost approach) or by increasing the amount that employees produce by adding more human and/or physical capital to the process. Companies such as Southwest Airlines, Nucor, and the manufacturing and technology firm Danaher achieve low costs in their indus- tries not because they scrimp on employees but because they are the most productive.

United States is still by far the world’s most productive nation in terms of the total value of all goods and services it produces, even when it comes to manufacturing. China ranks second. Apparel and textile manufacturing are far smaller industries in the United States than what they once were, but they have been replaced by industries that rely more on technological precision and brainpower than on low-skilled labor— industries for aircraft, sophisticated machinery, medical devices, and so on.27 How- ever, the growth in output per worker is now climbing fast in countries such as China that in the past have lacked the amount of technology available to U.S.  workers. When the investment in faster computers and more efficient machine tools levels off, this limits how much assistance technology can offer employees in terms of  their productivity. Any additional productivity will have to come from the enhanced abil- ity of employees, their motivation, and their work environment, which makes the job of the HR manager in the coming years all the more crucial.28

1.4b Managing the Size of the Workforce Part of managing productivity is matching the size of the workforce to the demand requirements of a firm given technology, the firm’s strategic direction, and global competition. Sometimes this task entails hiring additional personnel to expand a firm’s capacity. At other times, offshoring is used to increase capacity. Offshoring can help a firm deliver products more quickly if people across the globe are working around the clock on them. For example, to keep up with demand as well as lower costs, some U.S. clinics and hospitals have offshored the task of reading X-rays to radiolo- gists in other countries such as India. X-rays taken in the day are read at night abroad and delivered the next day to the hospitals and clinics.29 Offshoring is also used when

As a manager, do you think it would be pos- sible to maintain the morale of your firm’s employees in the face of shrinking budgets and benefits? How might you do so?

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16 Part 1 Human Resources Management in Perspective

companies want to expand to other countries and capture market share there. Apple is trying to do this by opening an iPhone manufacturing facility in India.

Outsourcing can help a firm manage the size of its workforce, reduce costs, and focus on the activities it does best. For example, companies hire advertising firms to handle their promotions, software firms to develop data-processing systems for them, and law firms to handle their legal issues rather than do them in-house. Maintenance, security, catering, and payroll (and in small companies, sometimes entire HR departments) are outsourced to increase the organization’s flexibility and manage the size of the workforce.

Despite the advantages offshoring and outsourcing offer, a growing number of firms are moving jobs back to their domestic markets or in-house. Delta Air Lines is among the firms that returned its call-center operations to the United States after customers complained about the service they received from personnel in foreign coun- tries. Other companies are nearshoring, which is the practice of bringing jobs closer to domestic countries, and homeshoring, which is the practice of outsourcing work to domestic workers who work out of their homes.

Downsizing is, of course, another way to manage the size of the workforce as is furloughing. Furloughing is the practice of requiring employees to take time off for either no pay or reduced pay. More diligent workforce planning may be a better solution than either downsizing or furloughing, says John Sullivan, an HR expert and consultant. Business revenues seldom fall off overnight. Sullivan says the best managers develop a process that pinpoints skills the company no longer needs, low-impact jobs, and poor performers in advance of a crisis. Instead, part-time or contract employees can be hired and their hours of service adjusted as needed.30

1.4c Managing Pay and Benefits Most firms closely monitor employee pay and benefit programs. Skyrocketing health care costs are perhaps the biggest concerns companies are facing when it comes to compensation and benefits. Companies are taking many different approaches to try to keep health care costs in check, including charging employees higher premiums for covering their spouses if they are able to obtain insurance through their own employers. Yet another approach is giving employees a set amount of money they can use to purchase health insurance on their own. Walgreen’s and Darden Restaurants, which operates the Olive Garden and Red Lobster chains, have taken this approach. A more proactive approach is to offer employees incentives to get healthy—for example, by quitting smoking, losing weight, or exercising.31

Another way firms are managing benefits is by using employee leasing. When employee leasing is used, a firm signs an agreement with a professional employer orga- nization (PEO). The PEO—typically a larger company—takes over the management of the smaller company’s HR tasks and becomes a coemployer to its employees. The PEO performs all the HR duties of an employer—hiring, payroll, and performance appraisal. Because PEOs can coemploy a large number of people working at many different compa- nies, they can provide employees with benefits that small companies cannot afford, such as 401(k) and health care plans, workers’ compensation, and even adoption assistance.

Another strategy to manage pay and benefits is to hire freelancers, part-time employees, independent contractors, and consultants, who work in what’s being called the “gig economy.” In the gig economy, people earn income from various nonperma- nent “gigs,” or jobs, and work independently, rather than full time for a single employer. An Uber driver is an example of a person participating in the gig economy. The gig economy isn’t new, but it’s definitely a growing trend.

nearshoring Occurs when a firm relocates jobs abroad to nations closer to its domestic market.

homeshoring The practice of outsourc- ing work to domestic workers who work out of their homes.

furloughing A situation in which an organization asks or requires employees to take time off for either no pay or reduced pay.

employee leasing The process of eliminat- ing the jobs of employ- ees who are then hired by a leasing company (which handles all HR- related activities) and contracting with that company to lease back the employees.

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17Chapter 1 The Rewards and Challenges of Human Resources Management

Some companies, such as Google, are able to hire talented employees by offering them great pay and fantastic benefits. However, most companies, especially small ones or ones that are struggling, find it hard to compete with bigger firms like Google with deluxe ben- efit packages. What can small companies do to attract employees yet contain costs? Many companies are finding that providing work flexibility is a good way to improve the produc- tivity and motivation of valuable employees, especially when giving them larger benefit packages is not an option. For example, when gasoline prices shot up to over $4/gallon during the last recession, most small companies weren’t able to increase their employees’ pay because they were facing higher transportation costs themselves for the goods and services they had to buy. But some companies began letting employees telecommute (work from home) or, like the state of Utah did, work 10 hours per day, 4 days a week.

As experienced and highly respected HR professionals, Delise West and Tonya Rochette could have easily fur- thered their careers by pursuing positions in large corpo- rations or academia. Instead, they chose to forge a new path for themselves by founding Human Resource Part- ners, a small human-resources consulting firm located in Dover, New Hampshire. Friends and family thought they were both a little crazy to enter the “risky” world of owning a small business, but since joining forces 12 years ago, they have been very successful at serving other small, entrepre- neurial businesses just like theirs.

West and Rochette both recognized early on that small businesses need to address HR issues just as much as larger businesses, yet small-business owners usually do not have the time or expertise to devote to these issues themselves and often do not have the financial resources to hire a full-time, knowledgeable HR manager. This pair of entrepreneurs saw that reality as an opportunity to pro- vide a full spectrum of HR services to companies in need.

“There are so many companies who don’t have the right HR infrastructure in place,” said West, whose firm works mostly with companies under 70 employees. “Oftentimes, an owner of a growing business will come to me and simply say, ‘I can’t do it anymore because it has become too time consuming.’ Some of the companies that have turned to West and Rochette for help with HR functions and strategy include a major car dealership, a regional construction company, and a local nursery.

Work with a new client typically begins with an evaluation of the firm’s level of HR compliance and best practices, such as job description documentation, payroll systems, and legal interviewing practices. From

Small Business Application

there, Human Resource Partners develops strategies for the client to implement in the areas of recruiting, screening, interviewing, and hiring new staff; evaluat- ing and recognizing current employee performance; and improving employee relations and developing supervi- sory skills.

By giving small firms the tools, services, and train- ing they need, West and Rochette allow their clients to focus on their core business. Said West, Human Resource Partners lets small firms “realize the return on their invest- ments in their greatest assets: their people.”

Outsourcing a firm’s HR isn’t a new strategy for firms, big or small. Many companies have outsourced their pay and benefits functions for years. What is new is the growth in HR outsourcing. Currently, it’s a $42.6 billion industry. By 2020, that number is expected to grow to $53.9 billion, a 25 percent increase.

The growth of HR outsourcing has been good news for West and Rochette. Human Resource Partners expanded quickly and now serves larger, midsize busi- nesses as well. To help meet demand in Dover and other New Hampshire cities the two entrepreneurs also brought on additional HR professionals as partners. Because the outsourcing model gives small and midsize businesses senior-level HR expertise, West says she believes HRP will continue to grow.

Sources: Mark Feffer, “Meet the People Behind Your Outsourcing,” HR News (July 1, 2016),; Kim Murdoch, “Cel- ebrating 10 Years: Concord- and Dover-based HRP Marks Milestone,” ConcordPatch (May 24, 2013),; Michael McCord, “Outsourcing Frees Owners from Time Consuming Tasks,” Sea- (January 10, 2011),; company website:

A Small Business Built on Helping Small Businesses

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18 Part 1 Human Resources Management in Perspective

1.5 Employee Challenges Do you think a company has a moral obligation to take care of its workforce? What kind of company would you like to work for? These are questions you are probably asking yourself as you prepare for your career. Clearly, in addition to the strategic challenges that companies face, they also must attend to some very important employee concerns. Those challenges span a wide range of important concerns such as job security, health care, diversity, and employee rights.

1.5a Responding to the Demographic and Diversity Challenges of the Workforce

To forecast trends to support the strategies of their organizations, HR managers frequently analyze the capabilities of different demographic groups and how well each is represented in both fast-growing and slow-growing occupations. Women, for example, are fairly well represented in fast-growing occupations such as health services but are also represented in some slow-growth occupations such as admin- istrative jobs and computer and financial records processing jobs. Blacks and His- panics have been heavily concentrated in several of the slow-growth and declining occupations. The U.S. labor force also grew more slowly in the last decade than it did in the previous one, a trend that is projected to continue. The labor force participa- tion rate—that is, the number people employed or actively looking for work—is also declining in the United States. Figure  1.2 shows the U.S. labor force participation rate. The rate peaked in 2000 at about 67 percent; however, during the last recession, many people dropped out of the job market. The rate then fell before leveling off at about 62.7 percent.

But even with the economic recovery, the labor participation rate is predicted to fall because of declining birth rates and the aging U.S. population. By 2050, the U.S. Bureau of Labor Statistics (BLS) predicts the labor force participation rate will be about 60.2 percent. To accommodate shifts such as these, find qualified talent, and broaden their customer bases, businesses know it is absolutely vital to increase their

Think about some of the teams you have been a member of. Which of them per- formed better—those that were diverse or those that were not? What challenges and opportunities did the more diverse teams present? How do you think they translate to human resources management?

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58 59 60 61 62 63 64 65 66 67

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

P e rc

e n


U.S. Labor Force Participation Rates over TimeFigure 1.2

Source: U.S. Bureau of Labor Statistics

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19Chapter 1 The Rewards and Challenges of Human Resources Management

efforts to recruit and train a more diverse workforce. And with a more diverse work- force comes more diverse expectations on the part of employees for their employers to meet.

Ethnic and Racial Diversity in the Workforce Minorities in the United States are increasing relative to the total population. U.S. work- ers are becoming more diverse as well. Much of the growth of the minority workforce has been due to not only the arrival of immigrants but also high birth rates among some minority groups, such as Hispanics. By 2024, Hispanics are projected to make up nearly one-fifth of the labor force. By 2050, they are projected to make up about one-third of the labor force, as Figure 1.3 shows.32

Firms have been criticized for hiring immigrant workers—both legal and illegal— because people believe they prevent U.S. citizens from getting jobs. In addition, following the attack on the World Trade Center in 2001, the number of work visas issued to foreign- ers by the U.S. government was cut. Many American employers say this a problem because they lack the highly qualified workers they need for key positions. To bring in the talent it needs from abroad, Microsoft opened a facility in Canada, across from its Redmond, Washington, headquarters. However, critics of work visas, of which there are many, claim there isn’t a shortage of qualified workers and that employers use the program to hire foreign workers they can pay less. The United States has been able to attract the best and brightest of the world’s talent, which fueled the country’s success. For example, in 2016, all American Nobel Laureates were immigrants. But as you will learn in Chapter 15, that is changing.33

It is not just the most highly educated who are in demand either. Some busi- nesses, including those in the agricultural business, face labor shortages that would be even more severe without less-skilled immigrants willing to work for low pay and few or no benefits. The jobs these people do are often labor intensive and must be

2010 Projected 2050

Hispanic 15%

Non-Hispanic 85%

Non-Hispanic 70%

Hispanic 30%

Source: U.S. Bureau of Labor Statistics

Labor Force Participation Rates of Workers of Hispanic Origin versus Non-Hispanic Origin

Figure 1.3

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20 Part 1 Human Resources Management in Perspective

done in bad weather or in agricultural facilities in less-than-pleasant conditions, and involve work that many Americans don’t want to do. Nonetheless, there is a concern that immigrants (both legal and illegal) are taking away jobs from Americans. Illegal immigrants make up about 5 percent of the labor force. They are concentrated in certain jobs, such as farming (26%), cleaning and maintenance (17%), and construc- tion (14%).34

In recent years, the federal government and state and local governments have tried to make it harder for firms to hire illegal immigrants and passed laws making it more difficult for them to live, work, and drive in the United States. After Georgia and Ala- bama did so, crops rotted in the fields in those states because of a lack of workers to harvest them. Those states subsequently relaxed their rules. Later in the book we will discuss in more detail what companies are doing in response to minority and immigra- tion challenges and opportunities.35

Age Distribution of the Workforce The newest generation entering the workplace is Generation Z. The members of Gen- eration Z were born in the mid-1990s and early 2000s. It’s been estimated that by 2020, they will make up 20 percent of the workforce. These workers have never known life without smartphones and social media and they expect to be trained and managed with digital tools. They are also more comfortable with racial, cultural, and sexual diversity than other generations and want to change the world for the better. A large number of members of this generation say they want to start their own businesses. Others, having grown up during the last recession, want to go straight to work rather than incurring the cost of college.

The millennial generation (Generation Y) is having a big impact on the labor market right now. The group is also 75 to 80 million people strong, making it the larg- est generation ever. Millennials are generally regarded as having good technological knowhow and initiative, especially when it comes to starting their own businesses. (Facebook founder Mark Zuckerberg is a notable example.) Like Generation Z, they are also interested in meaningful work that will improve the world around them and want a good work-life balance. Neither generation wants to be pigeonholed into jobs. They want to try new jobs and new tasks, and they are quite willing to job hop to do so.

People in Generation X were born between 1964 and 1979. Many members of Generation X watched their babyboomer parents get downsized at some point in their lives. Now that they are raising children themselves, Generation Xers value job secu- rity. However, they are less likely to think of themselves as being wed to one employer as their parents were. The members of Generation X are also independent. They like challenging work rather than repetitive work and dislike supervisors who look over their shoulders.

A relatively large number of people were born after World War II (between 1946 and 1964). These people are members of the babyboom generation. A significant proportion of babyboomers have hit retirement age. Not all babyboomers are retiring, though. Due to advances in medicine, people are staying healthier as they age, and many are remain- ing in the labor force longer. Other factors—including an increase in the official retire- ment age in the United States from 65 to 67—are also keeping babyboomers working.

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21Chapter 1 The Rewards and Challenges of Human Resources Management

So are economic factors: Many babyboomers have not saved enough to retire, or their 401(k) retirement accounts have not grown as well as expected. Older workers tend to be dependable and remain on the job longer than younger workers, who operate more like free agents. Because their kids are grown up, older workers are also often willing to work flexible hours.

So, what will the workforce look like in years to come in terms of ages? Figure 1.4 shows older Americans—those hitting the 55-and-over age bracket—are the fastest growing segment of the workforce and will be for decades as the U.S. workforce con- tinues to age. By contrast, the average annual growth rate of 16- to 24-year-olds in the labor force is projected to decline. Managers can find themselves challenged in terms of getting the four generations to work well together. Babyboomers sometimes categorize younger workers as having a poorer work ethic. Some younger workers have the per- ception that older workers are set in their ways and are technologically challenged. The situation can also create supervisory issues. How will a 55-year-old react to being man- aged by someone in their 20s or 30s? To help companies overcome these obstacles, HR departments and experts are developing programs to help the generations understand one another better so they can capitalize on one another’s strengths rather than preying on one another’s weaknesses.

Keep in mind that the three generations of workers we have described here are gen- eralizations. Individual employees are vastly different from one another and motivated by different factors, even if they belong to the same generation. It is up to managers to figure out what drives each person so as to best utilize his or her talents and to meet the person’s employment demands and career aspirations.


23% 26%




22% 22%




22% 22%



2000 2010 Projected 2050

16 to 24 years

25 to 34 years

45 to 54 years

55 years and older

35 to 44 years

Source: U.S. Bureau of Labor Statistics

Labor Force Participation Rates of Workers in the Labor Force by Their Ages

Figure 1.4

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22 Part 1 Human Resources Management in Perspective

Gender Distribution of the Workforce Following World War II, less than one-third of women were in the workforce. Currently, women constitute a little under half of the U.S. workforce. About 60 percent of women age 16 and older are in the labor force, and approximately 70 percent of mothers with school-age children are employed in some capacity. As Figure 1.5 shows, the number of women joining the U.S. labor force has tapered off some in recent years as it has for men and is expected to continue to do so.36

The educational attainment of women is also increasing relative to men. Today, three of every five college graduates are women. Women’s wages have increased, too. In 1979, on average, women made 62 percent of what men made. Although the gap has not closed, it has narrowed. Women who are employed full time today make about 83 percent of what men employed full time make.37

However, some studies have found that younger women in urban areas make more than their male counterparts. One market research firm analyzing census data found that in 47 of the 50 biggest U.S. metropolitan areas, the median full-time salaries of young women were 8 percent higher than for men in their peer group.38 Top executive positions are still dominated by men, though.

Employers wanting to attract the talent that women have to offer are taking mea- sures to ensure they are treated equally in the workplace in terms of their advancement opportunities and compensation. In addition, more companies are accommodating working parents by offering them parental leave, part-time employment, flexible work schedules, job sharing, telecommuting, child and elder care assistance, and adoption assistance.

As we have suggested, harnessing a company’s talent means being aware of char- acteristics common to employees while also managing these employees as individuals. It means not just tolerating or accommodating all sorts of differences but support- ing, nurturing, and utilizing these differences to the organization’s advantage—in other words, strategically leveraging them rather than simply managing them so that people












0 19601950 1970 1980 1990 2000 2020








2030 20402010 2050

P e rc

e n


P e rc

e n




Labor Force Participation Rates by GenderFigure 1.5

Source: U.S. Bureau of Labor Statistics

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23Chapter 1 The Rewards and Challenges of Human Resources Management

are treated equitably and “everyone gets along.”39 HR managers have to ask themselves the following questions: What is it about the experiences, mindsets, and talents of dif- ferent groups of people that can be utilized in a strategic way? After all, despite our similarities, all of us are different in one way or another, aside from the obvious dif- ferences we have outlined in this section. These differences, too, can be the source of organizational strength. Later in the book, we will discuss more about the steps firms can take to leverage employee differences.

1.5b Educational Shifts Affecting the Workforce Over the years, the educational attainment of the U.S. labor force has risen dramatically.40 Figure 1.6 shows that a college education results in higher wages and lower unemploy- ment rates. Despite the fact the educational attainment of the labor force has risen in general, American students’ math and science test scores lag behind those of students in China, Japan, Singapore, Finland, and several other nations. The U.S. Department of Education has found that less than half of all high school seniors can handle mathematics problems involving fractions, decimals, percentages, elementary geometry, and simple algebra. American adults are struggling, too. In survey of adults in 24 developed coun- tries, Americans scored below the average on literacy, math, and computer skills tests.41 What does this mean for the United States? What will HR managers do? The best ones will find strategies to help their firms compete, despite these challenges.

Source: U.S. Department of Labor.

Doctoral degree

Professional degree

Master’s degree

Bachelor’s degree

Associate’s degree

Some college, no degree

High school diploma

Less than a high school diploma

All workers: $860 All workers: 4.3%

Median usual weekly earning Unemployment rate









$1,623 1.7%















Earnings and Unemployment Rates of Full-Time U.S. Workers by EducationFigure 1.6

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24 Part 1 Human Resources Management in Perspective

1.5c Adapting to Cultural and Societal Changes Affecting the Workforce

The attitudes, beliefs, values, and customs of people in a society are an integral part of their culture. Naturally, their culture and society affect their behavior on the job and the environment within the organization, influencing their reactions to work assign- ments, leadership styles, and reward systems. Cultural and societal changes are ongo- ing. HR policies and procedures therefore must be adjusted to cope with these changes.

Changing Employee Rights Laws affecting employee rights are continually changing. In this book we will dis- cuss the major laws affecting companies today. Among them are laws granting employees the right to equal employment opportunities (Chapter 3); union rep- resentation if they desire it (Chapter 14); a safe and healthful work environment (Chapter 12); unemployment and health care benefits as required by law and the regulation of pension plans by the government (Chapter 11); equal pay for equal work (Chapter 9); and so on. An expanded discussion of the specific areas in which rights and responsibilities are of concern to employers and employees will be pre- sented in Chapter 13.

Privacy Concerns of Employees HR managers and their staff members, as well as line managers in positions of respon- sibility, generally recognize the importance of discretion in handling all types of infor- mation about employees. Since the passage of the federal Privacy Act of 1974, increased attention to privacy has been evident, heightened by the increase in identity theft in recent years. While the act applies almost exclusively to records maintained by federal agencies, it has drawn attention to the importance of privacy and has led to the passage of addi- tional privacy legislation, including the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the associated privacy rule issued by the U.S. Department of Health and Human Services, which protects the use and disclosure of personal medical information.

In addition to implementing privacy policies, most companies try to limit the use of social security numbers on employment forms. Companies also restrict access to employee files, conduct background checks on employees who have access to others’ files, and contract with outside firms specializing in identity theft to prevent the abuse of employee information. Globalization has added another twist to privacy compliance. For example, EU countries prohibit the transfer of personal data to countries with inad- equate data protection laws.42

The Electronic Communications Privacy Act of 1986 protects people’s electronic communications such as their email. However, employers have a right to monitor their employees’ emails, phone calls, texts, and Internet use while on the job. Camera surveil- lance in the workplace is also an issue, as is the use of the global positioning system (GPS). The nonprofit organization Workplace Fairness reports that employers are using GPS in company cars to track where workers are, how fast they are driving, and the length of their breaks by monitoring how long their vehicles have not moved. Employers are also using applications installed on workers’ smartphones and employee ID cards to see where they are, if they have arrived at jobsites on time, and dispatch the closest ones to jobs.43 In addition, employers are scrutinizing information employees post on the Web and social media. Some employers have gone so far as to demand job applicants give them their passwords to social media sites.

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25Chapter 1 The Rewards and Challenges of Human Resources Management

Is it legal to do these things? In many cases, yes. In most U.S. states it’s legal for employers to require their employees to give passwords to social networking sites, and ask job applicants what they earned at their previous jobs, despite efforts by some leg- islators to prohibit the practice. And in most states, it’s legal to monitor your employees without telling them.

But although legislators have not addressed all privacy situations, some of them are being decided in court. Firms that have disciplined or fired employees for making disparaging remarks about their organizations on the Internet have found themselves sued by the employees and labor organizations claiming the workers’ rights to com- municate and congregate freely were violated. Intrusive practices can also seriously erode employee morale and a firm’s ability to attract top talent. In Chapter 13, we will discuss employer-implemented privacy programs and guidelines along with the privacy employees can expect while on the job.

Changing Attitudes Toward Work and How They Relate to Employee Engagement Employees today are less likely to define their personal success only in terms of financial gains. Many employees, especially younger ones, believe satisfaction in life is more likely to result from balancing their work challenges and rewards with those in their personal lives. Though most people still enjoy work and want to excel at it, they tend to be focused on finding interesting work and are more inclined to pursue multiple careers. In fact, in a survey of more than 3,000 workers, 86 percent said work fulfillment and work-life bal- ance were their top priorities. Only 35 percent of workers said being successful at work and moving up the ladder were their top priorities. Remaining with a single employer is no longer a top priority either. People also appear to be seeking ways of living that are less complicated but more meaningful.

Tracking software and mobile apps are becoming more popular for employers to remotely track employees actions on their cell phones or computer to monitor their whereabouts and activities while on the job.

ch om

bo sa

n/ Sh

ut te

rs to


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26 Part 1 Human Resources Management in Perspective

These new lifestyles cannot help having an impact on the way employees must be motivated, managed, and engaged. Employee engagement can be defined as the extent to which employees are enthused about their work and committed to it. Employee engagement is not easy to achieve. Many studies show that far fewer employees are engaged with their jobs than their firms would like.

Consequently, firms are rethinking what employee engagement means and how it can be achieved. A growing number of them are thinking about the “employee experi- ence” like they do the “customer experience.” For example, how can a firm excite its employees about their jobs and gain their loyalty like Apple does its iPhone customers? In other words, firms are using some of the insights of consumer marketing and apply- ing them to HR.

To improve the employee experience, firms such as Whole Foods are allow- ing their workers to vote on firmwide initiatives and rate their company’s HR prac- tices—just like people rate restaurants, hotels, and movies on Yelp.44 Improving the employee experience also includes allowing employees to test-drive new roles and jobs, just like customers test-drive different products. One HR manager predicts there will come a time when, after completing projects, workers will get computer messages that say something like: If you enjoyed this type of work, you might also enjoy X type of work—just like you get alternate product selections when you’re shopping on the Web.

Balancing Work and Family Even though new Census Bureau figures show couples postponing marriage and parent- hood, balancing work and family continues to be a major concern for firms and their employees. Employees are already working more hours than they have at any time since 1973, and increasingly employees are tethered to their companies around the clock via communication technologies. Complicating the task is the fact that today’s families are also more diverse. They can consist of two-wage-earner families, single-parent families, families headed by same-sex couples, and families in which multiple generations of adults are living under one roof.

Competitive organizations are finding it advantageous to provide employees with more family-friendly options. Those options include telecommuting, flexible work hours, day care, elder care, part-time work, job sharing, parental leave, adoption assis- tance, spousal involvement in career planning, and assistance with family problems. Most Fortune 500 companies, including Walmart and Exxon-Mobile, now provide same-sex-partner health-insurance benefits.45

Companies with programs such as these calculate that accommodating their employees’ individual needs and circumstances is a powerful way to attract and retain top-caliber people. Aetna Life and Casualty, for example, cut its turnover by 50 percent after it began offering 6-month parental leaves, coupled with an option for part-time work when employees return to the job. Bank of America encourages all its employees to visit their children’s schools or volunteer at any school—on company time.46

Family-friendly companies have to balance the benefits they provide to families versus their single employees, though. The majority of employees have no children under 18. A  Conference Board survey of companies with family-friendly programs found that

employee engagement The extent to which employees are enthused about their work and committed to it.

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27Chapter 1 The Rewards and Challenges of Human Resources Management

companies acknowledge that childless employees sometimes harbor resentment against employees with children who are able to take advantage of these programs when they cannot.47

1.6 The Role HR Managers Play and Their Partnership with Other Managers

So far in this chapter, we have outlined a number of challenges firms face. HR managers can play a key role in terms of helping their firms meet these challenges. For example, utilizing business statistics and surveys, HR managers can measure the engagement and effectiveness of their firms’ workforces. How do employees think, learn, work, solve problems, manage their time, and deal with other peo- ple? By first seeing differences such as these, exploring them, and then discovering how they  can  provide value to the organization, HR managers can leverage those differences.

Similarly, by staying abreast of workforce trends and developments and gathering and analyzing data, HR managers can help theirs firms choose the best strategies when it comes to competing globally, selecting human resource systems that are ideal for a firm and its workers, maximizing productivity, managing benefits, and so on. For example, rather than cutting its health care benefits, HR personnel at Cerner Corp., a midsize Kansas City–based technology company, looked at statistics and other data to find out which diseases its workers were most likely to suffer from and adjusted its employee health-and-wellness programs accordingly. The company has been able to lower its health care costs as a result.

HR managers also serve as valuable partners to other managers, including line managers. Line managers are non-HR managers who are responsible for oversee- ing the work of other employees. Successful organizations combine the experience of line managers with the expertise of HR managers to develop and utilize the talents of employees to their greatest potential. HR programs in particular tend to more successful if they are “owned” by line managers and HR. When employees see HR as the sole owner of a pro- gram, they sometimes interpret it as an administrative or back-office rather than a strategic initiative.

Just as there are different types of line managers who specialize in different func- tions—operations, accounting, marketing, and so forth—there are different types of HR managers who specialize in different functions. Some of these workers specialize in employee training and development, recruitment, or compensation. Other HR employees specialize in studying the effects of industry and occupational trends, or concentrate on labor relations and prepare information for managers to use during negotiations with labor unions. By contrast, an HR generalist might handle all aspects of human resources work depending on his or her employer’s needs. Figure 1.7 shows salary information for some of the HR positions we have discussed. The median pay for HR managers in 2015 was $104,440.

The Bureau of Labor Statistics has forecasted that the number of HR managers needed is expected to grow by 9 percent between 2014 and 2024, which is faster than the

line managers Non-HR managers who are responsible for over- seeing the work of other employees.

Explain the dual role HR managers play in terms of serving both management and staff. Have you ever found yourself in a similar situation at work or school? Were you able to keep both groups happy? How were the challenges you faced similar to those faced by HR managers?

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28 Part 1 Human Resources Management in Perspective

average for all occupations. Nonetheless, we understand that most readers of this book will be line managers and supervisors rather than HR specialists. The text is, therefore, oriented to helping people lead and manage people more effectively, whether they become team leaders, first-line supervisors, HR managers, or chief executive officers.

1.6a Responsibilities of Human Resource Managers The major activities for which HR managers are typically responsible include:

1. Strategic advice and counsel. HR managers often serve as in-house consultants to supervisors, managers, and executives. Given their knowledge of internal employment information and productivity metrics as well as their awareness of external trends such as economic and unemployment data and new legal and regulatory issues, HR managers are an invaluable resource for making deci- sions. In some companies, generally larger ones, chief compliance or ethics officers help employees wade through gray areas when it comes to right and wrong and ensure personnel comply with the laws and regulations that affect their industries. The firm’s top HR manager is in a good position for this job. HR managers are also being relied on more heavily to advise compensation committees, which are more closely scrutinizing executives’ pay than they have in years past.

2. Service. HR managers perform a host of service activities such as recruiting, select- ing, testing, and planning/conducting training programs. Technical expertise in these areas is essential for HR managers as they design and implement talent-man- agement programs.

3. Policy formulation and implementation. HR managers generally propose and draft new policies or policy revisions to cover recurring problems or to prevent antici- pated problems. Ordinarily, the policies are proposed to the senior executives of the organization, who actually issue them. HR managers also monitor the firm’s managers and employees to ensure they follow established HR policies, procedures, and practices. Perhaps more important, they are a resource to whom managers can turn for policy interpretation.

4. Employee advocacy. One of the enduring roles of HR managers is to serve as an employee advocate—listening to employees’ concerns and representing their needs to managers—to make certain that the interests of employees and the interests of the organization are aligned with one another.

Source: U.S. Bureau of Labor Statistics.

Position Annual Wage

Training and development specialists $ 58,210

Labor relations specialists $ 58,820

Compensation, benefits, and job analysis specialists $ 60,850

Training and development managers $ 102,640

Compensation and benefits managers $ 111,430

Positions in HR and Their Median Annual WagesFigure 1.7

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29Chapter 1 The Rewards and Challenges of Human Resources Management

1.6b Competencies Human Resource Managers Require As top executives expect HR managers to assume a broader role in overall organi- zational strategy, many of these managers will need to acquire a complementary set of competencies. These competencies are summarized here and shown graphically in Figure 1.8.

• Business mastery. As we have explained, HR professionals need to know the busi- nesses of their organizations and their strategies thoroughly. This requires an under- standing of an organization’s customers and economic and financial capabilities to help a firm shape and achieve its strategic direction and adjust it as needed. Human resource managers who have good problem-solving skills and are also innovative and creative are a strategic asset to their firms.

• HR mastery. HR professionals are the organization’s behavioral science experts. They should develop expert knowledge in the areas of staffing, development, appraisals, rewards, team building, performance measurement, and communica- tion. Good interpersonal skills are essential.

• Personal credibility. Like other management professionals, HR professionals must establish personal credibility in the eyes of people internal and external to the firm. Credibility and trust are earned by developing good relationships with people both internal and external to the firm, demonstrating the values of the firm, standing up for one’s own beliefs, and dealing with all parties equitably. Highlights in HRM 2 outlines the code of ethical and professional standards HR personnel should follow, according to the Society for Human Resource Management.

Source: Adapted from Arthur Yeung, Wayne Brockbank, and Dave Ulrich, “Lower Cost, Higher Value: Human Resource Function in Transformation,” reprinted with permission from Human Resource Planning, vol. 17, no. 3 (1994). Copyright 1994 by The Human Resource Planning Society, 317 Madison Avenue, Suite 1509, New York, NY 10017, (212) 490 6387.

Business Mastery

HR Mastery

Personal Credibility

Human Resource Competency ModelFigure 1.8

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SHRM Code of Ethical and Professional Standards in Human Resource Management

Highlights in HRM2


Professional Responsibility Core Principle As HR professionals, we are responsible for adding value to the organizations we serve and contributing to the ethical success of those organizations. We accept pro- fessional responsibility for our individual decisions and actions. We are also advocates for the profession by engaging in activities that enhance its credibility and value.

Intent �� To build respect, credibility and strategic importance

for the HR profession within our organizations, the business community, and the communities in which we work.

�� To assist the organizations we serve in achieving their objectives and goals.

�� To inform and educate current and future practitio- ners, the organizations we serve, and the general public about principles and practices that help the profession.

�� To positively influence workplace and recruitment practices.

�� To encourage professional decision-making and responsibility.

�� To encourage social responsibility.

Guidelines 1. Adhere to the highest standards of ethical and

professional behavior.

2. Measure the effectiveness of HR in contributing to or achieving organizational goals.

3. Comply with the law.

4. Work consistent with the values of the profession.

5. Strive to achieve the highest levels of service, perfor- mance and social responsibility.

6. Advocate for the appropriate use and appreciation of human beings as employees.

7. Advocate openly and within the established forums for debate in order to influence decision-making and results.

Professional Development Core Principle As professionals we must strive to meet the highest standards of competence and commit to strengthen our competencies on a continuous basis.

Intent �� To expand our knowledge of human resource man-

agement to further our understanding of how our organizations function.

�� To advance our understanding of how organizations work (“the business of the business”).

Guidelines 1. Pursue formal academic opportunities.

2. Commit to continuous learning, skills development and application of new knowledge related to both human resource management and the organizations we serve.

3. Contribute to the body of knowledge, the evolution of the profession and the growth of individuals through teaching, research and dissemination of knowledge.

4. Pursue certification where available, or comparable measures of competencies and knowledge.

Ethical Leadership Core Principle HR professionals are expected to exhibit individual leader- ship as a role model for maintaining the highest standards of ethical conduct.

Intent �� To set the standard and be an example for others.

�� To earn individual respect and increase our credibility with those we serve.

Guidelines 1. Be ethical; act ethically in every professional interaction.

2. Question pending individual and group actions when necessary to ensure that decisions are ethical and are implemented in an ethical manner.

3. Seek expert guidance if ever in doubt about the ethi- cal propriety of a situation.

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Professional Standards in Human Resource Management or with one's responsibilities and duties as a member of the human resource profession and/or as an employee of any organization.

Guidelines 1. Adhere to and advocate the use of published

policies on conflicts of interest within your organization.

2. Refrain from using your position for personal, material or financial gain or the appearance of such.

3. Refrain from giving or seeking preferential treatment in the human resources processes.

4. Prioritize your obligations to identify conflicts of inter- est or the appearance thereof; when conflicts arise, disclose them to relevant stakeholders.

Use of Information Core Principle HR professionals consider and protect the rights of indi- viduals, especially in the acquisition and dissemination of information while ensuring truthful communications and facilitating informed decision-making.

Intent To build trust among all organization constituents by maxi- mizing the open exchange of information, while eliminating anxieties about inappropriate and/or inaccurate acquisition and sharing of information

Guidelines 1. Acquire and disseminate information through ethical

and responsible means.

2. Ensure only appropriate information is used in deci- sions affecting the employment relationship.

3. Investigate the accuracy and source of information before allowing it to be used in employment related decisions.

4. Maintain current and accurate HR information.

5. Safeguard restricted or confidential information.

6. Take appropriate steps to ensure the accuracy and completeness of all communicated information about HR policies and practices.

7. Take appropriate steps to ensure the accuracy and completeness of all communicated information used in HR-related training.

4. Through teaching and mentoring, champion the development of others as ethical leaders in the profes- sion and in organizations.

Fairness and Justice Core Principle As human resource professionals, we are ethically respon- sible for promoting and fostering fairness and justice for all employees and their organizations.

Intent �� To create and sustain an environment that encourages

all individuals and the organization to reach their full- est potential in a positive and productive manner.

Guidelines 1. Respect the uniqueness and intrinsic worth of every


2. Treat people with dignity, respect and compassion to foster a trusting work environment free of harassment, intimidation, and unlawful discrimination.

3. Ensure that everyone has the opportunity to develop their skills and new competencies.

4. Assure an environment of inclusiveness and a commit- ment to diversity in the organizations we serve.

5. Develop, administer and advocate policies and proce- dures that foster fair, consistent and equitable treat- ment for all.

6. Regardless of personal interests, support decisions made by our organizations that are both ethical and legal.

7. Act in a responsible manner and practice sound man- agement in the country(ies) in which the organiza- tions we serve operate.

Conflicts of Interest Core Principle As HR professionals, we must maintain a high level of trust with our stakeholders. We must protect the interests of our stakeholders as well as our professional integrity and should not engage in activities that create actual, apparent, or potential conflicts of interest.

Intent To avoid activities that are in conflict or may appear to be in conflict with any of the provisions of this Code of Ethical and

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32 Part 1 Human Resources Management in Perspective

Understanding human resource manage- ment practices and issues can help you better com- pete in the marketplace—as an employee, manager, or HR manager. Employees and managers who have a good understanding of their firm’s business can help it achieve its strategies—whatever they may be— through the effective utilization of people and their talents.

An organization’s success increasingly depends on the knowledge, skills, and abilities of its employees. To “compete through people,” organizations have to do a good job of fostering and managing human capital: the knowledge, skills, and capabilities that have value to organizations. Managers must develop strategies for identifying, recruiting, and hiring the best talent available; developing these employees in ways that are firm specific; helping them to generate new ideas and generalize them throughout the company; encourag- ing information sharing; and rewarding collaboration and teamwork among employees.

Globalization has become pervasive in the marketplace. It influences the number and kinds of jobs that are available and requires that organi- zations balance a complicated set of issues related to managing people working under different busi- ness conditions in different geographies, cultures, and legal environments. HR strategies and func- tions have to be adjusted to take into account these differences.

The fast pace of globalization along with corpo- rate scandals over the years have led to a new focus on corporate social responsibility (good citizenship) and sustainability (a company’s ability to produce a good or service without damaging the environment or depleting a resource). Companies are finding out that having a good reputation for pursuing these efforts can enhance their revenues and improve the caliber of talent they are able to attract. One of HR’s leadership roles is to spearhead the development and implementation of corporate citizenship throughout their organizations, especially the fair treatment of workers.

Technology has tended to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill, a shift we refer

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to as moving from touch labor to knowledge work. This displaces some employees and requires that oth- ers be retrained. In addition, information technology has influenced HRM through human resources infor- mation systems (HRIS) that streamline HR processes, make information more readily available to managers and employees, and enable HR departments to focus on the firm’s strategies. The Internet and social media are also affecting how employees are hired, work, and are managed.

Productivity can be defined as “the output gained from a fixed amount of inputs.” Organiza- tions can increase their productivity either by reduc- ing their inputs (the cost approach) or by increasing the amount that employees produce by adding more human and/or physical capital to the process. Companies such as Southwest Airlines, Nucor, and the manufacturing and technology firm Danaher achieve low costs in their industries not because they scrimp on employees but because they are the most productive.

To maximize productivity and contain costs, organizations have to manage the size of their work- force. Some of the techniques used to do so are off- shoring, outsourcing, downsizing, furloughing, using part-time employees, and leasing them from profes- sional employment agencies. HR’s role is to not only implement these programs but consider the pros and cons of programs such as these and how they might affect a company’s ability to compete, especially if they lead to the loss of talented staff members.

The workforce is becoming increasingly diverse, and organizations are having to do more to address employee concerns and to maximize the benefit of different kinds of employees. HR manag- ers have to keep abreast of the educational abilities of the talent available to their organization. Employee rights, privacy concerns, attitudes toward work, and efforts to balance work and family are becoming more important to workers as the cultural dynam- ics in the labor force shift. Companies are finding that accommodating employees’ individual needs as a result of these shifts is a powerful way to attract and retain top-caliber people and improve employee engagement.

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33Chapter 1 The Rewards and Challenges of Human Resources Management

HR managers play a number of important roles when it comes to meeting the challenges their firms face; they are called for strategic planning, advice and ethics counsel, various service activi- ties, policy formulation and implementation, and employee advocacy. To perform these roles effec- tively, HR managers must have a deep understanding of their firm’s operational, financial, and personnel capabilities and work with line managers and execu- tive managers above and below them. HR managers

LO 6 who do and are creative and innovative can help shape a firm’s strategies so as to respond successfully to changes in the marketplace. Ultimately, manag- ing people is rarely the exclusive responsibility of the HR function. Every manager’s job involves managing people. Consequently, successful companies com- bine the expertise of HR specialists with the expe- rience of line managers and executives to develop and use the talents of employees to their greatest potential.


corporate social responsibility


employee engagement

employee leasing



human capital

human resources information system (HRIS)

human resources management (HRM)

knowledge workers

line managers



organizational culture



workforce (HR) analytics

Key Terms

Are people always an organization’s most valu- able asset? Why or why not? Suppose your boss asked you to summarize the major people- related concerns related to opening an office in India. What issues would be on your list?

Name a company you hope to work for some- day. What is its track record in terms of cor- porate social responsibility and sustainability? Are these factors important to you? Why or why not?

Will technology eliminate the need for human resource managers?

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Do cost-containment pressures work against the effective management of people? Why or why not?

What are the pros and cons of having a more diverse workforce? Is the United States in a better position to compete globally because of its diverse population?

In your opinion, what is the most important role HR managers play?

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Discussion Questions

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34 Part 1 Human Resources Management in Perspective

CASE STUDY New HR Strategy Makes Lloyd’s a “Best Company”1

After more than 300 years in business, a few years ago, the global insurer Lloyd’s of London finally set out to establish its first true HR strategy, starting with the hiring of HR Director Suzy Black. “I was brought in to trans- form the HR function from one modeled on an old-style personnel office to a function that is more cutting edge, business focused, and value adding,” says Black.

Black’s first order of business was to evaluate the current state of affairs, particularly how the corpora- tion’s senior managers perceived the HR role. With this information in hand, Black and her team began to develop an overarching strategic agenda as well as specific tactics, addressing everything from recruit- ment to performance management to basic policies to rewards and compensation.

Changing longtime employees’ perception of HR took a bit of convincing, but employees quickly began to recognize the value of Black’s actions. Gradually, they could see how the HR strategies were effectively creating conditions in which they could develop in their careers, be successful, and find meaning and value in their work. Today, Lloyd’s employees list the company’s challeng- ing work environment, healthy incentive programs, and meaningful community outreach programs among the key reasons they enjoy working for the insurance giant.

Black’s efforts also enhanced Lloyd’s position as a desirable place to work. The average tenure of employ- ees at the company is, incredibly, 21 years. The insurer has been named one of the “Top 100 Best Companies to Work For” (in the United Kingdom) by the Sunday Times and hailed as one of the United Kingdom’s Top 40 Business Brands by an independent researcher.

Each year, new graduates scramble to get hired by Lloyd’s. These new hires rotate through three to four different assignments within Lloyd’s so they get a per- spective of the company and the insurance market as well as a better idea of the departments in which they would like to ultimately work. Lloyd’s also offers a

graduate program in insurance, apprenticeships, and internships.

Work-life balance at the company is good. Although sometimes extra hours have to be worked, that’s not the norm. Working mothers can choose to work part or full time. In addition, the company offers employees time to do charity and nonwork-related activities to further their personal growth, says Black. “Employees are very sophisticated people, and they have more drivers than just wanting to earn money,” she notes.

Ironically, Black’s position was the first HR posi- tion she had ever held, having risen through the ranks in other arenas in business. But her experience has given her a clear definition of the ideal characteris- tics of the HR professionals. “They must understand change and transformation, excel at operations, and balance tactical and strategic thinking and acting,” she says. “They will have to be able to manage and navigate organizational complexity and ambiguities and not be afraid to say no occasionally in order to establish appropriate boundaries with the business.”

Questions 1. What skills does Black think employees need, to

work successfully in the area of HR? 2. What are some of the outcomes of the company’s

new HR strategy? 3. What do you think might be some of the challenges

of establishing HR policies for a global company? 4. What types of situations do you think might

require an HR manager to say “no”? Sources: “Lloyd’s of London Says India Reinsurance Branch to Open by April,” Reuters (January 18, 2017),; “Careers,” (January 17, 2017),; “Lloyd’s: A Top Place to Work,” (March 16, 2011),; Helen William, “City Slicker,” Personnel Today (August 11, 2009): 10–11; Digby Morgan Human Resourcefulness Newsletter (February 2010),; company website:

CASE STUDY Shell’s Top Recruiter Takes His Cues from Marketing2

When Navjot Singh joined the global oil-and-gas company Shell, the company was facing an extraor- dinary challenge: The rate at which Shell’s engineers

were retiring meant the global firm needed to more than triple the number of new recruits it hired, which was about 2,500, to nearly 8,000. Yet at the time, Shell

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35Chapter 1 The Rewards and Challenges of Human Resources Management

was not considered an employer of choice. The com- pany needed to project a new image—fast. Says Singh, “In the same way marketers know they need to adver- tise to be a market leader, HR had to know how to create an employer brand. Marketing is the only way to ensure customers buy products. It was also the only way to ensure Shell got the best people coming to us first.”

“Wait! Why would Shell’s HR guy be talking about marketing?” you might be wondering. As both an HR and marketing expert, Singh saw a powerful synergy between the two. “I’m 50 percent a marketer—the rest is HR, communications, and recruitment,” says Singh. Singh initially started out as VP of customer relationship management, but quickly joined the HR team when he recognized Shell’s emerging need for new talent and the immense potential for him to use classic marketing  techniques to help the com- pany achieve its objectives. His vision, skill sets, and experience  were a perfect match for the company’s situation.

So in Singh’s mind, addressing the company’s need for new talent meant building a brand as an employer, which in turn meant creating a cohesive message. But Shell’s global recruiting approach was anything but cohesive. “At the time we had 1,200 recruitment systems, 35 recruitment companies, and 400 executive search companies working for us,” he recalls. “I attended a careers event at Cambridge Uni- versity where there were three Shell stands beside each other—one from the UK, one from Malaysia, and another from Nigeria. This was a fragmented approach and tough for candidates to understand.” Shell needed to create a unified outreach program if it was going to meet its need for numbers while ful- filling its desire for a global talent pool. The company recruits from among 90 different nationalities each year because it recognizes the benefits of cultural diversity.

“It’s not enough to tell candidates why they should join Shell. We needed to demonstrate such reasons through the interviewing process and the whole candidate experience,” explains Singh. “A motivating candidate experience—from the moment someone hears about Shell to the moment they have joined us—requires a coordinated approach across all the recruitment disciplines: marketing, opera- tions, recruiters and line managers all need to work together.” It also necessitated personnel take less of a

more Shell-concentric perspective to one that focused on candidates.

Singh and his team set about applying various marketing techniques to the recruitment process, which have since resulted in an 80 percent cut in recruitment costs and a 20 percent reduction in the time to hire new staff. To attract talented gradu- ates, Shell annually sponsors a popular compe- tition that challenges student teams around the world to solve  various food, water, and alternative energy problems. About a thousand teams compete annually.

The efforts have paid off. Shell has won more than 75 awards for its unique HR strategy. Better yet, in a recent global survey of 8,400 people in the oil-and- gas sector, Shell received the most mentions from respondents who were asked to name the employers they would most like to work for.

Despite Shell’s recruiting success, Singh believes the war for talent will be ongoing: “In the future, companies will have to apply for skilled people to work for them rather than candidates applying to work at an organi- zation. HR must still realize the strategic value it can bring.”

Questions 1. What functions of HRM are similar to marketing

functions? How can thinking about “marketing” a company’s jobs improve the strategic focus of human resources personnel?

2. If you were planning to use marketing strate- gies to “brand” a company as an employer of choice, what are some of the factors you would consider?

3. Do you agree with Singh’s statement that in the future, companies will have to apply for skilled people to work for them rather than candidates applying to work at an organization? Why or why not?

Sources: Jon Mainwaring, “Shell Q&A: What Makes an Ideal Employer in Oil, Gas?” Rigzone (November 16, 2016),; Jon Mainwaring, “Shell Takes First Place in Rigzone’s Inaugural Ideal Employer Survey,” Rigzone (November 16, 2016), http://www.rigzone. com; Don Wood, “Lateral Thinking,” Human Resources (January 2010): 12–13; Christopher Van Mossevelde, “Views from the Top,” Employer Branding Today (April 16, 2009), http://www.employerbrandingtoday .com; Peter Crush, “Shell UK Combines HR and Marketing to Sell the Brand,” HR Magazine (August 25, 2009),; Navjot Singh and Ana Maria Santos, “How Shell Recruited More for Less,” Marketing Society (July 9, 2012),

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36 Part 1 Human Resources Management in Perspective

1. T. J. Watson, Jr. A Business and Its Beliefs: The Ideas That Helped Build IBM (New York: McGraw-Hill, 1963).

2. Donald C. Busi, “Assignment Reviews (ARs): Moving toward Measuring Your Most Valuable Asset,” Supervision 66, no. 1 (January 2005): 3–7.

3. David Lepak and Scott Snell, “Managing the Human Resource Architecture for Knowledge-Based Competi- tion,” in S. Jackson, M. Hitt, and A. DeNisi (eds.), Managing Knowledge for Sustained Competitive Advantage: Designing Strategies for Effective Human Resource Management, SIOP Scientific Frontiers Series (San Francisco: John Wiley & Sons, 2003), 127–54; David Lepak and Scott Snell, “Exam- ining the Human Resource Architecture: The Relationship among Human Capital, Employment, and Human Resource Configurations,” Journal of Management 28, no. 4 (2002): 517–43; Steve Bates, “Study Links HR Practices with the Bottom Line,” HRMagazine 46, no. 12 (December 2001): 14; Ann Pomeroy, “Cooking Up Innovation: When It Comes to Helping Employees Create New Products and Services, HR’s Efforts Are a Key Ingredient,” HRMagazine 49, no. 11 (November 2004): 46–54.

4. Dave Ulrich, Steve Kerr, and Ron Ashkenas, The GE Work- Out: How to Implement GE’s Revolutionary Method for Busting Bureaucracy & Attacking Organizational Problems (New York: McGraw-Hill Professional Publishing, 2002).

5. John P. Kotter, “Ten Observations,” Executive Excellence 16, no. 8 (1999): 15–16.

6. Jared Lindzon, “Welcome to a New Era of Human Resources,” Fast Company (May 20, 2015),

7. “Best Countries,” U.S. News & World Report (2016), http://

8. Ellen Sheng, “The Five Biggest Chinese Investments in the U.S. in 2016,” Forbes (December 21, 2016),

9. Candice Choi and Bruce Schreiner, “Beam Being Acquired by Japan’s Suntory,” Associated Press (January 13, 2014), http://; “Beermaker Eyes Chinese Factories,” Fort Worth Star- Telegram (December 28, 2010): 3C; Susan Meisinger, “Going Global: A Smart Move for HR Professionals,” HRMagazine 49, no. 3 (March 2004): 6; “AB InBev Completes ModeloGrupo Deal,” St. Louis Post-Dispatch (June 4, 2013), http://www.stl-

10. “U.K. Expresses Keenness to Have Free Trade Agreement with  India,” The Tribune (January 18, 2017), http://www.

11. Laura McKnight, “For Companies, Doing Good Is Good Business,” Kansas City Star (December 26, 2010), http://www.

12. Jeff Tanner and Mary Anne Raymond, Principles of Marketing (Nyack, NY: FlatWorld Knowledge, 2010), Chapter 10.

Notes and References

13. Nancy R. Lockwood, “Corporate Social Responsibility: HR’s Leadership Role,” HRMagazine 49, no. 2 (December 2004): S1–11.

14. Carol Carter, Keys to Business Communication (Upper Saddle River, NJ: Pearson, 2012), 414.

15. “Text Messaging Curtailed at Bank,” Wall Street Journal (January 14–15, 2017): B3.

16. Lauren Webber, “‘Routine Jobs’ Are Disappearing,” Wall Street Journal (January 3, 2017),

17. “China Engineers Next Great Leap with Wave of ‘Knowledge Workers,’ ” Milwaukee Journal Sentinel (December 31, 2003),; “Edward Yourdon’s New Book Helps ‘Knowledge Workers’ Put Emotion Aside to Look at the Facts of the New Economic Reality,” PR Newswire (October 4, 2004); Marshall Goldsmith, “Supervisors of the Smart,” BRW 30, no. 20 (May 22, 2008): 57–57.

18. Christopher Mims, “Technology’s Long-Term Toll on the Middle Class,” Wall Street Journal (January 23, 2017): B1–B4.

19. Melissa Korn, “Imagine Discovering Your Teaching Assistant Is a Robot,” Wall Street Journal (May 6, 2016),

20. Steve Lohr, “Robots Will Take Jobs, but Not as Fast as Some Fear, New Report Say,” New York Times (January 12, 2017),

21. Ben Worthen, “Measuring the ROI of Training,” CIO 14, no. 9 (February 15, 2001): 128–36; Hashi Syedain, “Out of this World,” People Management 14, no. 8 (April 17, 2008): 20–24.

22. Sarah Castellanos, “Augmented Reality in the Workplace,” Wall Street Journal (December 13, 2016): B4.

23. Scott A. Snell, Donna Stueber, and David P. Lepak, “Virtual HR Departments: Getting Out of the Middle,” in R. L. Heneman and D. B. Greenberger (eds.), Human Resource Management in Virtual Organizations (Columbus, OH: Information Age Pub- lishing, 2002): 81–99; Samuel Greengard, “How to Fulfill Tech- nology’s Promise,” Workforce, HR Software Insights (February 1999): S10–18.

24. Drew Robb, “Building a Better Workforce: Performance Management Software Can Help You Identify and Develop High-Performing Workers,” HRMagazine 49, no. 10 (October 2004): 86–92.

25. Josh Bersin, “The Datification of Human Resources,” Forbes (July 19, 2013),

26. Robb, “Building a Better Workforce,” 86–92; “How to Imple- ment an Effective Process for a New HR Management Sys- tem,” HRFocus (January 2005): 3–4; “New Study Finds HRIS Key to Reducing Costs,” Payroll Managers Report 7, no. 5 (May 2007): 13.

27. Bruce Stokes, “Is There a Future for ‘Made in America,’ ” The Atlantic (December 9, 2010),

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37Chapter 1 The Rewards and Challenges of Human Resources Management

28. Patrick Barta and Andrew Caffrey, “Productivity Leap Shows Potential of U.S. Economy—Rise at 8.6 Percent Pace, Positive for Profits, Doesn’t Bode Very Well for Employment,” The Wall Street Journal (May 8, 2002): A1; Jon E. Hilsenrath, “The Economy: Big U.S. Service Sectors Boosted Late 1990s Surge in Productivity,” The Wall Street Journal (April 22, 2002): A2; Karen Lowry Miller, “Economy: Out of Steam—A Dip in U.S. Productivity Provokes Anxious Questions,” Newsweek Inter- national (February 21, 2005): 34; Milan Yager, “Outsource to Gain Human Resources Expertise,” Hotel & Motel Manage- ment 223, no. 7 (April 21, 2008): 14.

29. Pete Engardio, Michael Arndt, and Dean Foust, “The Future of Outsourcing,” BusinessWeek (January 30, 2006): 50–58.

30. John Sullivan, “Employee Furloughs Can Be a Bad Alternative to Layoffs,” (February 9, 2009),

31. Mike Stobbe, “Dieting Like It’s Your Job: Does Paying for Healthy Habits Work?” USA Today (June 1, 2010), http://; Tom Murphy, “To Cut Health Costs, Firms Target Spousal Benefits,” Fort Worth Star-Telegram (September 16, 2013): 1D.

32. Mitra Toossi, “Labor Force Projections to 2024: The Labor Force Is Growing, But Slowly,” Monthly Labor Review (December 2015): 3–16.

33. Ibid. 34. Jeffrey S. Passel and D’Vera Cohn, “Share of Unauthorized

Immigrant Workers in Production Construction Jobs Falls, since 2007,” Pew Research Center (March 26, 2015), www.

35. Irwin Speizer, “Diversity on the Menu: Rachelle Hood, Denny’s Chief Diversity Officer, Has Boosted the Company’s Image. But That Hasn’t Sold More Breakfasts,” Workforce Management 83, no. 12 (November 1, 2004): 41; Patrick Purcell, “Older Work- ers: Employment and Retirement Trends,” Journal of Pension Planning & Compliance 34, no. 1 (Spring 2008): 32–48.

36. U.S. Bureau of Labor Statistics, “Occupational Employment,” Occupational Outlook Quarterly Online (Winter 2013–2014),

37. Ibid.

38. U.S. Bureau of Labor Statistics, “Women in the Labor Force: A Databook,” BLS Reports (December 2015), http://www.bls. gov.

39. Kathleen Iverson, “Managing for Effective Workforce Diver- sity,” Cornell Hotel and Restaurant Administration Quar- terly 41, no. 2 (April 2000): 31–38; Gail Johnson, “Time to Broaden Diversity Training,” Training 41, no. 9 (September 2004): 16.

40. The U.S. Department of Labor’s Bureau of Labor Statis- tics  keeps up-to-date projections and percentages on educational requirements for different kinds of jobs. Inter- ested  readers can access this information at http://www.; Louis Uchitelle, “College Degree Still Pays, but It’s  Leveling Off,” The New York Times (January 13, 2005): C1.

41. Lyndsey Layton, “U. S. Adults Lag Most Countries in Literacy and Computer Skills,” Washington Post (October 8, 2013),

42. “Avoiding Identity Theft,” Aftermarket Business 114, no. 12 (December 2004): 10.

43. “Your Rights: Surveillance at Work,” Workplace Fairness (December 2010),

44. Jeanne Meister, “The Employee Experience Is the Future of Work,” Forbes (January 5, 2017),; Rachel Emma Silverman, “Workplace Democracy Catches On, Wall Street Journal (March 28, 2016): B5.

45. Ashley Surdin, “Benefits for Same-Sex Couples Expanding,” Washington Post (November 27, 2009), http://www.washing-

46. Todd Raphael, “The Drive to Down-shifting,” Workforce 80, no. 10 (October 2001): 23; Jim Olsztynski, “Flexible Work Schedules May Make More Sense: One in Six Americans Qualifies as a Caregiver Who May Benefit from Flextime,” National Driller 26, no. 2 (February 2005): 16–19; Karen Springen, “Cutting Back Your Hours,” Newsweek, 151, no. 19 (May 12, 2008): 60.

47. Leah Carlson, “Flextime Elevated to National Issue,” Employee Benefit News (September 15, 2004): 1–16.

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Strategy and Human Resources Planning

Learning Outcomes After studying this chapter, you should be able to

Explain how human resources planning and a firm’s mission, vision, and values are integrally linked to its strategy.

Understand how an organization’s external environ- ment influences its strategic planning.

Understand why it is important for an organization to do an internal resource analysis.

LO 1

LO 2

LO 3

Explain the linkages between competitive strategies and HR.

Understand what is required for a firm to success- fully execute a strategy and assess its effectiveness.

Describe how firms evaluate their strategies and HR execution.

LO 4

LO 5

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rt D

al y/

G et

ty Im

ag es

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39Chapter 2 Strategy and Human Resources Planning

O ne of the clichés about the annual reports of companies is that they often claim that “people are our most important asset.” Do you believe this is true? Historically managers often have not acted as though they themselves really believed it. Too

often the focus has been on minimizing the number of a firm’s employees rather than strategically utilizing their talents.

But for many firms, this is changing. Surveys show that 92 percent of chief financial officers now believe human capital affects an organization’s customer service, 82 percent believe it affects profitability, and 72 percent believe it affects innovation.1 And in a sur- vey by the consulting firm Deloitte, nearly 80 percent of corporate executives said the importance of HRM in their firms has grown substantially over the years, and two-thirds said that HR expenditures are now viewed as a strategic investment rather than simply a cost to be minimized.

Forward-thinking companies are also demanding their human resource groups push past short-term projections and provide detailed forecasts for needs and the associated costs over a 2- to 3-year horizon. Even small companies are realizing that their employ- ees are the key to ensuring their ability to compete and survive. As Apple’s legendary founder Steve Jobs put it: “Hiring the best is your most important task. ”

2.1 Strategic Planning and Human Resources Planning

As we explained in Chapter 1, “competing through people” is the theme for this book. But the idea remains only a premise for action until put it into practice. To deliver on this promise, we need to understand some of the systems and processes in organizations that link human resources management with strategic management. A few definitions may be helpful upfront.

First of all, strategic planning involves a set of procedures for making decisions about the organization’s long-term goals and strategies. In this chapter, we discuss stra- tegic plans as having a strong external orientation that covers major portions of the organization. The plans especially focus on how the organization will position itself relative to its competitors, to ensure its long-term survival, create value, and grow. Human resources planning (HRP), by comparison, is the process of anticipating and providing for the movement of people into, within, and out of an organization. Overall, its purpose is to help managers deploy their human resources as effectively as pos- sible, where and when they are needed, to accomplish the organization’s goals. Strategic human resources management combines strategic planning and HR planning. It can be thought of as the pattern of human resource deployments and activities that enable an organization to achieve its strategic goals.

HR planning is an essential activity of organizations. Consider CNA Financial Corp., a Chicago-based insurance company. CNA Financial discovered via HR planning that it would run short of underwriters—a key skill pool in the company—in just 2 years’ time if their turnover rates continued at their current pace. The global strategies firms

strategic planning Procedures for making decisions about the organization’s long-term goals and strategies. human resources planning (HRP) The process of anticipat- ing and providing for the movement of people into, within, and out of an organization. strategic human resources management The pattern of human resources deployments and activities that enable an organization to achieve its strategic goals.

Why is HR planning integral to a firm’s strategic planning? As an HR professional, what do you think you could do to tie the two functions together? What role might the firm’s mission, vision, and values play?

LO 1

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40 Part 1 Human Resources Management in Perspective

increasingly pursue include mergers, joint ventures, offshoring, automating, relocating plants, and planning product innovations, thus making HR planning more critical and more complex for managers.

According to Walt Cleaver, an HR strategist and president of the Cleaver Con- sulting Group, increased global competitiveness in many industries has led to the commoditization of products based on price, which is making talent the “great dif- ferentiator” among firms. As we explained in Chapter 1, it is relatively easy for a competitor to copy your product and make it more cheaply. But duplicating the tal- ents of your employees is much more difficult.2 Globalization and shifts in the com- position of the labor force that are occurring also require that HR managers become more involved in planning because these changes affect the full range of a company’s HR practices (such as employee recruitment, selection, training, compensation, and motivation).

2-1a Strategic Planning and HR Planning: Linking the Processes

Good HR managers “marry” human resources planning to the strategic planning for their organizations as a whole. Human resources planning relates to strategic planning in several ways, but at a fundamental level, we can focus on two issues: strategy formulation and strategy execution. Human resources planning provides inputs into  the strategic formulation process in terms of what is possible, that is, whether a firm has the types and numbers of people available to pursue a given strategy. For  example, when Barnes & Noble executives contemplated the move into web-based commerce to compete with, one of the issues they had to address was whether they had the talent needed to succeed in that arena. Barnes &  Nobles had to  go through the same exercise again prior to launching its Nook reader.

In addition to strategy formulation, HRP is important in terms of strategy execu- tion. In other words, once the firm has devised its strategy, the company’s executives must make resource allocation decisions to implement that strategy, including decisions related to the firm’s structure, processes, and human capital.3 3M’s managers have the two aspects down to a science. Not only does the company engage in elaborate work- force planning, it has figured out how to utilize its employees to expand into markets worldwide. Once primarily a domestic company, today most of its products are sold abroad. The company is able to project the demand for any workforce category, in any business, in any part of the world.4

Figure 2.1, which will serve as a map for this chapter’s discussion, shows how com- panies align their HRP and strategic planning in this way: A firm’s business strategy, along with its overall purpose, goals, and values, establishes the context for its HR strat- egy and the number and types of people, the skills they must have, and the like. In other words, the firm’s HR strategy follows the business strategy and helps to execute it: If the firm’s strategy is based on efficiency, its HR strategy will focus on practices that encourage employees to look for better, faster, and more efficient ways for the company to do business. If the firm’s strategy is based on innovation, its HR strategy will involve encouraging and incentivizing employees to be creative and innovative. For example, at GE, employees receive monetary incentives for developing and patenting products for the company.

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41Chapter 2 Strategy and Human Resources Planning

Although the firm’s business strategy affects its HR strategy, it is not a one-way street. The type of people an organization has, and the culture and climate of the com- pany, in turn will constrain what the firm is able to achieve strategically. So, HR plan- ning and strategic planning are integral to one another: Strategic planning decisions affect—and are affected by—HR concerns. As James Walker, a noted HRP expert, puts it, “Today, virtually all business issues have people implications; all human resource issues have business implications.”

Researchers Douglas Conger and Jeff Ready have studied businesses that lacked the talent to get their strategies off the ground. To underscore how important talent is to firms, they point to an instance in which a London real estate developer had to pass on a project worth more than $0.5 billion of reconstruction work because it hadn’t groomed anyone capable of leading the project. Talent problems are all too common in firms.



A n

a ly

si s


• Identify purpose and scope of organization • Clarify its long-term direction • Establish its enduring beliefs and principles

• Assess its opportunities and threats (OT) • Conduct environmental scanning (legal, etc.) • Analyze the industry and competitors

• Analyze firm’s strengths and weaknesses (SW) • Analyze firm’s core competencies • Analyze firm’s resources: people, process, and systems

• Develop corporate strategy • Develop business strategy

• Design structure, systems, and so on • Allocate resources • Functional strategy: ensure alignment

• Evaluate benchmarking efforts • Ensure alignment is achieved • Encourage workforce agility and flexibility

• Capture underlying business philosophy • Establish cultural foundation • Guide ethical codes of conduct

• Gauge demographic trends • Gauge the external supply of labor • Benchmark competitors’ HR metrics

• Analyze workforce’s culture, competencies, and composition • Forecast the demand for employees • Forecast the supply of employees

• Establish productivity and efficiency goals • Establish quality, service, speed, and innovation goals for workforce • Reconcile supply and demand via hiring, downsizing, layoffs, etc.

• Ensure vertical and horizontal fit • Use staffing, training, rewards, and so on to motivate employees to achieve the strategy

• Maintain human capital metrics • Utilize balanced scorecard

External Analysis

Internal Analysis

Strategy Formulation

Strategy Execution

Mission, Vision and Values


Linking Strategic Planning and Human ResourcesFigure 2.1

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42 Part 1 Human Resources Management in Perspective

2.2 Step One: Mission, Vision, and Values When you entered college, you probably thought a lot about what you should do with your life. Believe it or not, firms go through the same sort of search process when they develop their strategic plans. The first step in strategic planning is establishing a mission, vision, and values for the organization. The mission is the basic purpose of the organiza- tion, as well as its scope of operations. It is a statement of the organization’s reason for existing and the shared purpose of the people in the organization. The mission often is described in terms of the customers the firm serves. Depending on the scope of the organization, the mission may be broad or narrow. For example, the mission of Google is “to organize the world’s information and make it universally accessible and useful.”5

The strategic vision of the organization moves beyond the mission statement to provide a perspective on where the company is headed and what the organization can become in the future. Although the terms mission and vision often are used interchangeably, the vision statement ideally clarifies the long-term direction of the company and its strategic intent.

The organization’s core values are the strong enduring beliefs and principles that guide a firm’s decisions and are the foundation of its corporate culture.6 The following are the core values for the organic grocer Whole Foods:

• We sell the highest quality natural and organic products available. • We satisfy, delight, and nourish our customers. • We support team member happiness and excellence. • We create wealth through profits and growth. • We serve and support our local and global communities. • We practice and advance environmental stewardship. • We create ongoing win-win partnerships with our suppliers. • We promote the health of our stakeholders through healthy eating education.

Core values such as these indicate how a company intends to act toward its custom- ers, employees, and the public in general.

2-2a Developing a Mission Statement How as a manager or business owner would you begin to craft the business’s mission statement? One way to begin would be to ask yourself the following questions and write down your answers to them:

• What is my organization’s reason for being? What need do we fulfill that isn’t already being met by another firm or could be better met?

• For whom will the firm fulfill the need? Who are our customers? • Where is our market and our customers? Where will operate? Locally, geographi-

cally, or globally? • What core values do the people in my organization share as part of our mission? • How do these values differentiate us from other companies?

Once an organization or entrepreneur has the answer to these questions, they can begin to draft a mission statement that synthesizes the information. For example, Uber’s mission, or vision statement, is to “make transportation as reliable as running water, everywhere, for everyone.”

mission The basic purpose of the organization as well as its scope of operations.

strategic vision A statement about where athe company is going and what it can become in the future.

core values The strong and enduring beliefs and principles that guide a firm’s deci- sions and are the foun- dation of its corporate culture.

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43Chapter 2 Strategy and Human Resources Planning

2-2b HR’s Role in Establishing and Reinforcing a Firm’s Mission, Vision, and Values

HR managers play a key role when it comes to formulating, vetting, and fine-tuning a firm’s mission, vision, and values. Does the mission statement accurately reflect employ- ees’ beliefs or only upper management’s? Does it accurately reflect the public’s percep- tion of the organization? If not, how should it be changed? A firm’s mission statement keeps everyone on the “same page” and heading in the same direction. Hence, it needs to be accurate.

HR managers help embody the firm’s mission, vision, and values within the orga- nization by doing the following:

• Communicating them frequently, both informally and formally, via verbal and written communications such as employee meetings, emails, newsletters, bul- letins boards, the firm’s website, annual report, and employee orientations. Nordstrom’s asks its employees to describe to new hires work incidents that demonstrate how they put the retailer’s mission, vision, values into action. Doing so is more powerful and motivating than merely stating them or putting them into print.

• Recruiting and hiring employees whose values are consistent with the organization. This can also help organizations attract Generation Z and millennial workers, who place a high priority on finding employment meaningful to them and aligned with their goals and values in life.

• Translating the mission, vision, and values into job descriptions and specific behav- iors and recognizing and rewarding employees based on them.

Like organizations themselves, firms have to be prepared to change their mission statements as conditions change over time. Monitoring those changes requires a firm to continually scan the environment for threats and opportunities, which we discuss next.

2-3 Step Two: External Analysis Before you decided on your major, you probably looked at information about possible careers—whether there were many opportunities in those careers—or not. Were certain fields becoming more demanding than others or more profitable than others? Firms do something similar. On an ongoing basis, they analyze external opportunities and threats. A comparison of one’s strengths, weaknesses, opportunities, and threats is referred to as a SWOT analysis. A SWOT analysis summarizes the major facts and forecasts derived from external and internal analyses. We’ll discuss how to do a SWOT analysis later in the chapter. Environmental scanning is the systematic monitoring of major external forces influencing the organization, including forces in the business environment—which is sometimes called the remote environment—and the competitive environment, which we will discuss.7

Changes in the external environment directly impact the way organizations are run and people are managed. Some of these changes represent opportunities, and some of them represent real threats to the organization. By continuously scanning the environment for changes, managers can anticipate their impact and make adjustments early.

SWOT analysis A comparison of one’s strengths, weaknesses, opportunities, and threats for strategy formulation purposes.

environmental scanning Systematic monitoring of the major external forces influencing the organization.

What external factors in the environment do you think firms are most likely to overlook when formulating their business strategies? How can an HR man- ager help its executive team get a fuller pic- ture of the competitive environment in which a company operates?

LO 2

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44 Part 1 Human Resources Management in Perspective

2-3a The Business Environment A firm’s business environment consists of all of the external factors in the general environment—factors a firm cannot directly control but that can affect its strategy. The business environment includes forces that generally affect most, if not all, firms—forces over which they have virtually no control. Economic changes, technological changes, demographic changes, and legal and regulatory changes are examples. By and large, a firm can only adapt to these changes rather than influence them. In the next sections, we will look at these factors and how HR personnel can help their companies understand the business environment.

Economic Changes All firms must react to local, regional, and global economic conditions. During eco- nomic booms, firms are more likely to expand. During recessions they generally con- tract. But this isn’t true for all businesses. It depends upon their strategies. Dollar stores, such as Family Dollar and Dollar Tree, usually see their sales and stock prices rise during recessions as consumers cut back on their spending at regular retail stores. During the last recession, Family Dollar and Dollar Tree opened thousands of new stores and hired thousands of employees. Meanwhile, many other retailers scaled back their operations.8

Ecological Changes Closely related to the economy are ecological conditions. To deal with climate change, farmers around the globe have had to adopt environmentally conscious techniques to combat erosion and depleted aquifers. No-till farming is one such technique: With this method, farmers don’t ever till up the soil. Doing so depletes it of moisture and nutrients. Instead, growers just plant over any old plants from the year before.9

The catastrophic tsunami that struck Japan in 2011 is another example of an eco- logical change that affected thousands of different types of businesses and supply chains worldwide. One Japanese semiconductor manufacturer recovered more quickly than its peers from the tsunami, thanks to a strategy it had developed in the aftermath of an earlier earthquake: The company had created flexible manufacturing capabilities that allowed it to shift production to unaffected facilities in other parts of Japan and Asia.10

Technological Changes Like economic and ecological changes, technological changes such as automation have a broad effect on businesses—changes that they have had to adapt to strategically. Many technology experts expect that in the future, 3D printers and other technological advances will dramatically change what products get made, how they get made, and by whom. The Internet, of course, has affected businesses in nearly every industry and in nearly every country. Think about travel agents. For decades they used to be the key resource people used to search for flights, hotels, rental cars, and the like. However, with the advent of online reservation systems, travel agents have had to adapt their approach. Today, they are more likely to compete based on the service they provide and the exper- tise they have about particular locations. Likewise, newspapers have had to adjust from print to digital subscribers and adjust their sales and revenues strategies to match the new medium or go out of business.

Demographic and Social Changes Chapter 1 discussed demographic and labor market trends, including the age, composition, and literacy of the labor market, and immigration. From a strategic standpoint, changes in the labor supply can limit the strategies available to firms.

business environment Factors in the external environment that a firm cannot directly control but that can affect its strategy and performance.

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45Chapter 2 Strategy and Human Resources Planning

High-growth companies in particular may find it difficult to find the talent they need to expand their businesses. Unemployment rates vary by sector, but the short- age of talent in high-skill jobs continues to create strategic challenges for firms. The U.S. Department of Labor indicates that 11 of the 15 fastest growing occupations between now and 2024 will require some level of postsecondary education. These labor force trends illustrate the importance of monitoring demographic changes as a part of environmental scanning. It is a core responsibility of human resource managers.

Likewise, societal attitudes are constantly changing the business landscape for firms in all industries. We talked about social changes in Chapter 1 such as people’s chang- ing priorities toward work, the need for child care, elder care, adequate wages and job security, educational priorities, and environmental and sustainability concerns. How do these changes affect a firm’s strategies, and HR strategies in particular?

Consider Walmart. For decades, selling products at low prices has been Walmart’s main focus. But now the retailer and others are facing increasing social pressure to provide better pay for employees as are many fast-food companies. Offering low prices yet higher employee pay will be a strategic challenge for them.

Legal and Regulatory Changes Finally, government and legislative issues, including laws and administrative rulings, have a broad effect on the business environment. Any one change can require firms and entire industries to dramatically adjust their strategic directions. For example, the U.S. government put a ban on slaughtering of horses in 2006. U.S. horse slaughter- houses were forced to exit this line of business or move their plants abroad, such as to Mexico—not an inexpensive proposition. And it’s not just U.S. laws and regulations that are a part of the business environment, but the laws of other countries as well that affect businesses. Until recent years, Apple and other 4G smartphone makers were unable to sell devices in the lucrative Chinese market, because the Chinese government hadn’t granted the country’s major telecommunications companies licenses to build 4G networks there.11

2-3b The Competitive Environment The competitive environment is narrower than the business environment, and firms have a greater ability to affect it. As Figure 2.2 shows, the competitive environment consists of a firm’s specific industry, including the industry’s customers, rival firms, new entrants, substitutes, and suppliers. Firms analyze their competitive environment to adapt to or influence the nature of competition. A general rule of thumb about this analysis is: The more power each of these forces has, the less profitable (and therefore attractive) the industry will be. Let us look at each of the five forces.

Customers A firm’s strategy should focus on creating value for customers, who often want differ- ent things. For example, in the hotel industry, business travelers may want convenient locations with meeting facilities. Vacationers may want resort locations with swimming pools, golf courses, and luxury spas. Other travelers may just want an inexpensive room next to the highway. The point is that increasingly “one size does not fit all,” so orga- nizations need to know how they are going to provide value to customers. That is the foundation for strategy, and it influences the kinds of skills and behaviors needed from employees.

competitive environment Consists of a firm’s spe- cific industry, including the industry’s custom- ers, rival firms, new entrants, substitutes, and suppliers.

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46 Part 1 Human Resources Management in Perspective

Rival Firms Perhaps the most obvious element of industry analysis is examining the nature of com- petition. Who is the competition? Often the answer is clear to everyone, but sometimes it is not. For many years, Toys “R” Us viewed its main competitors to be other toy stores such as FAO Schwarz. However, other retailers such as Target and Walmart soon moved into this space very successfully. This had a direct effect on human resources planning for Toys “R” Us. While in the past, Toys “R” Us had been successful with a volume-based approach, bigger retailers like Walmart were even better at that game. As a consequence, Toys “R” Us had to modify its strategy to compete more on customer service and the expertise of its employees.

New Entrants New companies can sometimes enter an industry and compete well against established firms, and sometimes they cannot. To protect their positions, companies often try to establish entry barriers to keep new firms out of their industries. However, when new firms do enter an industry it is often because they have a different—and perhaps better— way to provide value to customers. When Virgin America entered the airlines market, the company’s goal was not just to sell cheap tickets. It promised to make “flying good again” by offering, among other perks, in-flight live concerts, free Wi-Fi, USB plugs at every seat, mood lighting, and top-notch customer service.12 New entrants such as this can change the “rules of the game” in an industry.

Substitutes At times, the biggest opportunity or threat in an industry does not come from direct competition but from buyers substituting other products. For example, people are increasingly disconnecting their cable-TV service and instead using streaming services such as Netflix and Hulu. That implies that firms may need to adjust their employee skill bases to support different technologies, or they may need to think about how they will compete in different ways.






The Five Forces FrameworkFigure 2.2

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47Chapter 2 Strategy and Human Resources Planning

Suppliers Organizations rarely create everything on their own but instead have suppliers that provide them with key inputs. These inputs can include raw materials for production, money (from banks and stockholders), information, and people. This last factor—peo- ple, or labor as it is historically called—has direct implications for strategic planning and human resources planning.

Stakeholders Stakeholders are key people and groups that have an interest in a firm’s activities and can either affect them or be affected by them. A firm’s primary stakeholders include its investors, employees, customers, suppliers, and creditors. Primary stakeholders have a direct stake in the firm and its success. A firm’s secondary stakeholders have less of a stake but can nonetheless affect or be affected by the company. Secondary stakeholders include the community in which the firm operates, the government, business groups, and the media.

Firms have to analyze and balance the interests of their various stakeholders. For example, laying off employees will often result in lower costs for a firm, at least in the short term. But if the cuts are too severe and affect a firm’s service, for instance, cus- tomers are likely to suffer as will investors and creditors. The community could suffer as well.

One way a firm attempts to balance the interests of their shareholders is by deter- mining how a strategic action is likely to impact each group. For which group is the action critical? For which group is the action less critical? As Figure 2.3 shows, the firm may want to involve or at least consult primary shareholders in major strategic actions. In contrast, secondary stakeholders can be monitored and informed. So, for example, if a firm is considering developing a new product, its suppliers, creditors, and employees should definitely be involved and consulted about the move. Secondary stakeholders, such as the community and the media, can merely be informed about the new strategy when appropriate and their responses monitored.

stakeholders Key people and groups that have an interest in a firm’s activities and that can either affect them or be affected by them.




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Pr im

ar y

Se co

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In fl u

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Primary Stakeholders versus Secondary StakeholdersFigure 2.3

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48 Part 1 Human Resources Management in Perspective

2-3c HR’s External Analysis Because strategic management is ultimately aimed at creating a competitive advantage, many firms also evaluate their performance against other firms. Benchmarking is the process of looking at your practices and performance in a given area and then compar- ing them with those of other companies. To accomplish this, a benchmarking team collects metrics on its own company’s performance and those of other firms to uncover any gaps. The gaps help determine the causes of performance differences the team can use to map out a set of best practices.

The target company for benchmarking does not need to be a competitor. For exam- ple, when Xerox wanted to learn about excellent customer service, it benchmarked L.L. Bean. By working with noncompeting companies, Xerox was able to get access to information a competitor would not divulge.

Sources of information about the changes in a firm’s external environment, par- ticularly the external supply of labor, are invaluable for both operational and strategic reasons. HRP has to focus on both. At an operational level, labor-supply changes directly affect hiring plans in the area where the organization is located or plans to locate. To be closer to younger, educated workers, who will lead them into the digital future, as well as high-earning consumers, companies that moved to the suburbs decades ago are relocat- ing to the cities or opening satellite offices there. In Detroit, Microsoft, Quicken Loans, and dozens of tech companies have relocated suburban facilities to the downtown area.13

Similarly, with a “maturing” workforce, HRP must consider the implications for recruitment and replacement policies. Other “barometers” of the labor market include migration in and out of the area and the mobility of the population, the firm’s demand for specific skills, unemployment rates, educational level of the workforce, government labor regulations, and so on.

The analysis of the external labor market is aided by published documents. In the United States, unemployment rates, labor force projection figures, and population char- acteristics are reported by the U.S. Department of Labor.14 The Monthly Labor Review and Occupational Outlook Handbook, both published by the Bureau of Labor Statistics (BLS), contain information on jobholder characteristics and predicted changes in the workforce. In addition, local chambers of commerce and individual state development and planning agencies can assist both large organizations and new business ventures by providing them with a labor market analysis of their areas. Offshore consulting firms such as IBM Global

benchmarking The process of looking at your practices and performance in a given area and then comparing them with those of other companies. has tested technology to deliver small packages to people’s houses via drones. How might drone delivery change Amazon’s competitive environment? What changes in customers, new entrants, substi- tutes, and suppliers might result? How would it affect the firm’s HR practices?

A m

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/N ew

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49Chapter 2 Strategy and Human Resources Planning

Services and Accenture can be a good source for information about labor trends in other countries. 3M’s HR team regularly consults with outside recruiters to learn about the talent supplies in various countries in which it does or wants to do business.

Part of conducting an external labor analysis includes gauging the talent in your own industry—in other words, looking at the competitive environment for labor. What schools are the top candidates being recruited from? What firms are attracting the most candidates and why? What firms end up hiring the best candidates and why? Astute HR managers who track their firms’ hiring and recruiting metrics relative to the competition are an invaluable source of external labor “intelligence” such as this. Attending industry conventions and talking to your company’s suppliers about business and employment trends are other good ways of gathering competitive intelligence. So are interviews with job candidates. Simply asking candidates who turned down job offers why they did so can yield a great deal of information. We will talk more about this aspect of HR in Chapter 5.

The HR benchmarks, or metrics, a firm collects fall into two basic categories: human capital metrics and HR metrics. Human capital metrics assess aspects of the workforce, whereas HR metrics assess the performance of the HR function itself. For its clients, the management consulting company PwC publishes monthly and annual human capital benchmarking information, which includes metrics from almost 900 companies.

Highlights in HRM 1 shows some of the basic HR metrics companies use. Most larger companies use software to track their HR metrics over time. Figure 2.4 shows an example of an HR “dashboard,” which is software that tracks and graphically displays HR statistics so they can be viewed by managers at a glance (like you can your dashboard readings when driving a car).

An Example of an HR Dashboard Figure 2.4

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As we have explained, today’s HR managers can significantly enhance their worth to their organizations if they go a step further by gathering informal information, or “intelli- gence,” about the strategic and HRM practices of their competitors. This can be done by legal means, such as by reading industry blogs, checking competitors’ press releases and Facebook pages, and signing up for their newsfeeds, messages they put out on Twitter, LinkedIn, and Google email alerts that are triggered when competing firms’ names appear in the news.

Gathering competitive intelligence and benchmarking alone will not give a firm a competitive advantage, though. According to author and HR consultant Mark Huselid, a competitive advantage is based on the unique combination of a company’s human capi- tal, strategy, and core capabilities—which differ from firm to firm. This means that HR managers cannot simply rely on the benchmarks and strategies of other firms. Instead, they must develop their own. If they can successfully do so and implement them, they can achieve a sustained competitive advantage.15

2.4 Step Three: Internal Analysis When you decided on your major, you not only had to look at careers that were in demand, you had to take a hard look at yourself and what you’re good at relative to other people. For example, software engineers make a lot of money and are in great demand. But do you have what it takes to become one? Similarly, organizations also analyze their own strengths and weaknesses.

HRM Metrics

Different companies rely on different HRM metrics, depend- ing upon their strategic objectives. The following are some of the metrics mostly commonly used:

General Total payroll and benefits costs Payroll and benefits costs per employee Revenue earned per employee Average salary per employee Total employee hours worked Hours worked per employee Employees per department Average employee tenure Average employee age Employee absenteeism rate

Training and Development Total training costs Training costs per employee Average training hours provided to existing employees Average training hours provided to new hires

Hiring and Turnover Total separation costs (severance, etc.) Separation costs per employee Average time to fill (a position) Quality of fill Cost per fill Percentage of positions filled internally Percentage of new hires retained for 90 days Employee turnover rate Voluntary turnover rate Involuntary turnover rate

HR Department Metrics Number of employees per HR professional Total HR expenses HR expenses per employee Percentage of HR expenses spent on outsourced functions

Highlights in HRM1

Recall from Chapter 1 the discussion about autoparts makers having to look for new markets when car sales plum- meted in the last reces- sion. How do you think the autoparts makers assessed their ability to enter new markets? Do you think they looked first at new markets and then the capabili- ties of their employees and suppliers—or vice versa?

LO 3


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51Chapter 2 Strategy and Human Resources Planning

2.4a Core Capabilities A growing number of experts now argue that the key to a firm’s success is based on establishing a set of core capabilities—abilities that distinguish an organization from its competitors and create value to customers. You can think of value creation as a cost–benefit scenario: value benefits costs5 2 . For example, what is driving, or would drive, a customer’s willingness to buy from your firm versus another? What benefits do, or would, customers get from your firm relative to the costs they incur? In what areas does your organization excel as far as potential customers are concerned? Most firms recognize that there is a small set of three to six core capabilities that are most critical to differentiating them from competitors. Core capabilities can consist of a combination of three resources: (1) processes, (2) systems (technologies), and (3) people.

Processes are “recipes” or standard routines for how work will be done and results will be accomplished. For example, when Intermountain Healthcare (IHC), a hospital and clinic chain in Utah, analyzed the firm’s capabilities, it found that less than 10 percent of its processes accounted for over 90 percent of the cost, time, and quality of a health care. Consequently, ICH chose to focus on these processes to enhance its core capabilities.

Top-notch systems are also part of the core capabilities equation. They include information systems, databases, proprietary technologies, and the like. Great systems and technologies are a core capability of—one that has resulted in a sig- nificant competitive advantage for the firm. UPS’s Orion system is another example of a great system. The Orion system takes into account all of the packages a UPS driver has to deliver and determines out the fastest route for doing so.

Last, but certainly not least, people are a key resource that underlies a firm’s core capa- bilities. Particularly in knowledge-based industries such as the software and information services industries, success depends on “people-embodied knowhow.” Knowhow includes the knowledge, skills, and abilities of employees most critical for executing the firm’s plan to create the most value for customers and whose skills are difficult to replicate or replace.

core capabilities Integrated knowledge sets within an organiza- tion that distinguish it from its competitors and deliver value to customers.

value creation What a firm adds to a product or service by virtue of making it; the amount of benefits pro- vided by the product or service once the costs of making it are subtracted.

FedEx’s workers sup- port their employer’s

core capabilities. That helps FedEx stand out

from its competitors and deliver added

value to its customers.

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52 Part 1 Human Resources Management in Perspective

As a result, a number of companies that previously relied on standard plans for recruit- ing and managing their employees are designing more tailored plans to address the indi- vidual needs of employees so they will be in a better position to help execute their firms’ strategies. Microsoft enables certain types of employees to design their own career paths. For example, the company offers software engineers both a management-focused and technical specialist career track and allows them to move back and forth between the two.

2.4b Sustaining a Competitive Advantage Through People Organizations can achieve a sustained competitive advantage if they have resources— particularly people—that meet the following criteria16:

1. The resources must be valuable. People are a source of competitive advantage when they improve the efficiency or effectiveness of the company. Value is increased when employees find ways to decrease costs, provide something unique to cus- tomers, or some combination of the two. To improve the bottom line, REI and Southwest Airlines are among the companies that empower and motivate their workers to spark their creativity.

2. The resources must be rare. People are a source of competitive advantage when their knowledge, skills, and abilities are not equally available to competitors. Companies such as Facebook, Four Seasons Hotels, and Virgin America therefore invest a great deal to hire and train the best and the brightest employees to gain an advantage over their competitors.

3. The resources must be difficult to imitate. People are a source of competitive advan- tage when the capabilities and contributions of a firm’s employees cannot be copied by others. Disney and Starbucks are each known for creating unique cultures that get the most from employees (through teamwork) and are difficult to imitate.

4. The resources must be organized. People are a source of competitive advantage when their talents can be combined and deployed to work on new assignments at a moment’s notice. As you learned in Chapter 1, companies such as IBM, GE, and Procter & Gamble closely “track” employees and their talents. As a result, these firms are able to quickly reassign talent to different areas of their companies and the world as needed.

These four criteria highlight the importance of people and show the closeness of HRM to strategic management.

2.4c Types of Talent and Their Composition in the Workforce

A related element of internal analysis for organizations that compete on capabilities is determining the types of talent needed and their composition of a firm’s current workforce. As we have indicated, managers need to determine whether people are available internally to execute an organization’s strategy. Managers have to make tough decisions about whom to employ internally, whom to contract externally, and how to manage different types of employees with different skills who contribute in different ways to the organization.

Figure 2.5 shows that different skill groups in any given organization can be classi- fied according to the degree to which they create strategic value and are unique to the

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53Chapter 2 Strategy and Human Resources Planning

organization. This figure shows the departments for an Australian biotechnology firm and the quadrants those groups fall into. As a general rule, managers often consider con- tracting externally (or outsourcing) skill areas that are not central to the firm’s core com- petence. HRP plays an important role in helping managers weigh the costs and benefits of using one approach to employment versus another. Evidence from research suggests that employment relationships and HR practices for different employees vary according to which segment they occupy in this matrix.

Strategic Knowledge Workers This group of employees tends to have unique skills directly linked to the company’s strategy and are difficult to replace (such as research and development scientists in a pharmaceuticals company or computer scientists in a software development company).



Customer Service

Quality Control


Manu- facturing

R&D Partners






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Mapping Human CapitalFigure 2.5

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54 Part 1 Human Resources Management in Perspective

These employees typically are engaged in knowledge work that involves considerable autonomy. Companies tend to make long-term commitments to these employees, investing in their continuous training and development, and perhaps giving them an equity stake in the organization.

Core Employees This group of employees has skills that are quite valuable to a company but not par- ticularly unique or difficult to replace (such as salespeople in a department store or truckdrivers for a courier service). These workers tend to be employed in traditional types of jobs. Because their skills are transferable, it is quite possible that they could leave to go to another firm. As a consequence, managers frequently invest less to train and develop these employees and focus more on paying them for their short-term per- formance achievements.

Supporting Workers This group of workers typically has skills that are less central to creating customer value and generally available in the labor market (such as clerical workers, customer service representatives, and manufacturing, operations, and distribution employees). Individuals in these jobs are often hired from external agencies on a contract basis to support the strategic knowledge workers and core employees. The scope of their duties tends to be limited, and their employment relationships tend to be transac- tion based and focused on rules and procedures. Less investment is made in their development.

Complementary (External) Partners Complementary partners are external people and firms with skills that are unique and specialized but not directly related to a company’s core strategy. Attorneys on retainer, consultants hired on a contract basis, and external companies that work with the firm, such as research and development firms, for example, are complementary partners. Although a company perhaps cannot justify their internal employment given their indi- rect link to the firm’s strategy, these individuals have skills that are specialized and not readily available to all firms. As a consequence, companies tend to establish longer-term alliances and partnerships with them and nurture an ongoing relationship focused on mutual learning. Considerable investment is made in the exchange of information and knowledge with these people.17

2.4d Corporate Culture Think about our initial discussion of mission, vision, and values back at Step One. Because managers increasingly understand that their employees are critical to their success, they often conduct cultural audits to examine their values, attitudes, beliefs, and expectations. Can they make a difference in a firm’s strategy? Yes. Cultural audits can help firms decide upon the strategic investments and maneuvers that their cultures lend themselves to. The audits can also be used to determine if the cultures of two companies will complement one another should the firms merge. As we will discuss later, many a merger has failed due to corporate “culture clashes” between companies that tried to join forces.

cultural audits Audits of the culture and quality of work life in an organization.

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55Chapter 2 Strategy and Human Resources Planning

Conducting a Cultural Audit To conduct a cultural audit, employees can be surveyed about how they feel about issues such as the following: How is business conducted within your organization? How do people communicate with one another? How are conflicts and crises resolved?

The cultural audit conducted by SAS, a business-analytics corporation that often ranks No. 1 on Fortune magazine’s “Best Companies to Work For” list, includes detailed questions about the company’s pay and benefit programs and a series of open-ended ques- tions about the company’s hiring practices, internal communications, training and recog- nition programs, health care and other benefits, and diversity efforts.18 Cultural audits can also be used to determine whether there are different groups, or subcultures, within the organization that have distinctly different views about the nature of the work and how it should be done. To prevent legal and ethical breaches, some firms conduct cultural audits that ask employees questions about the degree of fear associated with meeting their firms’ revenue goals and incentive plans that could encourage unethical or illegal behavior.19

Perhaps the most widely used cultural audit questionnaire is the Organizational Culture Assessment Instrument (OCAI), developed by Kim Cameron and Robert Quinn. The questionnaire helps identify four distinct types of corporate cultures, which are shown in Figure 2.6.

• The “clan” culture in which employees are closely knit and exhibit great concern for one another and their customers, and loyalty and cohesion are highly valued. Starbucks’s culture can be categorized as a clan culture. Many small and midsize businesses fall into this category, too. Their HR strategies are more informal and focused on creating a family-type feel that binds employees emotionally to the organization.20

• The “adhocracy” culture, which is a culture characterized by risk-taking, innova- tion, and a spirit of entrepreneurship. Google clearly fits into this category.

• The “market” culture, which encourages competitive, result-oriented behaviors. Investment banks that closely focus on achieving their financial numbers are an example of firms with market cultures. The investment bank Goldman Sachs falls into this category.

• The “hierarchical” culture, which is characterized by formal structures and proce- dures and in which efficiency and stability are greatly valued. Utility-type compa- nies and well-established companies such as railroads fall into this category.

Some cultures lend themselves more readily to certain strategies than others; however, almost all firms have elements of each of the four cultures. For example, W.L. Gore & Asso- ciates, which makes Gore-Tex fabric and other cutting-edge products such as space suits and surgical products, is highly entrepreneurial like an adhocracy is. However, the company, which was launched by entrepreneur Bill Gore and his wife, Vivien Gore, in their basement in the 1950s, remains privately owned and exhibits elements of the “clan” culture as well.

According to author James Clawson, leaders who target employees’ values, attitudes, beliefs, and expectations are more effective than those who simply focus on workers’ behaviors or thought processes. This makes sense. Recall from Chapter 1 the story about the entrepreneur who tripled his sales but, because he took his staff for granted, was then muscled out of the market by a competitor. If a firm lacks a clear idea of how employees view the organization, no matter how great the organization’s plans are, those plans might never be successfully executed and sustained.

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56 Part 1 Human Resources Management in Perspective


• Family-feel oriented


• Risk-taking and innovation oriented


• Formal structures and procedures oriented


• Competitive and results-oriented

Four Basic Types of Organizational CultureFigure 2.6

2.4e Forecasting An internal analysis of an organization can reveal a great deal about where it stands today. However, things change. In an important sense, strategic planning is about managing that change. Managers must continually forecast both the needs and the capabilities of the firm for the future to do an effective job at strategic planning. As Figure 2.7 shows, managers focus on (at least) three key elements: (1) forecasting the demand for labor, (2) forecasting the supply of labor, and (3) balancing supply and demand considerations.

Consider for a moment the high costs of not forecasting—or forecasting poorly. If job vacancies are left unfilled, the resulting loss in efficiency can be very costly, par- ticularly when you consider the amount of time it takes to hire and train replacement employees. As pointless as it may sound, it’s not uncommon for employees to be laid off in one department while applicants are hired for similar jobs in another department. Poor forecasting that leads to unnecessary layoffs also makes it difficult for employees to accurately assess their own career prospects and development. When this happens, a firm’s more competent and ambitious workers will be inclined to seek other employment where they feel they will have better career opportunities.21

On the plus side, accurate forecasting provides the kind of information managers need to make sound decisions. It can help them ensure that they have the right number and right kinds of people in the right places at the right times, doing things that provide value to both the organization and the employees.

Forecasting a Firm’s Demand for Employees As we have indicated, a variety of factors, including a firm’s competitive strategy, tech- nology, structure, and productivity, will affect its demand for labor. External factors such as business cycles—economic and seasonal trends—can also play a role. For example,

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57Chapter 2 Strategy and Human Resources Planning

retailers such as BestBuy, Bath & Body Works, and Target rely heavily on temporary employees between November and January, during the holiday season. There are two approaches to HR forecasting—quantitative and qualitative—which we discuss next.

Quantitative Approaches. Quantitative forecasting approaches involve the use of sta- tistical or mathematical techniques. One commonly used method is a trend analysis, which plots a historical trend of a business factor, such as sales, in relation to the number of employees. The trend and its strength up or down will affect how many employees should be hired. Other, more sophisticated statistical planning methods include model- ing or multiple predictive techniques.

Whereas a trend analysis relies on a single factor (such as sales) to predict employment needs, more advanced methods combine several factors, such as inter- est rates, gross domestic product, the disposable income of consumers, and sales, to predict employment levels. Factors such as a firm’s strategy and “what if ” scenarios can also be incorporated in the analysis. For example, if the firm wants to increase its sales by 10 percent, how many additional salespeople should it hire? Forecasting methods such as these are often used by larger companies with the help of analysts and statisticians. However, advances in data collection technology and software have made it easier and affordable for smaller businesses to use more sophisticated fore- casting techniques.

trend analysis A quantitative approach to forecasting labor demand based on a fac- tor such as sales.






• Reduce employees’ work hours • Implement a hiring freeze • Lay off or furlough

employees • Offer employees early



• Utilize overtime • Add full-time workers • Add part-time workers • Employ contract workers • Recall employees • Outsource work • Reduce employee turnover


• Product/service demand • Economics • Technology • Financial resources • Absenteeism/turnover • Organizational growth • Management philosophy


• Trend analysis • Managerial estimates • Delphi technique


• Staffing tables • Markov analysis • Skills inventories • Management inventories • Replacement charts • Succession planning

External Considerations

• Demographic changes • Education of workforce • Labor mobility • Government policies • Unemployment rate

Model of HR ForecastingFigure 2.7

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Qualitative Approaches. Forecasting is frequently more of an art than a science, pro- viding inexact approximations rather than absolute results. The ever-changing envi- ronment in which an organization operates contributes to this situation. For example, estimating changes in the demand for a firm’s products or services is a basic forecasting concern, as is anticipating economic changes.

A firm’s internal changes are critical, too. A community hospital anticipating inter- nal changes in its technology or how the facility is organized or managed must consider these factors when it forecasts its staffing needs. Also, the forecasted staffing needs must be in line with the organization’s financial resources.

In contrast to quantitative approaches, qualitative approaches to forecasting are less statistical. Management forecasts are the opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization’s future employment needs. For example, at Souplantation and Sweet Tomatoes, a national soup, salad, and bakery chain, each restaurant manager is responsible for his or her store’s employment forecasts. Another qualitative forecasting method, the Delphi technique, attempts to decrease the subjectivity of forecasts by soliciting and summarizing the judg- ments of a preselected group of individuals. HR personnel can do this by developing a list of questions to ask the managers in their companies. Highlights in HRM 2 contains some good questions to ask.

Ideally, forecasting should include the use of both quantitative and qualitative approaches. Numbers without context—including the context supplied by skilled HR professionals who understand the business and can analyze and interpret the data— are less useful. “The most important software is the one running between your ears,” explains one HR director about the qualitative forecasting.22

Forecasting the Supply of Employees Just as an organization must forecast its future requirements for employees, it must also determine whether sufficient numbers and types of employees are available to staff the openings it anticipates having. As with demand forecasts, the process involves both tracking current employee levels and making future projections about those levels.

management forecasts The opinions (judg- ments) of supervisors, department manag- ers, experts, or others knowledgeable about the organization’s future employment needs.

HR Planning and Strategy Questions to Ask Business Managers

�� What are your current pressing business issues?

�� What are our competitors’ organizational strengths? How do we compare?

�� What core capabilities do we need to win in our markets?

�� What are the required knowledge, skills, and abilities we need to execute the winning strategy?

�� What are the barriers to achieving the strategy?

�� What types of skills and positions will be required or no longer required?

�� Which skills should we have internally versus contract with outside providers?

�� What actions need to be taken to align our resources with our strategy priorities?

�� What recognition and rewards are needed to attract, motivate, and retain the employees we need?

Sources: Adapted from Agilent Technologies for The Conference Board and the Society for Human Resource Management.

Highlights in HRM2


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59Chapter 2 Strategy and Human Resources Planning

Staffing Tables and Markov Analyses. An internal supply analysis can begin with staff- ing tables. A staffing table shows a firm’s jobs, along with the numbers of employees cur- rently occupying those jobs (and perhaps future employment requirements derived from demand forecasts). Another technique, called a Markov analysis, shows the percentage and actual number of employees who remain in each of a firm’s jobs from year to year and the proportions of those promoted, demoted, transferred, or who have quit. As Figure 2.8 shows, a Markov analysis can be used to track the pattern of employee movements through various jobs and to develop a transition matrix for forecasting labor supply.

Forecasting the supply of human resources available to a firm requires managers to have a good understanding of employee turnover and absenteeism. We have included formulas for computing turnover and absenteeism rates in an appendix to this chapter. Also included in the appendix is a formula for calculating a metric called quality of fill. It was developed because managers understand that simply having “bodies” in place is not enough. The quality-of-fill metric attempts to measure how well new hires are performing so the company will have enough top performers to propel it toward its strategic objectives. We will show you how it is calculated in Chapter 5 when we discuss recruiting metrics.

Skill Inventories and Management Inventories. Staffing tables, a Markov analysis, turnover rates, and the like tend to focus on the number of employees in particular jobs. Other techniques are more oriented toward the types of employees and their skills, knowledge, and experiences. Skill inventories can also be prepared either manually or using a human resources information system that lists each employee’s education, past work experience, vocational interests, specific abilities and skills, compensation history, and job tenure. The inventories allow an organization to quickly match forthcoming job openings with employee backgrounds. When data are gathered on managers, these inventories are called management inventories.

staffing table A table that shows a firm’s jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements.

Markov analysis A method for tracking the pattern of employee movements through various jobs in a firm.

quality of fill A metric designed to measure how well new hires that fill positions are performing on the job.

skill inventories Files of personnel education, experience, interests, skills, and so on that allow managers to quickly match job openings with employee backgrounds.


11% 83%

11% 66% 8%

72% 2%








Forecasted Supply 15 41 92 301 1072 351

Store Managers (n = 12)

Assistant Store Managers (n = 36)

Section Managers (n = 96)

Department Managers (n = 288)

Sales Associates (n = 1440)


4 30

11 63 8

207 6








Store Managers

Asst. Store Managers

Section Managers

Dept. Managers

Sales Associates Exit2018

Transition percentage Actual number of employees


Hypothetical Markov Analysis for a Retail CompanyFigure 2.8

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60 Part 1 Human Resources Management in Perspective

Replacement Charts and Succession Planning. Skill and management inventories (talent inventories) can be used to develop employee replacement charts, which list current jobholders and identify possible replacements should openings occur. Figure 2.9 shows an example of how an organization might develop a replacement chart for the managers in one of its divisions. The chart provides information on the current perfor- mance and promotability of possible replacements.

A replacement chart can be used side by side with other pieces of information for succession planning—the process of identifying, developing, and tracking talented indi- viduals so that they can eventually assume top-level positions. The strategy and consulting firm Accenture has developed an application listing its employees, where they are based, and their individual areas of expertise. The application helps managers with deployment decisions. It also makes it easier for Accenture’s employees who do not necessarily know each other or work together to collaborate with one another. Succession planning and replacement charts are often developed in conjunction with talent reviews: strategic meetings to determine if a company has the human resources it needs to compete in the future.

replacement charts Listings of current job- holders and people who are potential replace- ments if an opening occurs.

succession planning The process of identify- ing, developing, and tracking key individuals for executive positions.

talent reviews strategic meetings to determine if a company has the human resources it needs to compete in the future.


W. Shepard C/2


N. Lyman B/3



L. Green A/2 A. Tupper C/4


J. Gomez A/1


O. Morris B/3


Names provided are replacement candidates

A. Promotable now B. Needing development C. Not fitted to position 1. Superior performance 2. Above-average performance 3. Acceptable performance 4. Poor performance


L. Martinez B/1


R. Gorton A/2 T. Brown B/3


J. Green A/2


C. Broderick A/1


B. Verkozen A/1 T. Turner B/1


D. Lim B/2

An Executive Replacement ChartFigure 2.9

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61Chapter 2 Strategy and Human Resources Planning

A certain mystique exists about family businesses being car- ried on for generations, But although 80 to 90 percent of U.S. businesses are family owned, less than a third of these companies continue to exist into the second generation, and just 10 percent survive into the third, according to one study. One reason this occurs is because only about one- quarter of family businesses have succession plans. It may take the death of a colleague or a sudden illness for business owners to realize that, like a will, they need a succession plan to keep a business going, continue to provide for their fami- lies, and keep their workers out of the unemployment line.

Business owners are sometimes reluctant to put suc- cession plans in place for fear of relinquishing control, or they don’t feel their successor is ready to take over the business. In some cases there is no clear successor. Some- times the next generation just is not enthusiastic about joining the family business.

Even with a business owner willing to relinquish the reins and a well-chosen successor waiting in the wings, an

Small Business Application

actual transition plan is still needed. “[Any transition] needs to be carried out without causing any alarm to the other stakeholders—that is, financiers who may be worried that such a change may increase firm-specific risk,” says Dr. Ashraf Mahate, an economist and expert on international trade and finance. “Suppliers may be concerned about pro- viding future credit facilities or even doing business with the company. Customers may be fearful of long-term rela- tionships with the company. Therefore, it is in everyone’s interest to have an orderly change to the new structure.”

Sources: Michael Cohn, “Most Family Businesses Lack Succession Plans,” Accounting Today (January 14, 2017), http://www.accounting-; “Next in Line: The Advantages of Succession Planning,” Forbes (July 30, 2013),; “Canada’s Banks Eye Succession Plans for Boomers,” Reuters (December 20, 2012), http://; Manoj Nair, “Succession Planning Is the Key,” gulf- (January 19, 2011),; Ernesto J. Poza, Family Business (Boston: South-Western/Cengage Learning, 2010), 85–89; Don Schwerzler, “Family Succession Plan First,” http://www

Lack of Succession Planning Threatens Family Businesses

Human resource managers frequently lament that they have trouble keeping man- agers, including CEOs, focused on succession planning. It’s possible that because CEOs are increasingly being recruited from the outside, they are less concerned with internal succession planning than they are in “bringing in their own people.” And, of course, because the workforce is becoming increasingly mobile, some managers wonder why they should develop employees internally who may eventually leave the organization when they can recruit qualified talent from the outside. Managers also get distracted by putting out immediate fires, especially in tough times, explains Ranjay Gulati, a Harvard Business School professor. Instead of planning for succession, they look externally for “savior” types of employees to rescue their organization because they have been unable to adapt to the competition.23

Not having a succession plan can imperil a small firm, as the small-business box in this chapter illustrates. Highlights in HRM 3 shows a checklist for evaluating how successful a firm’s succession planning is.

2.4f Assessing a Firm’s Human Capital Readiness: Gap Analysis

Once a company has assessed both the supply and demand for employee skills, talent, and knowhow, it can begin to understand its human capital readiness. Any difference between the quantity and quality of employees required versus the quantity and quality of employees available represents a gap that needs to be fixed.

Figure 2.10 shows how a pharmaceutical company approached its assessment of human capital readiness. Similar to our discussion in the preceding sections, managers

human capital readiness The process of evaluating the availability of critical talent in a company and comparing it to the firm’s supply.

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Succession-Planning Checklist

Highlights in HRM3


For each characteristic of a best-practice succession-planning and management program appearing in the left column below, enter a number to the right to indicate how well you believe your organization manages that characteristic. Ask other decision makers in your organization to complete this form individually. Then compile the scores and compare notes.

Total (add up the scores for items 1–10

and place in the box on the right)

Your organization has successfully…

Characteristics of a Best-Practice Succession-Planning and Management


Clarified the purpose and desired results of the succession-planning and management program.

Created a means by which to document competence and find organizational talent quickly when needed.

Established a means by which to evaluate the results of the succession planning and management program.

Created and sustained rewards for developing people.

Created a means to follow up and hold people accountable.

Established a means by which to narrow gaps through the use of individual development plans (IDPs).

Created an ongoing means by which to assess individual potential against future competency models.

Determined what performance is needed in the future by establishing future competency models for all job categories.

Established a means to measure individual performance that is aligned with the competencies currently demonstrated by successful performers.

Determined what performance is required now for all job categories in the organization by establishing competency models.

Very Poor




Neither Poor

Nor Good (3)



Very Good


How Would You Rate Your Organization’s Succession-

Planning and Management Program on the Characteristic?











50–40 Congratulations. The succession-planning and management program in your organization conforms with best practices.

29–20 Okay. While your organization could make improvements, you appear to have some of the major pieces in place for a succession-planning and management program.

39–30 Pretty good. Your organization is on the way toward establishing a first-rate succession-planning and management program.

9–0 Give yourself a failing grade. You need to take steps immediately to improve the succession-planning and management practices of your organization.

19–10 Not good at all. Your organization is probably filling positions on an as-needed basis.


Source: From William J. Rothwell, “Putting Success into Your Succession Planning,” The Journal of Business Strategy 23, no. 3 (May/June 2002): 32–37. Republished with permission—Thomson Media, One State Street, 26th Floor, New York, NY 10004.

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63Chapter 2 Strategy and Human Resources Planning

begin by identifying a company’s core capabilities and the key people and processes critical to those capabilities. The company identified nine key job “families.” For each of these critical job families, managers identified the critical knowledge, skills, and behaviors necessary to build the core capabilities. They then determined the num- ber of people required for these positions, as well as the number who are currently qualified. As the lower portion of the figure shows, the company’s human capital (HC) readiness ranged between 63 percent for bioscientists and 100 percent for chemical and mechanical engineers. Once the assessment of a firm’s human capital readiness is complete, managers have a much better foundation for establishing their strategy going forward and the specific requirements for developing the talent needed to execute the strategy.24

Disease Area -------------- Experimental Design Results Interpretation -------------- Analytical Thinking Strategic Thinking Collaboration

Chemistry -------------- Molecular Design Protein Synthesis -------------- Analytical Thinking Collaboration Results- Orientation

Toxicology ------------- Pharmacology Molecular Toxicology -------------- Problem- Solving Results- Orientation Collaboration

Disease Area ------------- Clinical Trial Design Results Interpretation -------------- Communicate Collaboration

Brand and Market Knowledge Disease Areas -------------- Project Management -------------- Leadership Collaboration Results Orientation

Chemical & Mechanical Engineering ------------- Production Design Testing & Analysis Operations Management -------------- Detail Orientation

Formulation -------------- Analytical Chemistry Process Chemistry Scale Up -------------- Analytical Thinking














Lead Optimization

Predictive Science

Personalized Medicine


Chemists Toxicologists

SCM Specialists

Clinician/ Physicians


Clinical Trial Design

Patient Insight







Chem/Mech Engineers

Brand Marketers

Brand Team Leader









125 25 55 30 15 320

206 85 20 50 20 15 255

63% 68% 80% 91% 62% 100% 79%

Required Quali�ed

HC Readiness

Assessing a Firm’s Human CapitalFigure 2.10

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64 Part 1 Human Resources Management in Perspective

2.5 Step Four: Formulating a Strategy Think once again about your education, your major, and career choices. After you looked at possible careers, the opportunities they presented, and your ability and desire to do them, you probably had to formulate a strategy for pursuing one of them by choosing a college. When you graduate, you will have to formulate a strategy for suc- cessfully landing a job in your field. Similarly, after managers have analyzed the internal strengths and weaknesses of a firm, as well as external opportunities and threats, they have the information they need to formulate corporate, business, and HR strategies for the organization.

Strategy formulation builds on a SWOT analysis, discussed earlier in the chapter. A SWOT analysis can help a company move from formulating a strategy, to devising a plan, to capitalizing on opportunities, to counteracting on threats, to alleviating internal weaknesses. Figure 2.11 is an example of a SWOT analysis done for the women’s cloth- ing brand Liz Claiborne.

2.5a Corporate Strategy A firm’s corporate strategy includes the markets in which it will compete, against whom, and how. Some firms choose a concentration strategy that focuses on only a portion of the industry. Visteon Corporation specializes in electronics, climate, and powertrain technologies for the automotive industry. In contrast, Henry Ford at one time owned everything from the ore mines needed to make steel for his cars, all the way down to the showrooms in which they were sold.

Growth and Diversification Emerging and growing companies execute their strategies differently than mature com- panies or those in decline. As companies grow, they often formulate geographic, vol- ume, and product-expansion strategies. HR planning is vital to these decisions because

Think about a firm you enjoy doing business with or one you don’t. What competitive strat- egy does it pursue? Do you think its employees have the right skills given the strategy? Do you detect any mismatches?

LO 4

Strengths Weaknesses

• Brand Recognition • Understanding Customer Needs • New Product Lines • Advertising Scheme • Product Diversification Strategy • Tailor to Changing Needs • Preferences and Lifestyles

• Changing Consumer Needs • Highly Competitive Market • Long Lead Time Bringing New Styles to

Market • Clothing Line Is Complete Success or Costly


Opportunities Threats

• Overseas Markets • Worldwide Advertising • Entering the Large Size Consumer Market • Designing Mix-and-Match Outfits • Men’s Sportswear

• Key Competitors • Strict Government Regulations • Changing Shopping Patterns • Quota Restrictions

An Example of a SWOT Analysis for Liz ClaiborneFigure 2.11

Source: “Liz Claiborne SWOT Analysis,” WikiSWOT,

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65Chapter 2 Strategy and Human Resources Planning

achieving growth requires three related elements: (1) increased employee productivity, (2) a greater number of employees, and (3) employees developing or acquiring new skills. Thus, a firm’s staffing, training, employee motivation efforts, and the like can either enable the company to grow or limit its potential.

As companies diversify into new businesses, managers are faced with a “make or buy” decision, just like Ford was. That is, should they develop the capabilities in-house to produce their products or contract externally for them or at least parts of them? When IBM entered the personal computer market in the early 1980s, it contracted with (then startup companies) Intel and Microsoft to make the hardware and operating systems for its PCs. The decision did not rest solely on human resource issues, but they were an important part of the equation.

Eventually IBM got out of the PC business altogether by selling its PC product lineup to the Chinese computer manufacturer Lenovo. Today IBM develops custom technology services for businesses, which it believes will be more profitable in the long run and a harder product for competitors to imitate. To help accomplish the strategy, IBM bought up dozens of business-service-related companies and hired their talent.

Some companies diversify far beyond their core businesses. At one time GE mostly produced electrical and home-appliance products. Today its products include those in the health, finance, truck and air transportation, oil and gas, and power and water industries. To manage such a diverse portfolio, GE has invested heavily in developing its talent and leadership abilities in contrast to its traditional focus on manufacturing, much of which it has outsourced.

Mergers and Acquisitions As we have explained, the world has seen a host of mergers and acquisitions in recent years. They include such firms as AT&T and TimeWarner, Fiat and Chrysler, American Airlines and U.S. Airways, and others. When companies merge, they can often stream- line their costs by eliminating duplicate functions, such as duplicate accounting, finance, and HR departments, for example.

However, many mergers end up being risky because they do not go well (mea- sured by return on investment, shareholder value, and the like). Often the failure is due to cultural inconsistencies, as well as conflicts among the managers of each firm. The failure of the merger between the German firm Daimler-Benz (the manu- facturer of Mercedes Benz vehicles) and Chrysler in 1998 is an example. Although the German portion of the firm had superior technology, reportedly it was less than eager to share its knowhow with its American counterparts. Problems like this one point directly to the importance of effective HR planning prior to—and during—the merger process.

Strategic Alliances and Joint Ventures Sometimes firms do not acquire or merge with another firm but instead pursue coop- erative strategies such as a strategic alliance or joint venture. Especially when firms enter into international joint ventures, the issues of culture (both company culture and national culture) become paramount. On the front end, HR plays a vital role in assess- ing the compatibility of cultures and potential problems. As the alliance is formed, HR helps select key executives and develops teamwork across the respective workforces. In addition, HR is typically involved in the design of performance assessment and mutual incentives for the alliance.

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66 Part 1 Human Resources Management in Perspective

2.5b Business Strategy While we think about corporate strategy as domain selection, business strategy is viewed in terms of domain navigation. It is more focused on how the company will compete against rival firms to create value for customers. Companies can increase the value they offer customers by decreasing the costs of their goods and services or by increasing the benefits their products provide (or some combination of the two). Their business strategies reflect these choices.

Low-Cost Strategy: Compete on Productivity and Efficiency A low-cost strategy means keeping your costs low enough so that you can offer an attractive price to customers relative to your competitors. Organizations such as Dell, Walmart, and Spirit Airlines have been very successful competing based on a low-cost strategy by focusing on efficiency, productivity, and minimizing waste. These types of companies often are large and try to take advantage of economies of scale in the produc- tion and distribution of goods and services so they can sell them at lower prices, which leads to higher market shares, volumes, and (hopefully) profits. However, even a low- cost leader must offer a product or service that customers find valuable. As one CEO put it, “You can make a pizza so cheap that no one will buy it.”23 Ultimately organizations need to use a cost strategy to increase value to customers rather than take it away.

A low-cost strategy is linked to HR planning in several ways. The first has to do with productivity. A common misconception about low-cost strategies is that they inevitably require cutting labor costs. On the contrary, there are several good examples of companies that pay their employees “top dollar” but gain back cost advantages because of excellent productivity. That is, they get a terrific “bang for the buck.” Either they produce more from the workforce they have, or they can produce the same amount with a smaller workforce.

According to Peter Cappelli, who heads the Center for Human Resources at the Wharton School at the University of Pennsylvania, the productivity of the best- performing staffs can be 5 to 20 times higher than the productivity of the worst- performing staffs, depending upon the industry. Both Costco and Sam’s Club have low-cost, high-volume strategies. However, one study found that the pay and benefits to Costco’s employees far outstripped those earned by Sam’s Club employees, but so do Costco’s profits per employee. In addition, employee turnover and the costs associated with it are much lower for Costco.26 Similarly, Billy Beane, the general manager of the Oakland A’s, became famous for making the most of the A’s small payroll. Beane did so by carefully choosing and developing players and using them more strategically than other major league teams with bigger payroll budgets.

The second way that low-cost strategies are linked to HR pertains to outsourcing. Companies consider contracting with complementary (external) partners that can perform particular activities or services equally well (or better) at a lower cost. However, organizations need to have a clear understanding of their core processes and skills. Too often, a firm bases outsourcing decisions on costs alone. But this can lead to detrimental effects if the skills base of the firm’s employees suffers and its core capabilities erode.

Differentiation Strategy: Compete on Unique Value Added Another way to compete is by providing something unique and distinctive to customers, such as a high-quality product, innovative features, speed to market, or superior ser- vice. The Ritz-Carlton’s commitment to quality and luxury, FedEx’s focus on speed and flexible delivery, Neiman Marcus’s commitment to high fashion and customer service,

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67Chapter 2 Strategy and Human Resources Planning

and Apple’s emphasis on innovation and product development are all easily identifiable examples of differentiation strategies.

Each of these strategies is rooted in human resources management. Companies that focus on service, for example, need to identify and support ways to empower employees to serve customers better. Relative to companies that emphasize low cost and efficiencies, differentiating companies will bend the rules a bit more and customize products and services to let the customer “have it their way.” In place of rigid rules, Starbucks looks for prospective employees with the ability to make good decisions on their own. Similarly, Nordstrom’s employee handbook consists of just a single 538 index card that reads: “Welcome to Nordstrom. Rule #1. Use your good judgment in all situations. There will be no additional rules.”

2.5c HR Strategy A firm’s HR strategy must work in tandem with its corporate and business strategies. For example, decisions have to be made about the composition of the workforce. Getting the right number and kinds of people in right places at the right times doing things that ben- efit them and the firm is no small task. Too often firms focus on their core employees, such as knowledge workers, because they are in the best position to implement a firm’s strategies. But core workers alone can’t make or break a company. Engineering may develop a great product, but if the firm’s customer service representatives do a poor job of helping customers with the good or service, its sales will suffer—as will the company.

Instead, the firm must focus on all of its talent, including support employees, con- tractors, temporary employees, and complementary partners and how they mesh with one another. Each group of workers differs in terms of the human capital they bring, the expectations placed on them, the extent to which they are trained and developed, and so on. Subcultures will also emerge from the various groups. The firm’s engineers may have a whole different way of working and viewing the firm than, say, the com- pany’s customer representatives. HR managers have to examine and analyze these differences. They and line managers then have to formulate a plan that blends the firm’s structure, culture, operations, technology, and “people management” practices in ways that facilitate a firm’s competencies and drive its strategies forward.27

2.6 Step Five: Executing a Firm’s Strategy As the old saying goes, “Well begun is half done”—but only half. Like any plan, formu- lating the appropriate strategy is not enough. You can’t be successful by just planning to go to college and formulating a strategy to get a career. You have to actually do it. As you know, this is easier said than done.

Similarly, strategy alone does not differentiate high- from low-performing firms. The true differentiator between winners and losers turns out to be, not what their

Billy Beane won more games by using

statistics and other analytics to manage

the Oakland A’s.


Im ag

es /J

us tin

S ul

liv an

Why is it difficult to translate a firm’s strat- egy into HR deliverables that actually get the job done? What part of this endeavor do you think HR managers struggle with the most?

LO 5

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68 Part 1 Human Resources Management in Perspective

strategies were, but how well the strategy was executed. Yet half of managers in one sur- vey said there is a gap between their organization’s ability to develop a vision and strategy, and then actually execute it. Former Honeywell CEO Larry Bossidy noted in his book Execution that people believe they understand the concept—“it’s about getting things done”—but when asked how they get things done, “the dialogue goes rapidly downhill.”

Figure 2.12 shows the “4As” required to successfully execute a strategy. They are as follows:

• Alignment. Alignment occurs in an organization when it has a clear strategic intent, its staff has shared performance expectations, and are accountable for the results. We will talk about alignment more later in the chapter.

• Agility. Execution is not a “one and done event.” It’s also about competing tomorrow. The key to execution increasingly depends on being agile, nimble, and proactive in the face of change. As the great former hockey player Wayne Gretsky used to say, “I don’t skate to where the puck is. I skate to where the puck is going to be.”

• Architecture. A firm’s architecture consists of its structures, processes, and systems. Ideally, they should be simple and streamlined so as to propel the firm to success. But too often a firm’s architecture can end up being complicated and entangle a firm like a straightjacket.

• Ability. As we have explained, products and processes are easy to duplicate. Talent is not. Strategy execution (and ultimately growth, and profitability) depend on a firm’s talent capacity—a talented group of leaders, managers, and employees work- ing together in an engaged and collaborative way.

As the figure shows, execution is the process of combining these four elements of human capital and organizational capital.


• •



Human Capital Organization Capital


Clear strategic intent Shared performance expectations/culture

• • •

External connection Strengthening the core Organizational learning

• •

Simplified structures System and technology utilization Streamlined processes

• • •

Talent capacity Leadership bench Engagement and collaboration

Accountability for results

The 4As Framework of Execution CapabilityFigure 2.12

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69Chapter 2 Strategy and Human Resources Planning

2.6a HR’s Role in Strategy Execution In addition to formulating corporate- and business-level strategies, managers need to “translate” strategic priorities into functional areas of the organization (such as market- ing, manufacturing, human resources, and the like). Human resources management is instrumental to almost every aspect of strategy execution, whether it pertains to the organization’s structure, systems, style, skills, staff, or shared values.

Remaining Agile Like the firm as a whole, HR has to focus on ensuring agility when the environment changes. HR agility can be achieved in two primary ways: coordination agility and resource agility.

Coordination agility is the ability to rapidly reallocate resources to new or changing needs. Through HRP, managers can anticipate upcoming events, keep abreast of changes in legal regulations, forecast economic trends, spot competitors’ moves, and the like. With advance notice, managers can move people into and out of jobs, retrain them for new skill requirements, and modify the kinds of incentives they use. The use of a contin- gency workforce composed of part-timers, temporary employees, and complementary partners also helps achieve coordination flexibility.28

Resource agility, on the other hand, results from having resources that can be used in different ways and people who can perform different functions in different ways. Cross-training employees, rotating them into different jobs, and using teams are all efforts that focus on building a flexible workforce.

Reconciling Supply and Demand Part of remaining agile includes reconciling the firm’s demand for its products with its supply of employees. Demand considerations are based on forecasted trends in business activity. Supply considerations involve determining where and how candidates with the required qualifications can be found to fill a firm’s vacancies.

In an effort to meet their human resource demands, organizations have many staff- ing options, including recruiting and hiring full-time employees as well as reducing their turnover, having employees work overtime, recalling laid-off workers, using temporary or contract employees, and outsourcing or offshoring some of their business processes. Some of the ways firms say they are, or will, attract and retain babyboomers to avoid future labor shortages include offering employees flexible scheduling, health care, and long-term care benefits as they eventually retire.29

If its labor shortages are acute, a company may have to develop talent from the ground up. For example, knowing that about 40 percent of its aging workforce would be eligible for retirement in 5 years, Saudi Aramco, a Saudi-owned oil company, developed a system of hiring top high-school graduates in the country, sponsoring their college educations, and providing them with job training. The company employs 400 planners to analyze its workforce needs for the next decade and beyond.30

When forecasts show a surplus of employees, organizations often restrict their hiring, reduce their employees’ work hours or furlough them, and consider layoffs. Across-the-board pay cuts are sometimes utilized in lieu of or in addition to layoffs. Some organizations try to reduce their workforces by relying on attrition, which is a gradual reduction of employees that occurs due to employee resignations, retirements, and deaths. Programs in which employees are offered “sweetened” retirement benefits to leave a firm earlier than planned are common in large companies.

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70 Part 1 Human Resources Management in Perspective

As we have discussed, organizations have to be constantly prepared to exit and enter new lines of business, restructure, outsource, offshore, and sometimes downsize either because they have too many employees or employees with the wrong skill sets. Decisions about employee layoffs are usually based on seniority and/or performance. In some organizations, especially in Japanese firms, seniority is more likely to be the primary consideration. In other organizations, factors such as an employee’s ability and productivity take precedence over seniority. In the case of unionized organizations, the criteria for determining who will be laid off are typically set forth in union agreements and based on seniority. Unions recognize seniority because they feel that their members deserve certain rights proportionate to the years they have invested in their jobs.

Employers often recognize the seniority of employees who are not unionized, though. But one disadvantage of doing so is that the less-competent employees can end up receiving the same rewards and security as the more-competent employees. Also, the practice of using seniority as the basis for deciding which workers to lay off can inadvertently have a disparate impact on women and minority workers, who often have less seniority than other groups of workers.

When firms are downsizing, HR managers must ensure no laws are violated in the process, of which there are many. They range from laws designed to protect minorities and older employees from being unfairly targeted to laws requiring companies of a cer- tain size laying off a certain number of employees to give them warning between 60 days to 6 months. Firms must also comply with government provisions, giving some workers who have been laid off and their families the right to temporary health care coverage at group rates. We will talk more about these laws in Chapter 13.

2.7 Step Six: Evaluation You probably know someone who graduated, went to work in a particular field, assessed their success (or lack of it) in that field, and then decided to do something else for a living. The same sort of reevaluation and assessment is an important function for busi- nesses as well. At one level, it might seem that assessing a firm’s effectiveness is the final step in the planning process. But it is also the first step. Planning is cyclical, of course, and while we have somewhat conveniently placed evaluation at the end of this chapter, the information it provides actually provides firms with inputs they need for the next cycle in the planning process.

To evaluate their performance, firms need to establish a set of “desired” objectives as well as the metrics they will use to monitor how well their organizations delivered against those objectives. The objectives can include achieving a certain level of produc- tivity, revenue, profit, market share, market penetration, customer satisfaction, and so forth. For example, after Barnes and Noble saw lackluster sales for its Nook e-reader, the company reevaluated its strategy and began contemplating selling its Nook division for partnering with another company to produce it. Today it develops the tablets in conjunction with Samsung.

2.7a Evaluating a Firm’s Strategic Alignment This involves all aspects of the business, but in particular there needs to be a clear align- ment between HR and the requirements of an organization’s strategy. HR policies and practices need to achieve two types of fit: vertical and horizontal.31

As an HR manager, how would you know whether or not your firm’s overall strategy and HR strategy were being successfully implemented?

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71Chapter 2 Strategy and Human Resources Planning

Vertical Fit/Alignment Vertical fit (or vertical alignment) focuses on the connection between the business’s objectives and the major initiatives undertaken by HR. On the one hand, as we noted earlier, if a company’s strategy focuses on achieving low cost, its HR policies and prac- tices need to encourage employees to work more efficiently and be more productive. On the other hand, if the organization competes through innovation and new product development, then its HR policies and practices would be more aligned with the notion of fostering creativity and flexibility.

When ensuring alignment, firms have to ask themselves whether or not their capa- bilities, including those of its employees, are aligned with its value proposition. Most observers would agree that Tom Monahan, founder of Domino’s, was able to change the pizza industry not because he created a better product but because he was able to offer a different value proposition—delivery in 30 minutes or the pizza was free—and then created the capability to “deliver” against that promise. Case Study 2 discusses Domino’s alignment in more detail.

Horizontal Fit/Alignment In addition to vertical alignment, or fit, managers need to ensure that their HR practices are all aligned with one another internally to establish a configuration that is mutually reinforcing. The entire range of the firm’s HR practices—from its job design to staff- ing, training, performance appraisal, and compensation—need to focus on the same objectives. Too often, one HR practice will emphasize one objective, whereas another HR practice will emphasize another. Charles Schwab & Co. faced this situation. The company has a reputation in the financial services industry for developing a culture of teamwork that has been important to its strategy. However, when it changed its com- pensation strategy to provide more rewards to its high-performing brokers, the firm sent mixed signals to its employees. Which is more important: teamwork or individual high flyers?32

Figure 2.13 shows an example of how organizations can assess the horizontal fit of their HR practices. There are essentially three steps. First, managers need to iden- tify the key workforce objectives they hope to achieve. The objectives might include loyalty, customer service, productivity, and creativity. Second, managers would iden- tify each of the HR practices used to elicit or reinforce those workforce objectives (job design, staffing, training, appraisal, compensation, and so on). Third, managers would evaluate each HR practice on a scale of –5 (not supportive) to 5 (supportive). By tallying up the ratings across managers, organizations can get a very clear idea of which HR practices are working together to achieve the workforce objectives and which are not.

Keep in mind that horizontal fit is a necessary, but insufficient, cause of strategic alignment. A company could have nearly perfect alignment among its HR practices, and they still might not be aligned with the competitive strategy. For that reason, it is important for managers to assess both vertical and horizontal fit.

Strategic Alignment and the Balanced Scorecard One of the tools for mapping a firm’s strategy to ensure strategic alignment is the balanced scorecard (BSC). Developed by Harvard professors Robert Kaplan and David Norton, the BSC is a framework that helps managers translate their firms’ strategic goals into operational objectives. The model has four related cells: (1) financial, (2)  customer, (3) processes, and (4) learning. The logic of the BSC is firmly rooted in human resources

balanced scorecard (BSC) A measurement frame- work that helps manag- ers translate strategic goals into operational objectives.

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72 Part 1 Human Resources Management in Perspective

management. People management and learning help organizations improve their internal processes and provide excellent customer service. Internal processes—product development, service, and the like—are critical for creating customer satisfaction and loyalty, and they are also important for ensuring productivity to contain costs for bet- ter financial performance. Customer value creation, in turn, drives up revenues, which enhances profitability.

Figure 2.14 shows how this might work at Starbucks. In each cell, Starbucks would identify the key metrics that help translate strategic goals to operational imperatives. For example, under customer metrics, Starbucks might look at percentage of repeat customers, number of new customers, growth rate, and so forth. Under people met- rics, managers might measure the numbers of suggestions provided by employees, par- ticipation in the Starbucks stock sharing program, employee turnover, training hours spent, and the like. Each of these cells links vertically. People management issues such as rewards, training, and suggestions can be linked to efficient processes (brewing the perfect cup, delivering top-notch customer service, etc.). These processes then lead to better customer loyalty and growth. Growth and customer loyalty in turn lead to higher profitability and market value.

Assessing Horizontal FitFigure 2.13

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73Chapter 2 Strategy and Human Resources Planning

••Average tenure ••Voluntary turnover ••Engagement


Objectives Measures

••Number of customers

••New stores ••Repeat customers ••Same store sales

••Customer feedback

••First time right

••Order ful�llment


••Customer engagement


••40 hrs. training ••Employee


••Store develop ••New products ••Customer

loyalty program ••New partners


••Market value ••Revenue ••General and

administrative costs as % of Sales

••20 mill/week ••1500/yr

••15% 2/wk ••13% growth

••90+ satisfaction

••99+% accurate

••<3 minutes ••Mgr >3 yrs ••Barista 80% ••85% rating

••Pro�tability ••Grow revenues ••Improve cost


••New customers

••More value to current (now) customers

••Friendly service

••Accurate orders

••Fast ful�llment ••Store manager


••Barista engagement

Strategic Theme: “The Third Place”

Long Term Shareholder Value





Attract & Retain Customers

Grow Revenues

Premium Coffee

••20% Compound annual growth rate (CAGR)

••Intl. growth ••U.S. growth

Engage Cust.

Fill Orders


Asset Utilization

Store Manager

Building the Metrics ModelFigure 2.14

Strategic human resources management (SHRM) integrates strategic planning and HR planning. It can be thought of as the pattern of human resource deployments and activities that enable an organization to achieve its strategic goals. The firm’s mission, vision, and values provide a perspective on where the company is headed and what the organization can become in the future. Ideally, they clarify the long-term direction of the company and its strategic intent.

Analyzing the firm’s external environment is central to strategic planning. Benchmarking is the pro- cess of looking at your practices and performance and then comparing them to those of your competitors. Environmental scanning is the systematic monitor- ing of major external forces influencing the organi- zation, including forces in the business environment and the competitive environment. Changes in the external environment have a direct impact on the way

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organizations are run and people are managed. Some of these changes represent opportunities, and some of them represent real threats to the organization.

Conducting an internal analysis to gauge the firm’s strengths and weaknesses involves looking at a firm’s core capabilities, its talent and composition in the firm, and the firm’s corporate culture. An internal analy- sis enables strategic decision makers to assess the organi- zation’s workforce—its skills, cultural beliefs, and values.

An organization’s success increasingly depends on the knowledge, skills, and abilities of employees, partic- ularly as they help establish a set of core capabilities that distinguish an organization from its competitors. When employees’ talents are valuable, rare, difficult to imitate, and organized, a firm can achieve a sustained competi- tive advantage through its people. HRP is a systematic process that involves forecasting the demand for labor, performing supply analysis, and balancing supply and

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74 Part 1 Human Resources Management in Perspective

demand considerations. Quantitative and qualitative methods help a firm identify the number and type of people needed to meet the organization’s goals.

After managers have analyzed the internal strengths and weaknesses of the firm, as well as exter- nal opportunities and threats, they have the informa- tion they need to formulate corporate, business, and HR strategies for the organization. A firm’s corporate strategy includes the markets in which it will compete, against whom, and how. The firm’s business strategy is viewed in terms of domain navigation. It is more focused on how the company will compete against rival firms to create value for customers. A firm’s HR strategies and practices should be aligned with its cor- porate and business strategies.

Formulating an HR strategy is only half of the HR battle. The strategy must also be executed. Human resources management is instrumental to almost every aspect of strategy execution, whether it pertains to the organization’s structure, systems, style, skills, staff, or shared values. Like the firm as a whole, HR

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has to focus on ensuring agility when the environment changes. Employment forecasts must also be recon- ciled against the internal and the external supplies of labor the firm faces. This can include having cur- rent employees work overtime; hiring full-time, part- time, or contract employees; downsizing employees; furloughing them; and outsourcing or offshoring. If there is a labor shortage, the firm might have to refor- mulate its long-term and short-term strategic plans or find ways to develop employees “from the ground up.”

To evaluate their performance, firms need to establish a set of “desired” objectives as well as the metrics they will use to monitor how well their organizations delivered against those objectives. The objectives can include achieving certain levels of pro- ductivity, revenue, profit, market share, market pen- etration, customer satisfaction, and so forth. Issues of measurement, alignment, fit, and agility are central to the evaluation process. Firms use strategy mapping, the balanced scorecard (BSC) tool, and various HR- related metrics for these purposes.

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balanced scorecard (BSC)


business environment

competitive environment

core capabilities

core values

cultural audits

environmental scanning

human capital readiness

human resources planning (HRP)

management forecasts

Markov analysis


quality of fill

replacement charts

skill inventories

staffing tables


strategic human resources management

strategic planning

strategic vision

succession planning

SWOT analysis

talent reviews

trend analysis

value creation

Key Terms

Identify the three key elements of the human resources planning model and discuss the rela- tionships among them.

What external forces influence a firm’s strategy?

What criteria must be met if firms are to achieve a competitive advantage through their employees?

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Explain the difference between a firm’s cor- porate strategy and business strategy. Why do firms need to look at both aspects?

Why is it often difficult for a firm to match its strategy to HR deliverables?

What steps does the firm need to take to exe- cute its strategy and measure the results?

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Discussion Questions

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HRM Experience

Customizing HR for Different Types of Human Capital wants to give her all the room she needs to grow and stay committed to the firm.

Calvin Duff is a salesperson on the retail side of the firm. He has daily contact with customers and is responsible for mak- ing sales and communicating with service personnel. Make no mistake: To many customers, Calvin and his coworkers are the “face” of the company. Always on the lookout for a bet- ter position, Calvin has thought about working for PeachTree Computing, Applied Software Solution’s main competitor. Other salespeople have found that they can leave Applied Software Solutions and get “up to speed” easily at other firms. Their skills are very transferable, and the transition is not diffi- cult. Bill Ding and other managers at the company recognize this fact, so they try to keep salespeople loyal and productive, recognizing that many of them do eventually leave.

Chandra Singh is a part-time administrative assistant for Applied Software Solutions. She handles routine typing and filing work for the company, particularly in peak periods in the summer and around the holidays. She usually works for a few weeks at a time and then takes time off. The executives at the company have considered either outsourcing her job to an agency or automating it through a new computer system. But for now things are steady.

Part of strategic planning is mapping an organization’s human capital. When we look at the strategic value of a person’s skills as well as their uniqueness, we soon discover that organizations are comprised of different kinds of work- ers who have very different kinds of skills. Some are core knowledge workers; some are more traditional job-based employees; some are contract workers; and some are exter- nal partners. It is unlikely a firm would manage all of these employees the same way. There are differences in HR prac- tices for different groups. That is not bad, but it makes the job of HR managers more difficult.

Assignment The following are descriptions of three different employees. How would you characterize each worker? What role does each play when it comes to the organization’s strategy?

Sobadia Bascomb is a highly talented computer program- mer for Applied Software Solutions. She is among an elite set of engineers in the computer industry doing leading-edge work on advanced computer modeling. The firm’s CEO, Bill Ding, believes the future of the company rests on the innova- tive work that Sobadia and her team are doing. He worries that someone might lure her away to work for them, so he

CASE STUDY How a Strategy Change Led to Nike’s Formation1

Nike, the world’s most famous athletic company, didn’t start out by making Air Jordans. In fact, it didn’t make shoes at all. It distributed them.

Nike actually began as company called Blue Ribbon. It was founded in 1964 by Phil Knight, a runner from Oregon, along with his former college track coach, Bill Bowerman. At the time, the run- ning shoe market was dominated by the German firms Adidas and Puma. However, Knight and Bowerman had become intrigued by new lighter, lower-cost running shoes made in Japan. Bowerman had always tinkered with shoe designs to try to make his runners faster. Meanwhile, Knight had

just earned an MBA from Stanford University and was looking for a way to combine what he loved— sports—with work. So, the two men each chipped in $500, and began importing and selling Tiger-brand shoes (now Asics) made by the Japanese company Onitsuka.

Blue Ribbon’s start wasn’t glamorous. Bowerman and Knight began by selling the shoes out of their cars at local track meets. But runners liked the new lighter shoes, and the company started earning a profit. Even- tually the business did well enough it was able to hire some employees, most of whom were passionate run- ners like the owners.


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76 Part 1 Human Resources Management in Perspective

For about a decade Blue Ribbon’s strategy worked well. Business grew, and the company even opened its own store in Santa Monica, California. But by 1971, the firm was facing a crisis. Bowerman wanted Onit- suka to make a lighter shoe he had designed. Onitsuka wasn’t interested. Moreover, Knight believed Onitsuka was looking for other distributors to cut Blue Ribbon out of the business.

What did Knight and Bowerman do? They designed their own shoe called “the Nike” and began selling it. Executives at Onitsuka were enraged by the move. They immediately stopped selling shoes to Blue Robbin and sued it to boot.

At that point, it looked like it might be the end of the road for Blue Ribbon. There wasn’t much of a mar- ket for the Nike shoes yet. The company was still young and in debt, and a lawsuit would be expensive to fight.

Knight gave Blue Ribbon’s employees the bad news. But instead of throwing in the towel, he laid out a new vision and mission for the firm: “This is the moment we’ve been waiting for,” Knight recounts telling them in his bestselling book, Shoe Dog. “No more selling someone else’s brand. No more working for someone else. Onitsuka has been holding us down for years. Their late deliveries, their mixed-up orders, their refusal to hear and implement our design ideas— who among us isn’t sick of dealing with all that? . . . If we’re going to succeed, or fail, we should do so on our own terms, with our own ideas—our own brand.”

After the initial shock wore off, relief swept across Blue Ribbon’s employees. Not only were they undaunted

by the new mission, they were energized and excited about it. Their future lay in their own hands, and they would find a way to achieve it. Immediately they began formulating new strategies and plans.

Knight thinks the culture and agility of the com- pany were major reasons why Nike became the suc- cess it is today. Most, if not all, of its employees were scrappy competitive types. “Each of us was willing to do whatever was necessary to win,” he says. “And if ‘whatever was necessary’ fell outside our area of expertise, no problem. Not that any of us thought we wouldn't fail. In fact we had every expectation that we would. But when we did fail, we had faith we'd do it fast, learn from it, and be better for it . . . Taking a chance on people—you could argue that's what it's all been about.”

Questions 1. Who is ultimately responsible for formulating

a firm’s strategy—its managers, employees, or both?

2. What strategy execution problems do you think Knight and Bowerman might have faced in their effort to make Nike successful?

Sources: Frank Kalman, “Nike, Phil Knight and The Power of Shared Purpose,” Talent Economy (January 26, 2017), http://wwwtalentecon-; Andy Gould, “Three Lessons for Entrepreneurs from Nike ‘Shoe Dog’ Phil Knight,” Motley Fool (January 17, 2017), http://fool. com; Lara O’Reilly, “Eleven Things Hardly Anyone Knows about Nike,” Business Insider (November 4, 2014), http://www.businessinsider. com.

CASE STUDY Domino’s Tries to Get Its Strategic Recipe Right2

Believe it or not, years ago it was normal for people to have wait an hour or more to get their pizzas deliv- ered. But those were the years B.D.—before Domino’s. Started by Tom Monahan and his brother in Ypsilanti, Michigan, in the 1960s, Domino’s created a value proposition people were hungering for: pizza deliv- ered in 30 minutes or less. Better yet, if a Domino’s pizza wasn’t delivered in 30 minutes, it was free. That was unheard of in the pizza business.

Monahan changed the pizza industry not because Domino’s created a better product but because it was able to offer a different value proposition than anyone

else was offering and align its people, processes, and systems to deliver against that promise. Domino’s used assembly line–based systems and standardized processes to improve efficiency and reduce pizza preparation times. For example, it was the first to use conveyor-belt oven technology to ensure uniform temperatures and reduce baking times. Domino’s also translated its strategy into HR deliverables by empha- sizing and encouraging fast pizza-making and deliv- ery. Annually the company holds a “World’s Fastest Pizza Maker” competition in which its pizza makers compete for cash and other prizes.

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77Chapter 2 Strategy and Human Resources Planning

As important as what Domino’s did is what it did not do. Strategy is about making choices. Domi- no’s did not focus on great pizza—it focused on fast pizza. It did not customize every order but prepared them all in advance. It didn’t hire premiere pizza chefs who tossed pizza dough into the air to make lighter crusts. It didn’t use the wood-fired stoves to give the pizza an old-world taste. And it didn’t offer in-store dining.

Each of the ingredients in Monahan’s formula was aligned around its value proposition of fast delivery— a strategy that worked well for Domino’s for decades. This strategy and a franchise model helped the com- pany grow by leaps and bounds. Today there are over 13,000 Domino’s pizza stores, which are located in 80-plus countries around the world. India is currently the company’s hottest market.

Over time, however, Domino’s competitive envi- ronment changed. Other companies began delivering pizzas in about 30 minutes, and consumers began wanting more than fast pizza: They wanted good pizza. The problem was that Domino’s wasn’t deliver- ing on that score. In taste tests, customers complained Domino’s pizzas tasted like cardboard. At one point, the firms’ customer-satisfaction scores in terms of its food and service were lower than any other pizza chain. Perhaps not surprisingly, the firm’s stock price reflected as much.

To turn things around, the company had to rethink its value proposition. That included revamp- ing its food. The company developed a new recipe for its pizza crusts; began using fresher, gourmet types of ingredients; and began offering new products, such as artisan pizzas, pasta, and desserts. It also remodeled stores and added in-store dining. But Domino’s had to revamp its HR strategies and policies, too. One prob- lem was employee turnover. Domino’s turnover rate was 158 percent annually. In other words, for every employee hired during a year another 1.5 employees quit.

Domino’s CEO at the time, David Brandon, wasn’t convinced that higher pay for hourly-wage employees was the solution though. “If we could have increased everybody’s pay 20 percent could we have moved the needle a little bit to buy some loyalty? Maybe, but that’s not a long term solution.” Moreover, because most of Domino’s stores are individually owned rather than corporate owned, it is the individual owners of

the stores who have to decide for themselves whether to increase hourly wages.

Instead, the company focused on the quality of store managers—choosing better ones, finding ways to retain good ones, and coaching them to train and motivate employees by being respectful and polite. It’s store managers who cause employees to stick around—or not, said Rob Cecere, a regional man- ager for Domino’s. Employees can go to McDonald’s or Pizza Hut and make as much as they make at Domino’s. “You’ve got to make sure they are happy to come to work for you,” Cecere explained. Domi- no’s also worked harder to promote a culture of “fun” via its World’s Fastest Pizza competition and other initiatives.

Domino’s chief strength still lies in its systems and technology though. The biggest department at the firm’s headquarters in Ann Arbor, Michigan, is its technology department. The department has built novel applications over the years, such as an online ordering system that allows customers to “build” their pizzas online and track their prepara- tion, cooking, and delivery times. Customers can also use a mobile app for ordering, an emoji to text a standard order, or simply tell “Dom,” Domino’s chatbot, what they want. In Australia and New Zea- land, the company is experimenting with robot and drone delivery.

Has Domino’s new recipe worked? By most accounts, yes. Turnover dropped by more than 100 percent following the initiative, and customer satisfac- tion scores jumped up, too. In 2016, Domino’s sales growth was the best among the 25 largest restaurant chains in the United States. Its stock price has rocketed upward as well.

Still, strategy changes and their implementation are continually evolving challenges for firms, and Domino’s is no exception. “We need to understand what’s going on and create competitive advantage by being ahead of the curve,” says the company’s current CEO J. Patrick Doyle. For one, the company still faces issues with its HR piece of the puzzle and ensuring its strategy is aligned all the way down the food chain. Recently a group of franchise owners in New York agreed to pay $1.5 million to settle cases for mini- mum-wage and overtime violations.

Doyle says the firm has to start paying higher wages. Minimum-wage laws are rising in some states,

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78 Part 1 Human Resources Management in Perspective

and employers like Walmart and Target are raising their minimum wages. “The reality is the labor market is tightening up, and we’ve got to respond to that. It’s getting harder to hire people,” says Doyle. “We’ve got to do what the market demands to get the right people for our business,” he says.

Will paying hourly-wage employees a little more buy Domino’s a little more loyalty and prevent nega- tive publicity for the company? And if so, would the costs have been worth the benefits? And who should incur these costs since most of the stores are privately owned? These questions are food for thought, ones that Domino’s will have to resolve.

After all, even with the best technologies and systems, pizzas don’t cook and deliver themselves. People do.

Questions 1. Explain how Domino’s strategy differed from its

competitors. 2. Has the firm been able to achieve a long-term

strategic fit between its strategy and HR practices in your opinion? Why or why not?

Sources: Dave Buss, “What Matters to Domino’s: Five Questions with CEO J. Patrick Doyle,” Brandchannel (January 23, 2017), http://; Kevin McCoy, “N.Y. Sues Domino’s Pizza for Alleged Wage Theft,” USA Today (May 24, 2016), http://www.usatoday. com; “Domino’s Pizza Will Have to Raise Wages to Stay Competitive,” Reuters (April 6, 2015),; William James, David Kretzman, “Why Domino’s Digital Component Is Important,” Motley Fool (December 10, 2013),; Erin White, “To Keep Employees, Dominos Decides It’s Not All about Pay,” The Wall Street Journal (February 17, 2005),

1. Chistopher Rees, Hasanah Johari, “ ‘Senior Managers’ Per- ceptions of the HRM Function during Times of ‘Strategic Organizational Change,’ ” Journal of Organizational Change Management 23, no 2. (2010): 517.

2. Scott A. Snell, Mark Shadur, and Patrick M. Wright, “Human Resources Strategy: The Era of Our Ways,” in M. A. Hitt, R. E. Freeman, and J. S. Harrison (eds.), Handbook of Strategic Management (Oxford, UK: Blackwell, 2002), 627–49; Patrick M. Wright, Benjamin Dunford, and Scott A. Snell, “Human Resources and the Resource-Based View of the Firm,” Journal of Management 27, no. 6 (2002): 701–21; “What’s Affecting HR Operations? Globalization, Sustainability, and Talent,” HR Focus 84, no. 8 (August 2007): 8; Doris Sims, “Do You Know Where Your Talent Is?” Training 45, no. 1 (January 2008): 46–46.

3. “The Importance of HR,” HRFocus 73, no. 3 (March 1996): 14; David Brown, “HR’s Role in Business Strategy: Still a Lot of Work to Be Done,” Canadian HR Reporter 14, no. 19 (November 5, 2001):1–20; “How Should the HR Dept. of 2004 Be Structured?” Human Resource Department Management Report, no. 3 (November 2003): 1.

4. Patrick Kiger, “Serious Progress in Strategic Workforce Plan- ning,” Workforce Management (July 1, 2010), http://work-

5. Bala Iyer, “Deconstructing Google,” Computerworld 42, no. 15 (April 7, 2008): 32–33.

6. “Core Values and the Companies that Do Them Well, Grapper,” Grasslands: The Entrepreneurial Blog (April 4, 2010),

7. Jay J. Jamrog and Miles H. Overholt, “Building a Strategic HR Function: Continuing the Evolution,” Human Resource Planning

27, no. 1 (March 2004): 51; Gary L. Nielson, Karla L. Martin, and Elizabeth Powers, “The Secrets to Successful Strategy Exe- cution,” Harvard Business Review 86, no. 6 (June 2008):60–70.

8. Ann Zimmerman, “Dime a Dozen: Dollar Stores Pinched by Rapid Expansion,” WSJ Online (February 4, 2013), http://

9. Hiroko Tabuchi, “In America’s Heartland, Discussing Climate Change without Saying ‘Climate Change,’ ” New York Times (January 28, 2017),

10. Kelly Marchese, Siva Paramasivam, Michael Held, and Deloitte Consulting,“Bouncing Back: Supply Chain Risk Management Lessons from Post-Tsunami Japan,”Industry Week (March 9, 2012),

11. Paul Carsten,“Apple China Mobile Launch Could Spark Costly Subsidy War,” Reuters (January 17, 2014), http:www

12. Jan Alexander,“Virgin America’s Guide to Not Screwing Up Customer Service,” BNET (February 22, 2010),

13. John Gallagher,“Microsoft’s Move Boosts Detroit’s Credibility as Tech Hub,” Detroit Free Press (February 3, 2017), http://

14. For example, see U.S. Department of Labor, Bureau of Labor Statistics, Geographic Profiles of Employment and Unemploy- ment. The data and information are accessible via the Office of Employment Projections home page at emp.

15. Ray Brillinger, “Best Practices: Human Resources Bench- marking,” Canadian HR Reporter 14, no. 12 (June 18, 2001): 12; Chris Mahoney, “Benchmarking Your Way to Smarter Decisions,” Workforce 79, no. 10 (October 2000): 100–103; Brian E. Becker and Mark A. Huselid, “Strategic Human

Notes and References

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79Chapter 2 Strategy and Human Resources Planning

Resources Management: Where Do We Go from Here?” Jour- nal of Management 32, no. 6 (January 2006): 898–925.

16. For more information on methods to identify a firm’s core capabilities, see Khalid Hafeez, YanBing Zhang, and Naila Malak, “Core Competence for Sustainable Competitive Advantage: A Structured Methodology for Identifying Core Competence,” IEEE Transactions on Engineering Management 49, no. 1 (February 2002): 28–35; J. B. Quinn, “The Intelligent Enterprise: A New Paradigm,” Academy of Management Execu- tive 6, no. 4 (2002): 48–63; Jane Wollman Rusoff, “Outsourced Solutions: Brokerage Firms Looking to Focus on Their Core Competencies Find the Most Value in a Resource-Rich Clear- ing Partner,” Research 27, no. 11 (November 2004): 37–40.

17. Snell, Shadur, and Wright, “Human Resources Strategy,” 627–49; Wright, Dunford, and Snell, “Human Resources and the Resource-Based View of the Firm,” 701–21; David Col- lis and Cynthia Montgomery, “Competing on Resources,” Harvard Business Review 86, no. 7/8 (July–August 2008): 140–150; Susan Cantrell, “The Work Force of One,” Wall Street Journal 249, no. 140 (June 16, 2007): R10.

18. “ ‘SAS Again Ranks No. 1 on FORTUNE Best Companies to Work For’ List in America,” (January 20, 2011),

19. Joseph F. Castellan and Susan S. Lightle, “Using Cultural Audits to Assess Tone at the Top,” CPA Journal 75, no. 2 (Feb- ruary 2005): 6–11.

20. Patrick M. Wright, “Human Resource Strategy: Adapting to the Age of Globalization,” SHRM Foundation.

21. Stephenie Overman, “Gearing Up for Tomorrow’s Work- force,” HRFocus 76, no. 2 (February 1999): 1, 15; Kathryn Tyler, “Evaluate Your Next Move,” HRMagazine 46, no. 11 (November 2001): 66-71; Bill Leonard, “Turnover at the Top,” HRMagazine 46, no. 5 (May 2001): 46–52.

22. Carolyn Hirschman, “Putting Forecasting in Focus,” HRMagazine 52, no. 3 (March 2007): 44–49.

23. Leslie Kwoh, “Are Firms Neglecting Succession Planning?” Wall Street Journal (September 5, 2012), http://www.wsj. com.

24. Robert Kaplan and David Norton, Strategy Maps: Converting Intangible Assets into Tangible Objectives (Boston: Harvard Business School Press, 2006), Chapter.

25. John Huey, “Outlaw Flyboy CEOs,” Fortune 142, no. 11 (November 13, 2000): 237–50; “Visions of the Future,” HumanResources (January 2008): special section, 22.

26. Patrick Wright, “Human Resource Strategy: Adapting to the Age of Human Resources Management,” SHRM Foundation (2008),

27. Scott A. Snell, Mark A. Shadur, and Patrick M. Wright, “Human Resources Strategy: The Era of Our Ways,” Center for Advanced Human Resource Studies (November 1, 2000): working paper, 23–29.

28. R. Sanchez, “Strategic Flexibility in Product Competition,” Strategic Management Journal 16 (1995): 135–59; Wright and Snell, “Toward a Unifying Framework,” 756–72.

29. “Poll Shows Concern about Aging Workforce,” Credit Union Management 32, no. 6 (January 2011): 36.

30. Patrick Kiger, “Serious Progress in Strategic Workforce Plan- ning,” Workforce Management (July 1, 2010), http://work-

31. Brian Becker, Mark Huselid, and Dave Ulrich, The HR Score- card: Linking People, Strategy, and Performance (Cambridge, MA: Harvard Business School Press, 2001); see also Shari Caudron, “How HR Drives Profits,” Workforce 80, no. 12 (December 2001): 26–31.

32. “A Singular Sensation for Schwab Brokers,” Businessweek (January 24, 2002),

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Calculating Employee Turnover and Absenteeism Throughout this chapter, we have emphasized that HRP depends on having an accurate picture of both the supply of and the demand for employees. Two factors, employee turnover and absenteeism, have a direct impact on HR planning strategy and recruit- ment processes. In this appendix, we provide a detailed discussion of turnover and absenteeism, methods for measuring them, and suggestions for managing their impact.

A.1 Employee Turnover Rates Employee turnover refers simply to the movement of employees out of an organization. It is often cited as one of the factors behind the failure of U.S. employee productivity rates to keep pace with those of foreign competitors. It is also one of the chief determinants of labor supply. Even if everything else about an organization stays the same, as employees turn over, its supply of labor goes down. This involves both direct and indirect costs to the organization.

A.1a Computing the Turnover Rate The U.S. Department of Labor suggests the following formula for computing turnover rates:

Number of separations during the month Total number of employees at midmonth


So, if there were 25 separations during a month and the total number of employees at midmonth was 500, the turnover rate would be:

25 500

100 5 percent3 5

Turnover rates are computed on a regular basis to compare specific units such as departments, divisions, and work groups. In many cases, comparisons are made with data provided by other organizations. The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey is a very good source of comparative turnover data.1

Another method of computing the turnover rate is one that reflects only the avoid- able separations (S). This rate is computed by subtracting unavoidable separations

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81Chapter 2 Strategy and Human Resources Planning

(US)—for example, due to pregnancy, return to school, or death—from all separations. The formula for this method is as follows:

100 (turnover rate) −

3 5 S US


where M represents the total number of employees at midmonth. For example, if there were 25 separations during a month, 5 of which were US, and the total number of employees at midmonth (M) was 500, the turnover rate would be:

25 5 500

100 4 percent −

3 5

A.1b Determining the Costs of Turnoverr Replacing an employee is time consuming and expensive. Costs can generally be broken down into three categories: separation costs for the departing employee, replacement costs, and training costs for the new employee. These costs are conservatively estimated at two to three times the monthly salary of the departing employee, and they do not include indirect costs such as low productivity prior to quitting and lower morale and overtime for other employees because of the vacated job. Consequently, reducing turn- over could result in significant savings to an organization. Highlights in HRM 4 details one organization’s costs associated with the turnover of a single computer programmer. Note that the major expense is the cost involved in training a replacement.

A.2 Employee Absenteeism Rates How frequently employees are absent from their work—the absenteeism rate—is also directly related to HR planning and recruitment. When employees miss work, the orga- nization incurs direct costs of lost wages and decreased productivity. It is not uncom- mon for organizations to hire extra workers just to make up for the number of absences totaled across all employees. In addition to these direct costs, indirect costs may under- lie excessive absenteeism. A certain amount of absenteeism is, of course, unavoidable. There will always be some who must be absent from work because of sickness, accidents, serious family problems, or other legitimate reasons. However, chronic absenteeism may signal deeper problems in the work environment.

A.2a Computing Absenteeism Rates Managers should determine the extent of the absenteeism problem, if any, by maintain- ing individual and departmental attendance records and by computing absenteeism rates. Although there is no universally accepted definition of “absence” or a standard formula for computing absenteeism rates, the method most frequently used is that rec- ommended by the U.S. Department of Labor.

2 3

Number of worker days lost through job absence during period Average number of employees 3 number of workdays


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If 300 worker-days are lost through job absence during a month having 25 sched- uled working days at an organization that employs 500 workers, the absenteeism rate for that month is:

300 300 25

100 2.4 percent 3

3 5

The U.S. Department of Labor defines job absence as the failure of employees to report to work when their schedules require it, whether or not such failure to report is excused. Scheduled vacations, holidays, and prearranged leaves of absence are not counted as job absence.

A.2b Comparing Absenteeism Data The Bureau of Labor Statistics of the U.S. Department of Labor receives data on job absences from the Current Population Survey of Households conducted by the Bureau of the Census, and analyses of these data are published periodically. These analyses help identify problem areas—industries, occupations, or groups of workers with the highest incidence of absence or with rapidly increasing rates of absence. Comparison with other organizations may be made by referring to Bureau of Labor Statistics data reported in the Monthly Labor Review.

Costs Associated with the Turnover of One Computer Programmer

Turnover costs Separation costs Replacement costs

Training costs

5 1


Separation Costs 1. Exit interview cost for salary and benefits of both

interviewer and departing employee during the exit interview $30 $30 $60


5 1 5

2. Administrative and record keeping action $30 Sepa- ration costs 5 $60 $30 $90

2 5

5 1 5

Replacement Costs 1. Advertising for job opening $2, 5005

2. Preemployment administrative functions and record- keeping action $1005

3. Selection interview $2505

4. Employment tests $405

5. Meeting to discuss candidates(salary and benefits of managers while participating in meetings) $250 Replacement costs $2, 500 $100 $250 $40 $250 $3,140


5 1 1 1 1


Training Costs 1. Booklets, manuals, and reports $505

2. =Education $240 / day for new employee’s salary and benefits 10 days of workshops, seminars, or courses

$2, 400 3


3. 5 3


+ One-to-one coaching ($240 / day per new employee

$240 / day per staff coach or job expert) 20 days of one-to-one coaching $9, 600

4. Salary and benefits of new employee until he or she gets “up to par” $240 / day for salary and benefits 20 days $4, 800

5 3


Training costs $50 $2, 400 $9, 600 $4, 800 $16, 8501 1 1 5

Total turnover costs $90 $3,140 $16, 850 $20, 0805 1 1 5

Sources: Adapted from the book Turning Your Human Resources Department into a Profit Center by Michael Mercer, PhD (Barrington, IL: Castlegate Publishers, Inc.). Copyright 2002 Michael Mercer. Repro- duced with permission from Michael Mercer, PhD, http://www.DrMer-

Highlights in HRM4


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83Chapter 2 Strategy and Human Resources Planning

A.2c Costs of Absenteeism The cost of each person hour lost to absenteeism is based on the hourly weighted average salary, costs of employee benefits, supervisory costs, and incidental costs. For example, XYZ Company, with 1,200 employees, has 78,000 person hours lost to absenteeism; the total absence cost is $560,886. When this figure is divided by 1,200 employees, the cost per employee is $467.41. (In this example, we are assuming the absent workers are paid. If absent workers are not paid, their salary figures are omitted from the computation.)

A.2d Absenteeism and HR Planning While an employer may find that the overall absenteeism rate and costs are within an acceptable range, it is still advisable to study the statistics to determine whether there are patterns in the data. Rarely does absenteeism spread itself evenly across an organiza- tion. It is very likely that employees in one area (or occupational group) may have nearly perfect attendance records, while others in a different area may be absent frequently. By monitoring these differences, managers can assess where problems might exist and, more important, begin planning ways to resolve or improve the underlying causes. For example, incentives could be provided for perfect attendance. Alternatively, progres- sive discipline procedures might be used with employees having a record of recurring absenteeism.

By establishing a comprehensive absenteeism policy, Allen-Bradley (which is now a part of Rockwell Automation) cut absenteeism 83.5 percent in a 25-month period. This reduced the strain on labor costs and increased productivity.

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Equal Employment Opportunity and Human Resources Management

Learning Outcome After studying this chapter, you should be able to

Describe the major equal employment opportunity (EEO) laws related to age, gender, religion, weight, and sexual orientation. Determine the employment practices they prohibit and the reason behind passage of EEO legislation. Describe what a bona fide occupational qualification is.

Explain how the Uniform Guidelines on Employee Selection Procedures were developed and how firms use them to ensure they are abiding by the law. Understand adverse impact and disparate treatment.

LO 1

LO 2

Understand Equal Employment Opportunity Commission (EEOC) record-keeping and posting requirements and describe how discrimination charges are processed by the EEOC.

Explain what affirmative action is and how companies today are seeing the value of voluntarily having diverse workforces.

LO 3

LO 4

Yu ri_

A rc

ur s/

G et

ty Im

ag es

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85Chapter 3 Equal Employment Opportunity and Human Resources Management

O ne of the most important topics that must be discussed in any human resources management textbook is equal employment opportunity (EEO). Equal employ- ment opportunity, or the employment of individuals in a fair and nonbiased man-

ner, commands the attention of the media, courts, legislators, HR managers, and their firms alike. In 2016, 91,503,412 private-sector workplace discrimination charges were filed with the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency that enforces the nation’s fair employment laws.1 The number of filings have gradually increased over the last 20 years, marking an increased importance for man- agers to know and comply with numerous EEO laws as the workforce becomes more diverse and multicultural.

When managers ignore or are unaware of fair employment laws, they and their firms run the risk of costly and time-consuming litigation, negative public attention, potentially lower sales, lower employee morale, and even damage to their own indi- vidual careers.2 Because even unintentional discrimination can be illegal, supervisors need to be aware of their personal biases and how they can affect their dealings with their subordinates.3 Employment discrimination is not only a legal issue, but also an emotional one. It concerns all individuals, regardless of their sex, race, reli- gion, age, national origin, color, sexual orientation, physical condition, and position in an organization. Fortunately, it is a problem that can be minimized with good HR practices.

This chapter will help you better understand how to minimize employment dis- crimination and will also discuss the diversity efforts companies are actively pursuing

equal employment opportunity (EEO) The treatment of indi- viduals in all aspects of employment— hiring, promotion, training, etc.—in a fair and nonbiased manner.

Equal Employment Opportunity Commis- sion (EEOC) The EEOC’s work con- sists of formulating EEO policy and approving all litigation involved in maintaining equal employment opportu- nity. The EEOC’s guide- lines are not federal law but administrative rules and regulations published in the Federal Register.

The American Mus- tache Institute (AMI) has been working to

alleviate facial hair discrimination in the

United States.

G -s

to ck

st ud

io /S

hu tt

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oc k.

co m

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86 Part 2 Meeting Human Resources Requirements

as a way to gain a strategic edge. HR professionals agree that when all functions of HRM comply with the law, the organization becomes a fairer place to work and a more effective competitor.

3.1 Historical Perspective of EEO Legislation Equal employment opportunity as a national priority has emerged slowly in the United States. Three factors seem to have influenced the growth of EEO legislation: (1) chang- ing attitudes toward employment discrimination; (2) published reports highlighting the economic problems and injustices experienced by minority workers; and (3) a growing body of disparate discrimination laws and regulations at different levels of government that legislators feel should be standardized. (See Figure 3.1). Although the United States has progressed substantially in improving business practices and public attitudes about discrimination, problems still persist.

3.1a Changing National Values The United States was founded on the principles of individual merit, hard work, and equality. In spite of these values, employment discrimination has a long history in the United States. Organizations that claim to offer fair treatment to employees have inten- tionally or unintentionally engaged in discriminatory practices. As a result, laws have been passed to ensure equality and reward individual merit and hard work.

1. Changing attitudes towards employment discrimination

2. Published reports on economic injustices experienced by minority workers

Growth of EEO

legislation3. A growing body of disparate discrimination laws and regulations that legislators feel should be standardized

Three Factors Come Together to Influence EEO LegislationFigure 3.1

Have you ever felt discriminated against in the workplace? How about in school, by a teacher? How did it make you feel?

LO 1

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87Chapter 3 Equal Employment Opportunity and Human Resources Management

Nonetheless, discrimination still persists. The Employment Non-Discrimination Act, or “ENDA,” proposed by the U.S. Congress extends federal employment discrimi- nation protection currently provided on race, religion, gender, national origin, age, and disability to include sexual orientation and gender identity.

3.1b Early Legal Developments Litigation concerning discriminatory practices has been prevalent since the nine- teenth century. In 1866, Congress passed the Civil Rights Act, which extended to all people the right to enjoy full and equal benefits of all laws, regardless of race. In 1933, Congress enacted the Unemployment Relief Act, which prohibited employment discrimination on account of race, color, or creed (religious beliefs). Then in 1941, President Franklin D. Roosevelt issued Executive Order 8802, which was to ensure that every American citizen, “regardless of race, creed, color, or national origin,” would be guaranteed equal employment opportunities for workers employed  by firms  awarded World War II defense contracts. Over the next 20 years a variety of  other legislative efforts were promoted to resolve inequities in employment practices.

Unfortunately, these early efforts did little to correct employment discrimina- tion. First, nondiscrimination laws gave no enforcement powers to agencies. Laws did not  specify what discriminatory practices or methods needed correction and employers were not required to comply with Equal Employment Opportunity legislation.

Owners and managers of growing small businesses should consider conducting routine HR compliance assessments, either annually or perhaps each time the company reaches another significant increase in employees, for example, from less than 5 to closer to 15 employees.

There are other occasions when a small firm should check its compliance as well. Eric A. Marks, a partner in charge of the Human Resources Consulting Practice at the New York accounting firm Marks Paneth & Shron, explains:

Significant changes to the business, such as merg- ers; the retirement of senior managers; newly hired or promoted supervisors or managers who may lack HR experience; creation or revision of an employee handbook; changes in employee morale, turnover, attendance, or disciplinary prob- lems; taking on government contracts where com- pliance requirements are often stricter; and major changes in state or federal regulations—any of

Small Business Application

these are danger signs. They signal that the busi- ness has a fresh need to address compliance and make sure its house is in order.

In short, an HR compliance assessment reviews how well an employer is following employment, benefits, and safety laws. Fortunately, small-business owners do not have to remain in the danger zone. There are numerous HR consulting firms that not only can conduct a compliance assessment, but can also assist the owner with rectifying any noncompliant systems and procedures and train the company’s managers and supervisors to maintain them. There are even HR compliance self-assessment forms available online. Help is only a mouse-click away.

Source: “New Risks to Small Businesses” Marketwire (February 28, 2011),; “HR Compliance Assessment Overview,”; “HR Challenges: Compliance,” http://www.strategic-workplace-solutions .com/services/compliance.

The Perils of Noncompliance

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88 Part 2 Meeting Human Resources Requirements

3.2 Government Regulation of Equal Employment Opportunity

Despite their shortcomings, the laws and executive orders discussed in the previous sec- tion laid the groundwork for a significant number of laws that have since been passed barring employment discrimination.

Part of the reason why it is so critical for managers and supervisors to understand and apply EEO laws is that employees act as agents of their employers. If a manager or supervisor violates the law, both she and her organization can face legal consequences. The organization cannot claim that it is not legally responsible for what the manager or supervisor did.

Figure 3.2 shows the various prohibited HR activities related to hiring, promoting, compensating employees, and so forth covered by EEO laws. If you think you already know what constitutes a legal or illegal employment practice, you might be surprised. Highlights in HRM 1 will test your current understanding of how equal employment opportunity laws are applied in the workplace.

Prohibited Discriminatory Employment PracticesFigure 3.2

It is illegal to discriminate in any aspect of employment, including:

• hiring and firing;

• compensation, assignment, or classification of employees;

• transfer, promotion, layoff, or recall;

• job advertisements;

• recruitment;

• testing;

• use of company facilities;

• training and apprenticeship programs;

• fringe benefits;

• pay, retirement plans, and disability leave; or

• other terms and conditions of employment.

Discriminatory practices under these laws also include:

• harassment on the basis of race, color, religion, sex, national origin, disability, genetic information, or age;

• retaliation against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;

• employment decisions based on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain sex, race, age, religion, or ethnic group, or individuals with disabilities, or based on myths or assumptions about an individual’s genetic information; and

• denying employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, national origin, or an individual with a disability. Title VII also prohibits discrimination because of participation in schools or places of worship associated with a particular racial, ethnic, or religious group.

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Test Your Knowledge of Equal Employment Opportunity Law

The following questions have been used as “icebreakers” by employers and consultants when training supervisors and managers in EEO legislation. What is your knowledge of EEO laws? Answers are found at the end of this chapter.

1. Two male employees tell a sexually explicit joke. The joke is overheard by a female employee who com- plains to her supervisor that this is sexual harassment. Is her complaint legitimate? _______________Yes _______________No

2. To be covered by Title VII of the Civil Rights Act, an employer must be engaged in interstate commerce and employ 25 or more employees. _______________True _______________False

3. People addicted to illegal drugs are classified as dis- abled under the Americans with Disabilities Act of 1990. _______________Yes _______________No

4. The Equal Pay Act of 1963 allows employers to pay dif- ferent wages to men and women who are performing substantially similar work. What are the three defenses for paying a different wage?

1. __________________________________________

2. __________________________________________

3. __________________________________________

5. A person applies for a job as a janitor at your company. During his interview with you, the person mentions

that since birth he has sometimes experienced short periods of memory loss. Must you consider this indi- vidual a disabled person under the Americans with Disabilities Act of 1990? _______________Yes _______________No

6. On Friday afternoon, you tell Nancy Penley, a com- puter analyst, that she must work overtime the next day. She refuses, saying that Saturday is her regular religious holiday and she can’t work. Do you have the legal right to order her to work on Saturday? _______________Yes _______________No

7. You have just told an applicant that she will not receive the job for which she applied. She claims that you denied her employment because of her age (she’s 52). You claim she is not protected under the age discrimination law. Is your reasoning correct? _______________Yes _______________No

8. As an employer, you can select those applicants who are the most qualified in terms of education and experience. _______________Yes _______________No

9. As a manager, you have the legal right to mandate dates for pregnancy leaves. _______________True _______________False

10. State and local fair employment practice laws cover smaller employers not covered by federal legislation. _______________True _______________False

Highlights in HRM1

3.2a Major Federal Laws Major federal EEO laws have been enacted to prevent discrimination against groups of workers most often affected by unfair employment practices. These groups are referred to as protected classes.4 (See Figure 3.3).

Defined broadly, the classes include employees of a particular race, color, religion, national origin, sex, age, and those with physical or mental disabilities. Figure 3.4 lists the major and separate federal laws and their provisions governing equal employment opportunity.

Equal Pay Act of 1963 The Equal Pay Act makes it illegal to discriminate against people in terms of the pay, employee benefits, and pension they earn based on their gender when they do equal work.5 Jobs are considered “equal” when they require substantially the same skill, effort, and responsibility under similar working conditions and in the same establishment. However, a company does not violate the Equal Pay Act when the differences in the

protected classes Individuals of a minor- ity race, women, older people, and those with disabilities who are covered by federal laws on equal employment opportunity.


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90 Part 2 Meeting Human Resources Requirements

wages it pays to men and women for equal work are based on seniority systems, merit considerations, or the workers’ quantity or quality of production. Also, if a pay dispar- ity between the sexes exists, employers cannot legally lower the wages of one gender to comply with the law; rather, they must raise the wages of the gender being underpaid.

Civil Rights Act of 1964 The Civil Rights Act of 1964 is a landmark law that addresses discrimination in society. Title VII of the act specifically bars employment discrimination in all HR activities, including hiring, training, promotion, transfers, pay, employee benefits, and other con- ditions of employment. Discrimination is prohibited on the basis of race, color, religion, sex, or national origin. Title VII of the Civil Rights Act also created the EEOC to admin- ister the law in order to promote equal employment opportunity.

In response to the growing number of immigrant workers and workplace cultural and ethnic awareness, the EEOC has issued important guidelines on national origin discrimination.6 A “national origin group” is defined as a group of people sharing a com- mon language, culture, ancestry, and/or similar social characteristics. This definition includes people born in the United States who are not racial or ethnic minorities. Also prohibited under the act is discrimination based on pregnancy or a medical condition related to it or childbirth. The Civil Rights Act of 1964 covers a broad range of organiza- tions. The law includes under its jurisdiction the following:

1. All private employers in interstate commerce who employ 15 or more employees for 20 or more weeks per year

2. State and local governments 3. Private and public employment agencies

Protected Classes:

Employees of a particular Race Color

Religion National origin

Sex Age

Physical disabilities

Mental disabilities

Protected Classes of EmployeesFigure 3.3

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91Chapter 3 Equal Employment Opportunity and Human Resources Management

4. Joint labor-management committees that govern apprenticeship or training programs

5. Labor unions having 15 or more members or employees 6. Public and private educational institutions 7. Foreign subsidiaries of U.S. organizations employing U.S. citizens

Certain employers are excluded from coverage of the Civil Rights Act. Broadly defined, these are (1) U.S. government–owned corporations; (2) bona fide, tax-exempt private clubs; (3) religious organizations employing people of a specific religion; and (4) organizations hiring Native Americans on or near a reservation.

Bona Fide Occupational Qualification. Under Title VII of the Civil Rights Act, employers are permitted limited exemptions from antidiscrimination regulations if the employment preferences are based on a bona fide occupational qualification. A bona fide occupational qualification (BFOQ) permits discrimination when employer

bona fide occupational qualification (BFOQ) Suitable defense against a discrimination charge only when age, religion, sex, or national origin is an actual qualification for performing the job.


Equal Pay Act of 1963 Requires all employers covered by the Fair Labor Standards Act and others to provide equal pay for equal work, regardless of sex.

Title VII of Civil Rights Act of 1964 (amended in 1972, 1991, 1994, and 2009)

Prohibits discrimination in employment on the basis of race, color, religion, sex, or national origin; created the EEOC to enforce the provisions of Title VII.

Age Discrimination in Employ- ment Act of 1967 (amended in 1986 and 1990)

Prohibits private and public employers from discriminating against people age 40 or older in any area of employment because of age; exceptions are permitted when age is a bona fide occupational qualification.

Equal Employment Opportunity Act of 1972

Amended Title VII of Civil Rights Act of 1964; strengthens the EEOC’s enforcement powers and extends coverage of Title VII to government employees, employees in higher education, and other employers and employees.

Pregnancy Discrimination Act of 1978

Broadens the definition of sex discrimination to include pregnancy, childbirth, or related medical conditions; prohibits employers from discriminating against pregnant women in employment benefits if they are capable of performing their job duties.

Americans with Disabilities Act of 1990 (amended in 2008)

Prohibits discrimination in employment against people with physical or mental disabilities or the chronically ill; enjoins employers to make reasonable accommodation to the employment needs of the disabled; covers employers with 15 or more employees.

Civil Rights Act of 1991 Provides for compensatory and punitive damages and jury trials in cases involving intentional discrimination; requires employers to demonstrate that job practices are job-related and consistent with business necessity; extends coverage to U.S. citizens working for U.S. companies overseas.

Uniformed Services Employment and Reemployment Rights Act of 1994 (amended in 1998, 2004, and 2008)

Protects the employment rights of individuals who enter the military for short periods of service.

Don’t Ask, Don’t Tell Repeal Act of 2010

Bars discrimination against military personnel based on their sexual orientations.

Major Laws Affecting Equal Employment OpportunityFigure 3.4

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92 Part 2 Meeting Human Resources Requirements

hiring preferences are a reasonable necessity for the normal operation of the business. Courts have ruled that a business necessity is a practice that is necessary for the safe and efficient operation of the organization.

However, a BFOQ is a suitable defense against a discrimination charge only when age, religion, sex, or national origin is an actual qualification for performing the job. (See Figures 3.5). For example, an older person could legitimately be excluded from consideration for employment as a model for teenage designer jeans. It is also reasonable to expect the Chicago Bears of the National Football League to hire male locker-room attendants or for Abercrombie and Fitch Clothing Store to employ females as models for women’s fashions. Religion is a BFOQ in organizations that require employees to share a particular religious doctrine. National origin can also be a BFOQ if it is an actual qualification for a job. For example, to ensure the “authenticity” of the dining experience, an Asian restaurant could use the business-necessity defense to support its preference for hiring Asian American servers. The BFOQ exception does not, however, apply to discrimination based on race or color.

Religious Preference. Title VII of the Civil Rights Act prohibits employment dis- crimination based on a person’s religion. Title VII does not require employers to grant complete religious freedom in employment situations, however. Employers need only make a reasonable accommodation for a current employee’s or job applicant’s religious observance or practice without incurring undue hardship in the conduct of the busi- ness. Managers or supervisors may have to accommodate an employee’s religion in the specific areas of (1) holidays and observances (scheduling), (2) personal appearance (wearing beards, veils, or turbans), and (3) religious conduct on the job (missionary work among other employees).

What constitutes “reasonable accommodation” can be difficult to define. For example, in the 2012 case, Porter v. City of Chicago, the city of Chicago had tried to resolve scheduling conflicts with Latice Porter by offering an evening shift to appease her request for time off on Sundays for religious reasons. However, she wasn’t inter- ested in this option and didn’t return to work. She was later fired for not fulfilling work responsibilities. She sued the city based on discrimination against her religion. The

business necessity A work-related practice that is necessary to the safe and efficient opera- tion of an organization.

BFOQ Bona fide Occupational qualification

Must be an actual Qualification for performing the job.

Age Religion Sex National


BFOQ Bona Fide Occupational QualificationFigure 3.5

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93Chapter 3 Equal Employment Opportunity and Human Resources Management

City of Chicago won the case.7 Reasonable accommodation doesn’t mean an employer must accommodate at all costs, rather it is meant as a possible benefit to the employee.

Employer–employee cooperation and flexibility are often the key when it comes to employment accommodations, including those for religious reasons. The EEOC’s posi- tion is not that firms need to quash religious expression in the workplace but to make a reasonable effort to accommodate people with different belief systems.

Amendments to the Civil Rights Act of 1964 Equal Employment Opportunity Act of 1972. The Equal Employment Opportunity Act of 1972 amended the Civil Rights Act of 1964. Two important changes were made: (1) The act’s coverage was broadened to include state and local governments and public and private educational institutions, and (2) the law strengthened the enforcement pow- ers of the EEOC by allowing the agency itself to sue employers in court.

Civil Rights Act of 1991. The Civil Rights Act of 1991 was enacted to allow employ- ees who can prove they were intentionally discriminated against to seek compensatory monetary damages. Compensatory damages include money for emotional pain, suffer- ing, mental anguish, and so forth.

The Civil Rights Act of 1991 also states that employees who are sent abroad to work for U.S.-based companies are protected by U.S. antidiscrimination legislation governing age and disability and Title VII of the Civil Rights Act of 1964.

Glass Ceiling Act of 1991. The Glass Ceiling Act of 1991 was passed jointly with the Civil Rights Act of 1991. The “glass ceiling” represents an invisible barrier that prohibits protected class members from reaching top organizational positions. The act created the Glass Ceiling Commission to study and report on the status of and obstacles faced by minorities as they strive for top-level management jobs.

Title VII of the Civil Rights Act requires

employers to make reasonable accommo- dations for an employ- ee’s religious practices

and observances.

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94 Part 2 Meeting Human Resources Requirements

Lilly Ledbetter Fair Pay Act (2009). The Lilly Ledbetter Fair Pay Act states that the 180-day statute of limitations for filing an equal-pay lawsuit with EEOC resets with each new discriminatory paycheck an employee receives—not the date the employee received his or her first discriminatory paycheck as the U.S. Supreme Court had ruled. What this means is that employees can claim discrimination after years of getting unfair pay and demand to be compensated for the lost wages. Organizations therefore need to diligently and regularly examine their pay systems carefully to be sure they are equitable.

Age Discrimination in Employment Act of 1967 The Age Discrimination in Employment Act (ADEA) prohibits specific employers from discriminating against employees and applicants age 40 or older in any employment area. Employers affected are those with 20 or more employees; unions with 25 or more members; employment agencies; and federal, state, and local governments. Managers or supervisors discriminate against older employees if they:

• Exclude older workers from important work activities. • Make negative changes in the performance evaluations of older employees. • Deny older employees job-related education, career development, or promotional

opportunities. • Select younger job applicants over older, better-qualified candidates. • Pressure older employees into taking early retirement or terminate them. • Reduce the job duties and responsibilities of older employees.8

Exceptions to the law are permitted when age is a bona fide occupational qualification.

Amendments to the ADEA The Older Workers Benefit Protection Act of 1990 specifically prohibits employ- ers from denying benefits to older employees except in limited circumstances. The law also allows employers to ask older employees to waive their legal rights under the ADEA in exchange for compensation such as severance packages or court set- tlements. As a result of the act, many firms that have downsized have been able to legally  offer older employees early-retirement severance packages. However, to be  valid, an ADEA   waiver must be in writing, clear, and understandable, and the recipients need to be given a certain amount of time to consider the offer in the waiver.

Pregnancy Discrimination Act of 1978 The Pregnancy Discrimination Act amended the Civil Rights Act of 1964 by stating that pregnancy is a disability and that pregnant employees in covered organizations must be treated on an equal basis with employees having other medical conditions. Specifically, the Pregnancy Discrimination Act affects employee benefit programs including (1) hospitalization and major medical insurance, (2) temporary disability and salary continuation plans, and (3) sick leave policies.9 The law also prohibits dis- crimination in the hiring, promotion, transfer, or termination of women because of pregnancy.

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95Chapter 3 Equal Employment Opportunity and Human Resources Management

Americans with Disabilities Act of 1990 Congress in 1990 passed the Americans with Disabilities Act (ADA), which prohibits employers from discriminating against individuals with physical and mental disabilities and the chronically ill.10 Disability discrimination charges from employees have doubled from 2005 to 2016, from 14,893 to 28,073.

The law defines a disability as “(a) a physical or mental impairment that sub- stantially limits one or more of the major activities; (b) a record of such impairment; or (c) being regarded as having such an impairment.” Note that the law also protects people “regarded” as having a disability—for example, individuals with disfiguring burns.

Not every mental or physical impairment is considered a disability under the law. For example, significant personality disorders are covered under the EEOC’s “Enforce- ment Guidance on the Americans with Disabilities Act and Psychiatric Disabilities.”11 Covered personality disorders include schizophrenia, bipolar disorders, major affective disorders, personality disorders, and anxiety disorders. These impairments are char- acterized by aberrant behavior, self-defeating behavior, manipulation of others, and troublesome manners of behavior. However, mental impairments described as “adjust- ment disorders” or attributed to stress have generally not been subject to ADA cover- age. Therefore, employees who claim to be “stressed” over marital problems, financial hardships, demands of the work environment, job duties, or harsh and unreasonable treatment from a supervisor would not be classified as disabled.

The act requires employers to make a reasonable accommodation for disabled peo- ple who are otherwise qualified to work, unless doing so would cause undue hardship to the employer.12 “Undue hardship” refers to unusual work modifications or exces- sive expenses that might be incurred by an employer in providing an accommodation. Reasonable accommodation “includes making facilities accessible and usable to dis- abled persons, restructuring jobs, permitting part-time or modified work schedules, reassigning to a vacant position, changing equipment, and/or expense.” An example of a reasonable accommodation case is that of Minnihan v. Mediacom Communica- tions (2015). Minnihan had a seizure disorder that barred him from driving—an essen- tial part of his job. Mediacom offered as many accommodations as possible, such as a nondriving job in another facility, contact infor- mation of an employee who could give Minnihan a ride to work, and information on public trans- portation. However, Minnihan didn’t accept any of these suggestions and requested that Mediacom hire another employee to perform the driving por- tion of his job—but Mediacom rejected this idea. Mediacom was found to have provided reasonable accommodation.

Furthermore, employers cannot use selection procedures that screen out or tend to screen out dis- abled people unless the selection procedure “is shown to be job-related for the position in question and is consistent with business necessity” and acceptable job performance cannot be achieved through reason- able accommodation. Information and forms related to the health of employees must be kept confidential and separate from their regular personnel files.

reasonable accommodation An attempt by employers to adjust, without undue hardship, the working conditions or schedules of employees with dis- abilities or religious preferences.

The ADA prohibits employers from dis- criminating against

individuals regarded as having physical or

mental disabilities.


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96 Part 2 Meeting Human Resources Requirements

Hiring disabled individuals is not only a legal mandate, it is also good business. Employers subject to the ADA and those who value the varied skills and abilities of the disabled approach the law as a proactive business requirement. Hiring the disabled emphasizes what these individuals can do rather than what they cannot do. Two of the most comprehensive studies conducted on the ADA show that the law has had a positive effect on both business outcomes and disabled employees. Conducted by the National Council on Disability (NCD), the studies reported positive gains regarding the ADA’s four major goals: equal opportunity, full participation, independent living, and eco- nomic self-sufficiency for people with disabilities.13 Figure 3.6 identifies specific ways to make the workplace more accessible to the disabled.

Amendments to the ADA The Americans with Disabilities Act Amendments Act was enacted in 2008 in response to court rulings that had weakened the ADA. The ADAAA broadened the definition of what constitutes a disability. The new act makes it less likely a person will be denied protection because his or her condition does not seem severe enough or because it is improved by drugs, prosthetic devices, and so forth.

After the passage of the law, the EEOC filed a number of suits against companies including one that alleged that a longtime cashier with severe arthritis was denied a reasonable accommodation—a stool. The woman had used the stool for 7 years, but a new manager did not like the fact and had terminated her.14

Genetic Information Nondiscrimination Act of 2008 The Genetic Information Nondiscrimination Act (GINA) enacted in 2008 was passed to alleviate people’s fears that their genetic information would be misused. Under Title II of the act, employers are prohibited from requesting, requiring, or purchasing the genetic information of workers or their family members. Employers that happen to possess genetic information as a result of health insurance records must keep the information confidential and separate from an employee’s personnel files.15

• Install easy-to-reach switches.

• Provide sloping sidewalks and entrances.

• Install wheelchair ramps.

• Reposition shelves for the easy reach of materials.

• Rearrange tables, chairs, vending machines, dispensers, and other furniture and fixtures.

• Widen doors and hallways.

• Add raised markings on control buttons.

• Provide designated accessible parking spaces.

• Install hand controls or manipulation devices.

• Provide flashing alarm lights.

Americans with Disabilities Act Suggestions for an Accessible WorkplaceFigure 3.6

• Remove turnstiles and revolving doors or provide alternative accessible paths.

• Install holding bars in toilet areas.

• Redesign toilet partitions to increase access space.

• Add paper cup dispensers at water fountains.

• Replace high-pile, low-density carpeting.

• Reposition telephones, water fountains, and other needed equipment.

• Add raised toilet seats.

• Provide a full-length bathroom mirror.

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97Chapter 3 Equal Employment Opportunity and Human Resources Management

In 2016, this act was supported with the decision in the EEOC v. Joy Mining Machinery case, where the employer was denied the ability to make post-offer medical examinations in asking prospective employees if they had family medical history of tuberculosis, cancer, epilepsy, and heart disease.16

Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) covers all military personnel, including National Guard members, reservists, and active- duty military personnel, who enlist either voluntarily or involuntarily during peace or wartime. Under this act, people who enter the military for a total of five years can return to their private-sector jobs without risk of loss of seniority or benefits.17 The act protects against discrimination on the basis of military obligation in the areas of hiring, job retention, and advancement. The law does not require employers to pay the workers’ wages while they are enlisted.

Amendments to the USERRA In 2004, the USERRA was amended by the Veterans Benefits Improvement Act requir- ing employers to provide a notice of rights, benefits, and obligations of both employees and employers under USERRA.18 For their part, service members must provide their employers advance notice of their military obligations in order to be protected by the reemployment rights statute.

3.2b Other Federal Laws and Executive Orders Executive orders are used to provide equal employment opportunity to individuals employed by government contractors. Since many large employers—such as General Dynamics, Intel, Dell Computer, and Motorola—and numerous small companies have contracts with the federal government, managers are expected to know and comply with the provisions of executive orders and other laws. The federal laws and executive orders that apply to government agencies and government contractors are summarized in Figure 3.7.

EEO Rules Applicable to Federal Contractors and AgenciesFigure 3.7


Vocational Rehabilitation Act of 1973 (amended in 1974)

Prohibits federal contractors from discriminating against disabled individuals in any program or activity receiving federal financial assistance; requires federal contractors to develop affirmative action plans to hire and promote disabled people.

Executive Order 11246 (1965), as amended by Order 11375 (1966)

Prohibits employment discrimination based on race, color, religion, sex, or national origin by government contractors with contracts exceeding $10,000; requires contractors employing 50 or more workers to develop affirmative action plans when government contracts exceed $50,000 per year.

Executive Order 11478 (1969) Obligates the federal government to ensure that all personnel actions affecting applicants for employment be free from discrimination based on race, color, religion, sex, or national origin.

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98 Part 2 Meeting Human Resources Requirements

Vocational Rehabilitation Act of 1973 The Vocational Rehabilitation Act was passed in 1973 and required private employers with federal contracts over $2,500 to take action to hire individuals with a mental or physical dis- ability. Recipients of federal financial assistance, such as public and private colleges and uni- versities, are also covered. In applying the safeguards of this law, the term disabled individual means “any person who (1) has a physical or mental impairment which substantially limits one or more of such person’s major life activities, (2) has a record of such an impairment, or (3) is regarded as having such an impairment.” Also, employment is not required when some aspect of the employee’s disability prevents that person from carrying out essential parts of the job, nor is it required if the disabled person is not otherwise qualified.

In cases when people with contagious diseases are “otherwise qualified” to do their jobs, the law requires employers to make a reasonable accommodation to allow the disabled to perform their jobs.19 Individuals with AIDS or HIV are also disabled within the mean- ing of the Rehabilitation Act. However, the Rehabilitation Act does not require employers to hire or retain a disabled person if he or she has a contagious disease that poses a direct threat to the health or safety of others and the individual cannot be accommodated.

Executive Order 11246 Federal agencies and government contractors with contracts of $10,000 or more must comply with the antidiscrimination provisions of Executive Order 11246. The order prohibits discrimination based on race, color, religion, sex, or national origin in all employment activities. Furthermore, it requires that government contractors or subcon- tractors having 50 or more employees with contracts in excess of $50,000 develop affir- mative action plans; such plans will be discussed later in the chapter.

Don’t Ask, Don’t Tell Repeal Act of 2010. On September 20, 2011, the Don’t Ask, Don’t Tell Repeal Act was implemented to end the ban on gay, lesbian, or bisexual per- sons openly serving in the U.S. military.

3.2c Fair Employment Practice Laws In addition to federal laws and executive orders, almost all states and many local governments have passed laws barring employment discrimination. Referred to as fair employment practices (FEPs), these statutes are often more comprehensive than the federal laws.

3.3 Other Equal Employment Opportunity Issues

Federal laws, executive orders, court cases, and state and local statutes provide the broad legal framework; and within these major laws, specific issues are of particular interest to supervisors and managers.

3.3a Sexual Harassment Sexual harassment refers to unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. It can also include offen- sive remarks, vulgar or obscene gestures, language or comments, related to one’s sex,

disabled individual Any person who (1) has a physical or mental impairment that substan- tially limits one or more of the person’s major life activities, (2) has a record of such impairment, or (3) is regarded as having such an impairment.

fair employment practices (FEPs) State and local laws governing equal employment oppor- tunity that are often more comprehensive than federal laws and apply to small-business employers.

sexual harassment Unwelcome advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature in the working environment.

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99Chapter 3 Equal Employment Opportunity and Human Resources Management

an individuals body, or sexual activity. Both the victim and the harasser can be either female or male, and harassment can occur between individuals of the same or opposite sex. The harasser can be the victim’s supervisor, a supervisor in another area, a coworker, or someone who is not an employee of the employer, such as a client or customer.20

The EEOC recognizes two forms of sexual harassment as being illegal under Title VII. The first, quid pro quo harassment, occurs when “submission to or rejection of sexual conduct is used as a basis for employment decisions.”21 This type of harassment involves a tangible or economic consequence, such as a demotion or loss of pay. If a supervisor promotes an employee only after the person agrees to an after-work date, the conduct is clearly illegal.

The second type of harassment, hostile environment, can occur when unwel- come sexual conduct “has the purpose or effect of unreasonably interfering with job performance or creating an intimidating, hostile, or offensive working environment.”22

Dirty jokes, vulgar slang, nude pictures, swearing, and personal ridicule and insult create a hostile environment when an employee finds them offensive. Email, instant and text messages, and posts on social networking sites have become convenient ways for employees to sexually harass their coworkers electronically.

Via a questionnaire, it is possible to test the understanding of your employees about what is and what is not sexual harassment. Highlights in HRM 2 shows some sample questions firms can ask their employees to gauge their knowledge of the topic.

The EEOC considers an employer guilty of sexual harassment when the employer knew or should have known about the unlawful conduct and failed to remedy it or to take corrective action. Employers are also guilty of sexual harassment when they allow nonemployees (customers or salespeople) to sexually harass employees.23 When charges of sexual harassment have been proved, victims forced out of their jobs can be awarded back pay, lost benefits, attorney’s fees, and interest charges, and they may be reinstated in their jobs. Sexual harassment involving physical conduct can invite criminal charges, and punitive damages can be assessed against both the employer and the individual offender.24

Sexual harassment includes any type of behavior,

comments, gestures, and actions of a sexual nature

that create a hostile work environment for an


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Questions Used to Audit Sexual Harassment in the Workplace



�� Employees post cartoons on bulletin boards containing sexually related material. Yes No Uncertain Yes No

�� A male employee says to a female employee that she has beautiful eyes and hair. Yes No Uncertain Yes No

�� A male manager habitually calls all female employees “sweetie” or “darling.” Yes No Uncertain Yes No

�� A manager fails to promote a female (male) employee for not granting sexual favors. Yes No Uncertain Yes No

�� Male employees use vulgar language and tell sexual jokes that are overheard by, but not directed at, female employees. Yes No Uncertain Yes No

�� A male employee leans and peers over the back of a female employee when she wears a low-cut dress. Yes No Uncertain Yes No

�� A supervisor gives a female (male) subordinate a nice gift on her (his) birthday. Yes No Uncertain Yes No

�� Two male employees share a sexually explicit magazine while observed by a female employee. Yes No Uncertain Yes No

�� Female office workers are “rated” by male employees as they pass the men’s desks. Yes No Uncertain Yes No

�� Revealing female clothing is given as a gift at an office birthday party. Yes No Uncertain Yes No

�� A sales representative from a supplier makes suggestive sexual remarks to a receptionist. Yes No Uncertain Yes No

Highlights in HRM2

3.3b Sexual Orientation Nearly half of U.S. states and some cities also have passed laws prohibiting sexual ori- entation discrimination in workplaces.25 Although Title VII of the Civil Rights Act of 1964 lists “sex” as a protected class, currently no federal law bars discrimination based on one’s sexual orientation. For lesbian, gay, bisexual, transgender, and queer (LGBTQ) employees who do not work for the federal government, protection from discrimina- tion largely comes from fair employment practice laws passed at state and local levels. The laws vary regarding the protection afforded to the LGBTQ community and those who are covered under the laws. For example, in some states, public—but not private— sector employees are protected from discrimination based on their sexual orientation. Therefore, it becomes important for managers and supervisors to know and follow the legal rights of the LGBTQ community in their geographic area.26 Figure 3.8 shows a list of states that have passed non-discrimination laws based on sexual orientation.


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101Chapter 3 Equal Employment Opportunity and Human Resources Management

Regardless of any state or local laws, however, the EEOC interprets and enforces Title VII’s prohibition of sex discrimination as forbidding any employment discrimina- tion based on gender identity or sexual orientation.

The commission has obtained approximately $6.4 million in monetary relief for indi- viduals, as well as numerous employer policy changes, in voluntary resolutions of LGBTQ discrimination charges under Title VII since data collection began in 2013. Some exam- ples of LGBTQ-related claims that EEOC views as unlawful sex discrimination include:

• Failing to hire an applicant because she is a transgender woman. • Firing an employee because he is planning or has made a gender transition. • Denying an employee equal access to a common restroom corresponding to the

employee’s gender identity. • Harassing an employee because of a gender transition, such as by intentionally and

persistently failing to use the name and gender pronoun that correspond to the gender identity with which the employee identifies, and which the employee has communi- cated to management and employees.

• Denying an employee a promotion because of sexual orientation. • Discriminating in terms, conditions, or privileges of employment, such as providing a

lower salary to an employee because of sexual orientation, or denying spousal health insurance benefits to a female employee because her legal spouse is a woman, while providing spousal health insurance to a male employee whose legal spouse is a woman.

• Harassing an employee because of his or her sexual orientation, for example, by derogatory terms, sexually oriented comments, or disparaging remarks for associat- ing with a person of the same or opposite sex.

Not pictured: District of Columbia. Laws prohibit both sexual orientation

and gender identity

States with laws prohibiting sexual orientation and gender identity discrimination

Laws that prohibit both

Laws that prohibit only sexual orientation


No laws in place

Sexual orientation in public employment Sexual orientation and gender identity solely in public employment

Gender identity in public employment

States with Laws Prohibiting Sexual Orientation and Gender Identity DiscriminationFigure 3.8

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102 Part 2 Meeting Human Resources Requirements

• Discriminating against or harassing an employee because of his or her sexual orien- tation or gender identity, in combination with another unlawful reason, for example, on the basis of transgender status and race, or sexual orientation and disability.27

Regardless of how companies may feel about sexual orientation discrimination, studies have shown that prohibiting sexual orientation and gender discrimination can increase company performance. For example, one study points out that patent-based innovation increases by 8 percent in states after they adopt the federal Employment Non-Discrimination Act (ENDA) to ban sexual orientation and gender identity discrimination in the workplace.28

3.3c Immigration Reform and Control Good employment is the magnet that attracts many people to the United States. However, illegal immigration is an issue of national concern at the federal, state, and local legislative levels and among employers, unions, civil rights groups, and, of course, Donald Trump.29

Employers must comply with the requirements of the Immigration Reform and Control Act (IRCA). The law has two employer mandates. First, all employers covered by the law are prohibited from knowingly hiring or retaining unauthorized aliens on the job.30 Second, employers with four or more employees are prohibited from discriminat- ing in hiring or termination decisions on the basis of national origin or citizenship.31

Employers must comply with the law by verifying and maintaining records on the legal rights of applicants to work in the United States. The Handbook for Employers, published by the U.S. Department of Justice, lists five actions that employers must take to comply with the law:

1. Have employees fill out their part of Form I-9. 2. Check documents establishing an employee’s identity and eligibility to work. 3. Complete the employer’s section of Form I-9. 4. Retain Form I-9 for at least three years. 5. Present Form I-9 for inspection to an Immigration and Naturalization Service

officer or to a Department of Labor officer upon request.32

Employers with sizable contracts with the federal government must also use its E-Verification system. E-Verify is a system that provides an automated link to federal databases to help employers determine the legal eligibility of workers and the validity of their social security numbers. Employers that do not do business with the government can also use E-Verify.

Employers found to have violated the discrimination provisions of the Immigration Reform and Control Act will be ordered to cease the discriminatory practice. They may also be directed to hire, with or without backpay, individuals harmed by the discrimina- tion and to pay a fine of up to $1,000 for each person discriminated against. Charges of discrimination based on national origin or citizenship are filed with the Office of Special Counsel in the Department of Justice.

3.3d Emerging Employment Discrimination Issues Weight Discrimination Some studies show that weight discrimination, especially against women, is not only increasing but has become almost as common as racial discrimination.33 No federal laws prohibit weight discrimination, although the EEOC has said that morbid obesity is a

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103Chapter 3 Equal Employment Opportunity and Human Resources Management

protected disability under the ADA. At some point it is not out of the realm of possibility that it could become a protected class.34

Attractiveness and Discrimination There are no federal laws prohibiting discrimination in the workplace based on people’s attractiveness, although it undoubtedly occurs. In a survey of hiring managers con- ducted by Newsweek, 57 percent of them said that qualified but unattractive job candi- dates would have a harder time landing a job.

Part of the problem of implementing a law making it legal to discriminate based on a person’s appearance would be deciding who is unattractive enough to be protected by the law. Moreover, in some instances, good looks can be a BFOQ. The modeling busi- ness is one example.35

Caregivers and Discrimination In 2007, the EEOC issued new enforcement guidelines to help prevent discrimination against workers with caregiving responsibilities. There are no federal statutes that pro- hibit discrimination based “solely” on a person being a caregiver. However, disparate

Employers using E-Verify must display a

copy of this poster for employees to see.

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104 Part 2 Meeting Human Resources Requirements

treatment arises when an employee with caregiving responsibilities is subjected to dis- crimination based on a protected characteristic under equal opportunity laws (such as sex, race, age).36 The EEOC has outlined numerous scenarios it says could constitute discrimination against a caregiver. Denying women with young children an employment opportunity available to men with young children is an example. So is refusing to hire a worker who is a single parent of a child with a disability based on the assumption that caregiving responsibilities will make the worker unreliable.

3.4 Uniform Guidelines on Employee Selection Procedures

Employers are often uncertain about the appropriateness of specific selection proce- dures, especially those related to testing and selection. To remedy this concern, the EEOC, along with three other government agencies, adopted the current Uniform Guidelines on Employee Selection Procedures.37 The Uniform Guidelines is a very important procedural document for managers because it applies to employee selection procedures in the areas of hiring, retention, promotion, transfer, demotion, dismissal, and referral. It is designed to help employers, labor organizations, employment agen- cies, and licensing and certification boards comply with the requirements of federal laws prohibiting employment discrimination.

Validity When using a test or other selection instrument to choose individuals for employment, employers must be able to prove that the selection instrument bears a direct relationship to success on the job. This proof is established through validation studies that show how related the test is to the job.

Uniform Guidelines on Employee Selection Procedures A procedural document published in the Federal Register to help employ- ers comply with federal regulations against discriminatory actions.

The EEOC provides guidelines to help prevent discrimination against caregivers.

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Following so many EEO laws might sound daunting. Would it help if you had some type of guideline when hiring a person to make sure you do not break any of these laws?

LO 2

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105Chapter 3 Equal Employment Opportunity and Human Resources Management

Adverse Impact and Disparate Treatment For an applicant or employee to pursue a discrimination case successfully, the individual must establish that the employer’s selection procedures resulted in an adverse impact on a protected class. Adverse impact refers to the unintentional rejection for employment, placement, or promotion of a significantly higher percentage of members of a protected class when compared with members of non-protected classes.38 The Uniform Guidelines does not require an employer to conduct validity studies of its selection procedures when they have not resulted in adverse impact on a protected class. However, organiza- tions that validate their selection procedures on a regular basis and use interviews, tests, and other procedures in such a manner so as to avoid adverse impact, will generally be in compliance and avoid costly litigation.

In EEO cases, it is important to distinguish between adverse impact and disparate treatment discrimination. Adverse impact cases deal with unintentional discrimina- tion; disparate treatment cases involve instances of purposeful discrimination. Allow- ing men to apply for craft jobs, such as carpentry or electrical work, but denying this opportunity to women would also show disparate treatment. To win a disparate treat- ment case, the plaintiff must prove that the employer’s actions intended to discriminate, which is often difficult.

There are two basic ways to show that adverse impact exists.

Adverse Rejection Rate, or Four-Fifths Rule. According to the Uniform Guidelines, a selection program has an adverse impact when the selection rate for any racial, ethnic, or sex class is less than four-fifths (or 80 percent) of the rate of the class with the high- est selection rate. The EEOC has adopted the four-fifths rule as a rule of thumb to determine adverse impact in enforcement proceedings. The four-fifths rule is not a legal definition of discrimination; rather, it is a method by which the EEOC or any other enforcement agency monitors serious discrepancies in hiring, promotion, or other employment decisions. The appendix at the end of this chapter explains how adverse impact is determined and gives a realistic example of how the four-fifths rule is computed.

An alternative to the four-fifths rule, and one frequently used in discrimination law- suits, is to conduct a standard deviation analysis of a firm’s applicant data. The Supreme Court, in Hazelwood School District v. United States, set forth a standard deviation anal- ysis that determines whether the difference between the expected selection rates for protected groups and the actual selection rates could be attributed to chance. If chance is eliminated for the lower selection rates of the protected class, it is assumed that the employer’s selection technique has an adverse impact on the employment opportunities of that group.

Restricted Policy. Any evidence that an employer has a selection procedure that excludes members of a protected class, whether intentional or not, constitutes adverse impact. For example, hiring individuals who must meet a minimum height or appear- ance standard (at the expense of protected class members) is evidence of a restricted policy.

The benchmark case in employment selection procedures is Griggs v. Duke Power Company (1971). Willie Griggs, who was black, had applied for the position of coal handler with the Duke Power Company. His request for the position was denied because he was not a high school graduate, a requirement for the position. Griggs claimed the job standard was discriminatory because it did not relate to job success and because the standard had an adverse impact on a protected class. When employers use educational,

adverse impact A concept that refers to the rejection of a signifi- cantly higher percentage of a protected class for employment, placement, or promotion when compared with the successful, nonprotected class.

disparate treatment A situation in which protected class members receive unequal treat- ment or are evaluated by different standards.

four-fifths rule A rule of thumb followed by the EEOC in deter- mining adverse impact for use in enforcement proceedings.

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106 Part 2 Meeting Human Resources Requirements

physical, or intelligence standards as a basis for hiring or promotion, these must be absolutely necessary for job success.

Workforce Utilization Analysis As you have learned, employers must be aware of the impact their selection procedures have on protected class members. Part of this process involves analyzing the composi- tion of their internal workforce when compared with their external labor market. The EEOC refers to this comparison as workforce utilization analysis. This concept simply compares an employer’s workforce by race and sex for specific job categories against the surrounding labor market. The employer’s relevant labor market is that area from which employees are drawn who have the skills needed to successfully perform the job. For example, if Squarespace, the website maker, is hiring computer technicians from a labor market composed of 10 percent black workers, 8 percent Hispanic workers, and 2 percent Native American workers, all of whom possess the qualifications for the job, the employer’s internal workforce should reflect this racial composition. When this occurs, the employer’s workforce is said to be at parity with the relevant labor market. If the employer’s racial workforce composition is below external figures, then the pro- tected class is said to be underutilized, and the employer should take steps to correct the imbalance.

3.5 Enforcing Equal Employment Opportunity Legislation

As the federal government’s leading civil rights agency, the EEOC is responsible for ensuring that covered employers comply with equal employment opportunity legisla- tion. The commission accomplishes this goal primarily by (1) issuing various employ- ment guidelines and monitoring the employment practices of organizations and (2) protecting employee rights through the investigation and prosecution of discrimination charges.39

3.5a Record-Keeping and Posting Requirements Organizations subject to Title VII are required by law to maintain specific employ- ment records and reports. Those failing to comply with record-keeping and posting requirements or willfully falsifying records can incur penalties, including fines and imprisonment. See Highlights in HRM 3 for a recent example of one of the posters that companies are required by law to display in prominent places such as the cafeteria, by time clocks, or by the water cooler. It should be easier than finding Waldo in a Where’s Waldo book. If not, then the EEOC could allow an employee to file a discrimination charge late (past the 180-day filing deadline).

3.5b Processing Discrimination Charges Figure 3.9 summarizes the process of filing a discrimination charge with the EEOC.40 (Note that the process is slightly different for federal employees and job applicants.) Employees or job applicants who believe they have been discriminated against first file a discrimination complaint, or charge form, with the EEOC. The charge must be filed

workforce utilization analysis A process of classifying protected-class members by number and by the type of job they hold within the organization.

charge form A discrimination com- plaint filed with the EEOC by employees or job applicants.

Based on all these laws and regulations, wouldn’t it be best for the company to not let employees know about them?

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EEOC Poster Supplement for 2016

Highlights in HRM3

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108 Part 2 Meeting Human Resources Requirements

within 180 days of the alleged unlawful practice occurring.41 The processing of a charge includes notifying the employer that a charge of employment discrimination has been filed. See Figure 3.9 to understand how to file a charge of employment discrimination. Employers will receive a copy of the charge within 10 days of it being filed. Both parties, the plaintiff (employee) and the defendant (organization), must be prepared to support their beliefs or actions.

Retaliation Managers and supervisors must not retaliate against individuals who invoke their legal rights to file charges or to support other employees during EEOC proceedings.42 Retali- ation can include any punitive action taken against employees who elect to exercise their legal rights before any EEO agency.43 These actions can include terminating employ- ees, giving them unjustified negative appraisals, subjecting them to more supervision, demoting them, and reducing their salaries and work responsibilities, and transferring to a less desirable job.44 Of course, employees are not excused from continuing to per- form their jobs or follow their company’s legitimate workplace rules just because they have filed a complaint with the EEOC or opposed discrimination.

EEOC investigation

Charge filed

Suit filed by individual

Employer receives copy

of charge

Deferred to state agency

Determination to dismiss

charge Settlement

Successful Unsuccessful suit filed by


Failure to file suit within 180 days

Individual may sue within 90


Finding of reasonable



Federal District Court

Filing a Charge of Employment DiscriminationFigure 3.9

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109Chapter 3 Equal Employment Opportunity and Human Resources Management

3.5c Preventing Discrimination Charges Both large and small employers understand that the foundation to preventing any form of discrimination is having a comprehensive EEO policy. Employers that do not have an EEO policy are legally vulnerable. Antidiscrimination policy statements must be inclusive; they must cover all applicable laws and EEOC guidelines and contain practi- cal illustrations of specific inappropriate behavior. For the policy to have value, it must be widely disseminated to managers, supervisors, and all non-managerial employees. A complete policy will include specific sanctions for those found guilty of discrimina- tory behavior.45

Since managers and supervisors are key to preventing and correcting discrimi- nation, they, in particular, must be trained to understand employee rights and managerial obligations.46 A comprehensive training program will include (1) the prohibitions covered in the various EEO statutes and executive orders, (2) guidance on how to respond to complaints of discrimination, (3) procedures for investigat- ing complaints (see Chapter 13), and (4) suggestions for remedying inappropriate behavior. Perhaps the ultimate key to preventing employment discrimination is for managers and supervisors to create an organizational climate in which the principles of dignity, respect, and the acceptance of a diverse workforce are the norm and therefore expected.

3.6 Affirmative Action and Diversity Management

Equal employment opportunity legislation requires managers to provide the same opportunities to all job applicants and employees regardless of race, color, religion, sex, national origin, or age. Affirmative action goes beyond not discriminating among employees. Affirmative action occurs when employers take proactive steps to help reverse the impact of past discrimination against minorities. Employers with voluntary affirmative action programs actively encourage employment diver- sity, post job opportunities with minority agencies, remove unnecessary barriers to employment, and offer comprehensive training and mentoring to protected class members.

So what happens when affirmative action becomes controversial? Students at the University of Texas at Austin in 2016 illustrated the controversy through an affirma- tive action bake sale. Depending on your race or gender, you were charged a different amount to buy a pastry. View this clip to see the controversy: watch?v=dUR_MCdnUAo. Based on this clip, what is your own take on affirmative action within college?

Employers establish affirmative action programs for several reasons. Affirmative action programs are required by the OFCCP for employers with federal contracts greater than $50,000. The OFCCP provides regulations and suggestions for establishing affir- mative action plans. Specifically, employers must (1) provide an organizational profile that graphically illustrates their workforce demographics (see workforce utilization analysis previously discussed), (2) establish goals and timetables for employment of underutilized protected classes, (3) develop actions and plans to reduce underutiliza- tion, including initiating proactive recruitment and selection methods, and (4) monitor progress of the entire affirmative action program.

affirmative action A policy that goes beyond equal employ- ment opportunity by requiring organizations to comply with the law and correct any past dis- criminatory practices by increasing the numbers of minorities and women in specific positions.

What effect, if any, do you think ending affir- mative action programs in the United States have on the diversity and competitiveness of U.S. businesses?

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110 Part 2 Meeting Human Resources Requirements

Courts will sometimes mandate employers that have been found guilty of past dis- crimination to establish affirmative action programs, particularly when the discrimi- nation has been pervasive and a long-held organizational practice. A court-ordered program, often implemented through a consent decree between the court and employer, will require the setting of hiring and promotional goals along with stated timetables for compliance. When the requirements of the consent decree are met, the employer is no longer bound by the court order.

Sometimes employers voluntarily develop their own affirmative action programs to ensure that protected class members receive fair treatment in all aspects of employment. For example, some companies employ chief diversity officers. A chief diversity officer (CDO) is a top executive responsible for the implementation of a firm’s diversity efforts. For example, in 2016 Salesforce, Dropbox, Pinterest, and Twitter all hired a chief diver- sity officer, following the footsteps of tech giants like Google, Microsoft, and Facebook. Today, about one in five Fortune 1000 companies have a CDO. A number of studies have demonstrated how a diverse workforce drives up a company’s revenue.47 In fact, one study has shown that having a diverse set of leaders can improve a company’s likelihood of improving market share by 45 percent. As HR professionals readily note, the success of any voluntary affirmative action program or diversity effort largely depends on the support given to it by senior managers and supervisors at all organization levels.48 The EEOC recommends that organizations developing affirmative action programs follow specific steps, as shown in Highlights in HRM 4.

One of the drawbacks of implementing an affirmative action program is that an employer can be accused of reverse discrimination, or giving preference to members of protected classes to the extent that unprotected individuals believe they are suffering from discrimination. When these charges occur, organizations encounter a “catch-22” as they are caught between attempting to correct past discriminatory practices and handling present complaints from unprotected members alleging that HR policies are unfair.

3.6a Court Decisions In the 1970s, regarding two leading cases of reverse discrimination, University of California Regents v. Bakke and United States Steelworkers of America v. Weber,49 the Supreme Court ruled that applicants must be evaluated on an individual basis and race can be one factor used in the evaluation process as long as other competitive factors are considered. The Court stated that affirmative action programs were not illegal per se as long as rigid quota systems were not specified for different protected classes. Also, voluntary affirmative action programs are permissible where they attempt to eliminate racial imbalances in traditionally segregated job categories.

The judicial support for affirmative action programs has eroded over the decades, however. During the mid-1990s, federal courts increasingly restricted the use of race and ethnicity in awarding scholarships, determining college admissions, making layoff decisions, selecting employees, promoting employees, and awarding government con- tracts. Then in 2009, the Supreme Court heard Ricci vs. DeStafano, a lawsuit brought against the City of New Haven, Connecticut, by 19 city firefighters. The firefighters alleged that the city discriminated against them by invalidating a test for a promotion because no black firefighters had passed it with a score high enough to warrant promo- tion. The firefighters, 17 of whom are white and 2 of whom are Hispanic, claimed they were denied the promotions because of their race.

chief diversity officer (CDO) A top executive respon- sible for implementing a firm’s diversity efforts.

reverse discrimination The act of giving prefer- ence to members of protected classes to the extent that unprotected individuals believe they are suffering discrimination.

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Basic Steps in Developing an Effective Affirmative Action Program

Filing a Charge of Employment Discrimination 1. Issue a written equal employment opportunity policy

and an affirmative action commitment statement.

2. Publicize the policy and the organization’s affirmative action commitment.

3. Appoint a top official within the organization to direct and implement the program.

4. Survey minority and female employment by depart- ment and job classification.

5. Develop goals and timetables to improve utilization of minorities and women in each area in which underuti- lization has been identified.

6. Develop and implement specific programs to achieve goals.

7. Establish an internal audit and reporting system to monitor and evaluate progress in each aspect of the program.

8. Develop supportive in-house and community programs.

Source: U.S. Equal Employment Opportunity Commission.

Highlights in HRM4

In a split decision, the Court ruled in the firefighters’ favor. The ruling didn’t ques- tion the fire department’s efforts to ensure minorities were fairly promoted. However, it said throwing out the test midstream (which, incidentally, had been designed by an outside consulting firm to be nondiscriminatory) was unfair to those who had passed it. In its ruling, the Court said: “once that process has been established and employers have made clear their selection criteria, they may not then invalidate the test results, thus upsetting an employee’s legitimate expectation not to be judged on the basis of race.”

The ruling underscores the importance of designing careful selection procedures as well as following them once they are designed. It also shows how tricky it can be to implement an affirmative action program.50

One of the ways companies can foster

diversity within their organizations is by

getting employees to talk about their differ-

ences. For example, the Mallon Group Training and Management has

developed a series of Know Me games that

enable participants of different cultures,

races, sexual orienta- tions, and so forth

to explore issues of diversity together.

Ra w

pi xe

l.c om

/S hu

tt er

st oc



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112 Part 2 Meeting Human Resources Requirements

3.6b Beyond Affirmative Action: Leveraging Diversity The future of affirmative action might not rest in judicial decisions or laws, but in managers’ attitudes and voluntary actions to make the workplace fairer and more com- petitive. Managers who embrace a diverse workforce know individual employee differ- ences and the contributions made by people of varied abilities are one way to develop a competitive advantage. For example, some studies have found that companies with more progressive nondiscrimination policies outperform competing firms that lack them.51 As more companies expand around the globe either physically or on the Web, they are recognizing that they need to employ diverse people with different talents to better understand and compete in various markets abroad.

According to Martin Davidson, a professor and researcher at the Darden School of Business at the University of Virginia, strategically leveraging employee’s differences means seeing not only the more obvious differences between people, such as their ethnic backgrounds, sexes, ages, religions, and so forth, but how they think, learn, work, and interact with each other. How do they use their time? How do they solve problems? Why do some people “think outside of the box,” whereas others do not? What is it about the experiences, mindsets, and talents of different groups of people that can be utilized in a strategic way?

The steps toward leveraging people’s differences involves seeing, understand- ing, and valuing them, as shown in the model in Figure 3.10. Highlights in HRM 5 shows the actual activities individuals and organizations can take to facilitate each of these steps. We will discuss more about diversity in Chapter 5 and throughout this textbook.

Source: Martin N. Davidson, The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed (San Francisco: Berrett-Kohler Press, 2011).

See Difference





Step 1

Step 2 Step 3



Steps to Leveraging Employee DifferencesFigure 3.10

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Embracing Diversity and Leveraging Employee Differences

Practices for Individuals Seeing

�� Openly acknowledge that relevant differences are common.

�� Address points of conflict. Observe while remaining silent.

Understanding �� Seek sources of information that bring understanding

about the differences.

�� Acquire data through listening, asking questions, and sharing your story.

�� Involve people who are different from you in your network.

Valuing �� Avoid being overly careful in dealing with differences.

�� Accept that there will be conflict and discomfort that require perseverance.

�� Use data to develop a new perspective.

Practices for Organizations Seeing

�� Openly address tension among members. Encourage members to avoid secrecy.

Understanding �� Seek sources of information that bring understanding

about the differences.

�� Gather data through surveys and other techniques. Establish inclusive structures.

Valuing �� Reward members for engaging in activities that

address and diminish differences.

�� Hold employees accountable for employing new behaviors. Actively seek diversity when recruiting.

Source: Adapted from Martin N. Davidson, The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed. (San Francisco: Berrett-Kohler Press, forthcoming, 2011).

Highlights in HRM5

Government reports show that the wages and job opportunities of minorities typically lag behind those for white males. EEOC was originally set up to ensure fair employment practices regardless of race, gender, or age. Being fair requires knowing the legal aspects of the employment relationship, including the laws and various executive orders mentioned in this chapter. Other areas that have more recently become a concern include discrimination based on disabilities, sexual orientation, weight, appearance, or status as a caregiver.

The Uniform Guidelines on Employee Selec- tion Procedures is designed to help employers com- ply with federal bans against employment practices that discriminate on the basis of race, color, religion, gender, or national origin. The Uniform Guidelines

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provides employers with a framework for making legally enforceable employment decisions. Employers must be able to show that their selection procedures are valid when it comes to predicting a person’s job performance.

To ensure that organizations comply with antidiscrimination legislation, the EEOC was estab- lished to monitor employers’ actions. Employers subject to federal laws must maintain certain records and report certain employment statistics where man- dated. Employees or applicants for employment who believe they have been discriminated against may file a discrimination complaint (a charge form) with the EEOC. If an agreement is not reached, the EEOC may elect to sue the employer in federal court. Figure 3.9 illustrates the steps in filing a discrimination charge.

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114 Part 2 Meeting Human Resources Requirements

EEO legislation was prompted by significant social events. List those events and describe how they influenced the passage of various EEO laws. Cite and describe the major federal laws and court decisions that affect the employ- ment process of both large and small organi- zations. After receiving several complaints of sexual harassment, the HR department of a city library decided to establish a sexual harassment policy. What should be included in the policy? How should it be implemented?

What is the Uniform Guidelines on Employee Selection Procedures? To whom do the guide- lines apply? What do they cover? Joe Alverez has filed a complaint with the EEO alleging that his employer, Universal Mortgage Com- pany, promotes more whites than Hispanics into managerial positions. Explain the statisti- cal methods used by the EEOC to investigate this adverse impact claim.

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Understand how the EEOC affects compa- nies and what you must do as a manager to appropriately respond to the administrative rules and regulations published in the Federal Register. As a marketing manager, you have recently turned down Nancy Conrad for a position as sales supervisor. Nancy believes the denial was due to her gender, and she has filed a sex dis- crimination charge with the EEOC. Explain the steps the EEOC will use to process the charge; include Nancy’s options during the process.

Affirmative action is both a legal and emo- tional issue affecting employees and employers. Develop as many arguments as you can both supporting and opposing affirmative action as an employer policy. If you were asked to imple- ment such a program, what steps would you follow?

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Discussion Questions

Affirmative action goes beyond provid- ing equal employment opportunities to employ- ees. Firms with federal contracts and firms that have been found guilty of past discrimination can be required to utilize affirmative action programs. This is accomplished by employing protected classes for jobs in which they are underrepresented. The employer’s goal is to have a balanced internal

LO 4 workforce representative of the employer’s relevant labor market. The future of affirmative action might not rest in judicial decisions or laws but in the efforts of managers to voluntary embrace and foster diver- sity. Differences of all sorts among people are ubiq- uitous in the workforce. Managers need to leverage these differences because they can be the source of organizational strength.

adverse impact

affirmative action

bona fide occupational qualification (BFOQ)

business necessity

charge form

chief diversity officer (CDO)

disabled individual

disparate treatment

equal employment opportunity

Equal Employment Opportunity Commission (EEOC)

fair employment practices (FEPs)

four-fifths rule

protected classes

reasonable accommodation

reverse discrimination

sexual harassment

workforce utilization analysis

Uniform Guidelines on Employee Selection Procedures

Key Terms

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115Chapter 3 Equal Employment Opportunity and Human Resources Management

CASE STUDY Going to the Dogs1

Let’s admit it: With very few exceptions, we all love dogs. We love to be with our dogs, and our dogs love to be with us. So it is only natural, then, to want to keep our dogs with us as much as possible, even when we go to work. Pet Sitters International thinks this is such a good idea that they have instituted “Take Your Dog to Work Day,” a once-a-year event designed to raise awareness of the benefits of dog ownership and to encourage pet adoption.

But maybe you would like something a bit more regular, like having the option to bring Fido to work every day? According to a survey by the American Pet Products Manufacturers Association, it should not be too hard to find an opportunity since nearly one in five companies already allows pets in the work- place. You can even find a list of employers that allow canines at work on Fans of the dogs-at- the-office policy say it increases employee morale and decreases stress.

Before we go too far with this idea, however, per- haps we should take note of some arguments against bringing dogs to work. First, some HR experts like Ethan Winning have cautioned that dogs can be messy, placing an unfair burden on employers to clean up afterwards. Dogs can also be a distraction, and other employees may be allergic or otherwise disturbed by them. And what happens when two or more employ- ees bring their dogs to work on the same day, and Fido and Fifi don’t want to play nice?

Of course, some people actually need to bring their dogs to work, which is why the Americans with Disabilities Act permits the use of “service animals” to assist those with disabilities. For example, seeing-eye dogs are allowed to accompany blind individuals at work. The EEOC guideline is reasonable since guide dogs are necessary to blind individuals, and further- more, guide dogs are trained not to be a nuisance.

It can be challenging, however, for employers to know where to draw the line. Take the case of Eliza- beth Booth, a quadriplegic hired by Case Services Corporation as an accountant in the billing depart- ment. Booth, who uses a wheelchair for mobility, has trained her small, well-behaved dog to pick up small items that Booth has dropped. Along with a formal request to be allowed to bring her dog to work to assist her, Booth submitted to her employer a letter from her doctor stating that the dog would also help relieve Booth’s stress. When Case Services’s HR director denied the request, Booth immediately filed a discrimination charge with the EEOC, claiming the company did not provide a reason- able accommodation to her disability or her health needs.

When it comes to establishing a pet policy, as is so often the case, balancing the employer’s needs and responsibilities with the employees’ needs and wants presents something of a dilemma.

Questions 1. What is your position on this issue? Provide two

or three reasons to support your argument. 2. If you were an HR manager of a company, what

pet policy would you set and how would you implement it?

3. How would you decide the case of Elizabeth Booth, and which laws would you base your deci- sion on? Explain.

Sources: James J. McDonald, Jr., “Take Your Dog to Work Every Day,” Employee Relations Law Journal 32, no. 3 (Winter 2006): 86; “Has Your Organization Gone to the Dogs?” http://www.hrwebcafe .com/2007/06/has_your_organization_gone_to.html; Ethan A. Win- ning, “Pets at the Corporate Zoo,” .htm; “About Take Your Dog to Work Day,” http://www.takeyourdog .com/About/; “Take Your Dog to Work Every Day,” http://www .dog-

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HRM Experience

Sexual Harassment: A Frank Discussion behaviors might be viewed differently by female and male employees. Give examples.

2. Many sexual harassment incidents go unreported. Fully discuss why this can occur and what might be done to reduce this problem.

3. The cornerstone to addressing sexual harassment is achieving organizational awareness through training. Develop a sexual harassment training program for a company of 250 employees that covers, at a minimum, the following: (1) who should attend the training ses- sions, (2) the content outline for the training program (the list of materials your team wants to teach), (3) spe- cific examples to illustrate the training materials, and (4) how to investigate sexual harassment complaints.

4. This chapter will assist you with this assignment. You can obtain additional materials from EEOC offices and from various HR magazines.

5. Be prepared to present your training outline to other class members.

Over the past decade, the problem of sexual harassment has captured the attention of all managers and employees. While it is widely known that sexual harassment is both unethical and illegal, the incidents of sexual harassment continue to plague business. Unfortunately, when these cases arise, they cause morale problems among employees, embarrassment to the organization, and costly legal damages. Consequently, all managers and supervisors play a central role in prevent- ing sexual harassment complaints. It is important that man- agers understand the definition of sexual harassment, who is covered by sexual harassment guidelines, and how to pre- vent its occurrence. This skill-building exercise will provide you with knowledge in each of these areas.

Assignment 1. Working in teams of female and male members,

develop a list of behaviors that could be classified as quid pro quo harassment or hostile environment. Explore the possibility that some sexual harassing

CASE STUDY Misplaced Affections: Discharge for Sexual Harassment2

Peter Lewiston was terminated on July 15, 2017, by the governing board of the Pine Circle Unified School District (PCUSD) for violation of the dis- trict’s sexual harassment policy. Prior to Lewiston’s termination he was a senior maintenance employee with an above-average work record who had worked for the PCUSD for 11 years. He had been a widower since 2012 and was described by his coworkers as a friendly, outgoing, but lonely individual. Beverly Gilbury was a fifth-grade teacher working in the district’s Advanced Learning Program. She was 28 years old and married and had worked for PCUSD for 6 years. At the time of the incidents, Lewiston and Gilbury both worked at the Simpson Elementary School, where their relationship was described as “cooperative.” The following sequence of events was reported separately by Lewiston and Gilbury during

the district’s investigation of this sexual harassment case.

Gilbury reported that her relationship with Lewiston began to change during the last month of the 2016–2017 school year. She believed that Lewiston was paying her more attention and that his behavior was “out of the ordinary” and “sometimes weird.” He began spending more time in her classroom talking with the children and with her. At the time she did not say anything to Lewiston because “I didn’t want to hurt his feelings since he is a nice, lonely, older man.” How- ever, on May 25, when Lewiston told Gilbury that he was “very fond” of her and that she had “very beautiful eyes,” she replied, “Remember, Peter, we’re just friends.” For the remainder of the school year, there was little contact between them; however, when they did see each other, Lewiston seemed “overly friendly” to her.


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117Chapter 3 Equal Employment Opportunity and Human Resources Management

June 11, 2017. Gilbury obtained from the West- ern Justice Court an injunction prohibiting sexual harassment by Lewiston. Shortly thereafter Lewis- ton appealed the injunction. A notice was mailed to Gilbury giving the dates of the appeal hearing. The notice stated in part, “If you fail to appear, the injunction may be vacated and the petition dis- missed.” Gilbury failed to appear at the hearing, and the injunction was set aside. Additionally, on June 11 she had filed with the district’s EEOC officer a sexual harassment complaint against Lewiston. After the investigation, the district concluded that Lewiston’s actions created an “extremely sexually hostile” envi- ronment for Gilbury. The investigative report recom- mended dismissal based upon the grievous conduct of Lewiston and the initial injunction granted by the Justice Court.

Questions 1. Evaluate the conduct of Peter Lewiston against

the EEOC’s definition of sexual harassment. 2. Should the intent or motive behind Lewiston’s

conduct be considered when deciding sexual harassment activities? Explain.

3. If you were the district’s EEOC officer, what would you conclude? What disciplinary action, if any, would you take?

Sources: This case is adapted from an actual arbitration hearing con- ducted by George Bohlander. The background information is factual. All names and dates are fictitious.

June 7, 2017. On the first day of summer school, Gilbury returned to school to find a dozen roses and a card from Lewiston. The card read, “Please forgive me for thinking you could like me. I played the big fool. Yours always, P.L.” Later in the day Lewiston asked Gilbury to lunch. She replied, “It’s been a long time since anyone sent me roses, but I can’t go to lunch. We need to remain just friends.” Gilbury told another teacher that she was uncomfortable about receiving the roses and card and that Lewiston would not leave her alone. She expressed concern that Lewiston might get “more romantic” with her.

June 8, 2017. Gilbury arrived at school to find another card from Lewiston. Inside was a handwrit- ten note that read, “I hope you can someday return my affections for you. I need you so much.” Later in the day, Lewiston again asked her to lunch, and she declined, saying, “I’m a happily married woman.” At the close of the school day, when Gilbury went to her car, Lewiston suddenly appeared. He asked to explain himself but Gilbury became agitated and shouted, “I have to leave right now.” Lewiston reached inside the car, supposedly to pat her shoulder, but touched her head instead. She believed he meant to stroke her hair. He stated that he was only trying to calm her down. She drove away, very upset.

June 9, 2017. Gilbury received another card and a lengthy letter from Lewiston, stating that he was wrong in trying to develop a relationship with her and he hoped they could still remain friends. He wished her all happiness with her family and job.

Answers to Highlights in HRM 1 1. Yes 2. False 3. No 4. Merit, seniority, incentive pay plans 5. Yes 6. Yes, if no reasonable accommodation can be made 7. No 8. Yes, except if under a court order 9. False

10. True

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118 Part 2 Meeting Human Resources Requirements

1. U.S. Equal Employment Opportunity Commission, “Charge Statistics: FY 1997 Through FY 2016,” (March 7, 2017), charges.cfm.

2. J. B. Becton, J. B. Gilstrap, and M. Forsyth, “Prevent- ing and Correcting Workplace Harassment: Guide- lines for Employers,” Business Horizons 60, no. 1 (2017): 101–111; Darla Mercado, “Morgan Stanley Settles $46  Million Discrimination Suit,” (October 16, 2007), morgan-stanley-settles-46-million-discrimination-suit.

3. Michael Orey, “White Men Can’t Help It,” Business Week (May 15, 2006): 54.

4. For a practical overview of EEO law, see David J. Walsh, Employment Law for Human Resource Practice, 3rd ed. (Mason, OH: South-Western, 2010).

5. Dennis Cauchon, “Gender Pay Gap Is Smallest on Record,” USA Today (September 14, 2010),

6. For information on national origin discrimination, go to

7. Porter v. City of Chicago, No. 11-2006 (7th Cir. 2012 [March 7, 2017]), ca7/11-2006/11-2006-2012-11-08.html.

8. Lynn D. Lieber, “As Average Age of Workforce Increases, Age Discrimination Verdicts Rise,” Employment Relations Today 34, no. 1 (Spring 2007): 105.

9. Maria Greco Danaher, “Include Pregnancy Leave in Pension Credit,” HR Magazine 52, no. 11 (November 2007): 98.

10. United States Department of Justice Civil Rights Division, “The Americans with Disabilities Act of 1990 and Revised ADA Regulations Implementing Title II and Title III,” ADA .gov (Jan 2014),

11. U.S. Equal Employment Opportunity Commission, “EEOC Enforcement Guidance on the Americans with Disabilities Act and Psychiatric Disabilities,” EEOC (1997; January 2014),

12. Jonathan R. Mook, “Accommodation Paradigm Shifts,” HR Magazine 52, no. 1 (January 2007): 115; see also, James J. McDonald, Jr., “Take Your Dog to Work Everyday,” Employee Relations Law Journal 32, no. 3 (Winter 2006): 86.

13. Bill Leonard, “Studies: ADA Makes Business Better,” HR Magazine 52, no. 10 (October 2007): 22.

14. “Broadening the Coverage of the ADA: The 2008 Amend- ments to the Americans with Disabilities Act,” INSIGHT into Diversity (November 2010): 32–35.

15. “Genetic Information Nondiscrimination Act: A Primer on Title II,” Venulex Legal Summaries (Winter 2010): special section, 1.

16. “Joy Mining Machinery Settles EEOC Genetic Information Non-Discrimination Act Lawsuit,” US Equal Employment

Notes and References

Opportunity Commission, room/release/1-7-16.cfm.

17. Gary L. Tidwell, Daniel A. Rice, and Gary Kropkowski, “Employer and Employee Obligations and Rights under the Uniformed Services Employment and Reemployment Rights Act,” Business Horizons 52, no. 3, (May 2009): 243–250, DOI: 10.1016/j.bushor.2009.01.003. Find additional information on the law at the USERRA Advisor at the Department of Labor’s website,

18. Veterans Benefits Improvement Act of 2004, Public Law 108–454 (December 20, 2004).

19. As currently defined, an “otherwise qualified” employee is one who can perform the “essential functions” of the job under consideration.

20. Oncale v. Sundowner Offshore Services, Inc. 72 PED 45, 175; WL 88039 (U.S. 1l998), sexual_harassment.cfm.

21. Guidelines on Discrimination Because of Sex, 29 C.F.R. Sec. 1604.11(a) (1955).

22. Guidelines on Discrimination, Sec. 1605.11(a). 23. Jeffrey I.Chasen, “Discrimination and Harassment in the

Workplace: Five Essential Strategies for Smarter Risk Man- agement,” Risk Institute. PERI (January 2014), http://www

24. Margaret Bryant, “Harassment Lawsuits and Lessons,” Security Management 60, no. 4 (April 2006): 50.

25. Laura G. Barron, “Sexual Orientation Employment: Anti- Discrimination Legislation and Hiring Discrimination and Prejudice,” Academy of Management Annual Meeting Proceed- ings (2009): 1.

26. “What You Should Know about EEOC and the Enforcement Protections for LGBT Workers,” U.S. Equal Employment Opportunity Commission (March 7, 2017), https://www lgbt_workers.cfm. The EEOC has ruled that transgender and transsexual individuals are not covered by Title VII of the Civil Rights Act. According to the EEOC, gender only applies to one’s sex at the time of birth and not to one’s sexual orientation. See Jon D. Bible, “In a Class by Themselves: The Legal Status of Employee Appearance Policies Under Title VII after Jespersen v. Harrah’s Operating Co.,” Employee Relations Law Journal 32, no. 4 (Spring 2007): 3. See also, Stan Malos, “Appearance- Based Sex Discrimination and Stereotyping in the Workplace: Whose Conduct Should We Regulate?” Employee Responsibili- ties and Rights Journal 19, no. 2 (June 2007): 95.

27. What You Should Know about EEOC and the Enforcement “Protections for LGBT Workers,” U.S. Equal Employment Opportunity Commission (March 7, 2017), https://www.eeoc. gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_ workers.cfm.

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119Chapter 3 Equal Employment Opportunity and Human Resources Management

40. Howard S. Lavin and Elizabeth E. DiMichele, “The Time for Filing Charges of Discrimination: The Supreme Court’s Decision and Its Aftermath,” Employee Relations Law Journal 33, no. 3 (Winter 2007): 113; see also, Reynolds Holding, “Stumble on the Bench,” Time (June 18, 2007): 56.

41. The time period is 300 days in states in which the charge is deferred to a state agency.

42. David Sherwyn, Zev Eigen, and Gregg Gilman, “Retaliation: The Fastest Growing Discrimination Claim,” Cornell Hotel and Restaurant Administration Quarterly 47, no. 4 (November 2006): 350.

43. Rebecca M. Archer and Stephen T. Lanctot, “Are Your Hands Tied? A Practical Look at Employee Claims of Retaliation,” Employee Relations Law Journal 33, no. 1 (Summer 2007): 53; see also, Mary Price Birk, “Walking on Eggshells—Avoiding Retali- ation Claims When the Employee Does Not Leave,” Employee Relations Law Journal 32, no. 3 (Winter 2006): 10; and Martin K. LaPointe, “The Supreme Court Sets the Standard for Title VII Retaliation Claims: Burlington Northern and Santa Fe Railway v. White,” Labor Law Journal 57, no. 4 (Winter 2006): 205.

44. Jathan Janove, “Retaliation Nation,” HR Magazine 51, no. 10 (October 2006): 62.

45. Heather J. Broadwater, “Preventing Workplace Sexual Harass- ment,” Rural Telecommunications 25, no. 5 (September /Octo- ber 2006): 34.

46. Michael W. Johnson, “Harassment and Discrimination Pre- vention Training,” Labor Law Journal 55, no. 2 (Summer 2004): 119.

47. Alison DeNisco, “Does Your Company Need a Chief Diversity Officer?” TechRepublic (September 28, 2016).

48. Voluntary Diversity Plans Can Lead to Risk,” HR Focus 84, no. 6 (June 2007): 2.

49. University of California Regents v. Bakke, 438 U.S. 265 (1978) and United Steelworkers of America v. Weber, 443, U.S. 193 (1979).

50. Daniel A. Biddle and Richard E. Biddle, “Ricci v. Destefano: New Opportunities for Employers to Correct Disparate Impact,” Labor Law Journal 61, no. 3 (Fall 2010): 123–41.

51. Peng Wang and Joshua L. Schwarz, “Stock Price Reactions to GLBT Nondiscrimination Policies,” Human Resource Management 49, no. 2 (March–April 2010): 195.

28. Huasheng Gao and Wei Zhang, “Non-Discrimination Laws Make U.S. States More Innovative,” Harvard Business Review (August 17, 2016).

29. Ali Vitali, “President Trump Signs New Immigration Execu- tive Order,” NBC News (March 6, 2017); Mark Schoeff, “DHS Rule Rankles Employer Groups,” Workforce Management 86, no. 14 (August 20, 2007): 1.

30. 8 U.S.C.A. § 1324a (a) (1), (2) (2005). 31. 8 U.S.C.A. § 1324B (1) (2005). 32. U.S. Department of Justice, Immigration and Naturalization

Service, Handbook for Employers: Instructions for Completing Form I (Washington, D.C.: U.S. Government Printing Office, 2005).

33. Jacqueline Howard. “Weight Bias Is Bigger Problem than You May Think, Experts Say,”; Svetlana Shkolnikova, “Weight Discrimination Could Be as Common as Racial Dis- crimination,” USA Today (May 28, 2008), http://www.usatoday .com.

34. Donna Ballman, “Is Weight Discrimination At Work Ille- gal?” AOL Jobs (November 6, 2012), articles/2012/11/06/is-weight-discrimination-illegal/.

35. Enbar Toledano, “May the Best (Looking) Man Win: The Unconscious Role of Attractiveness in Employment Deci- sions,” Cornell (University) HR Review (February 14, 2013),

36. Gerald E. Calvasina, Richard V. Calvasina, and Eugene J. Cal- vasina, “Caregiver Responsibility Discrimination and EEOC Guidelines,” Journal of Legal, Ethical & Regulatory Issues 13, no. 2 (June 2010): 1–2.

37. The guidelines themselves and examples of their application can be found at

38. Uniform Guidelines, Sec. 40. Adverse impact need not be con- sidered for groups that constitute less than 2 percent of the relevant labor force.

39. The primary website for the EEOC is This website contains a wealth of information about the EEOC, including the agency’s history and administration, how discrimination charges are filed and processed, train- ing and outreach programs, litigation statistics, and various pamphlets and posters offered free of charge to interested parties.

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Determining Adverse Impact

A.1 The Four-Fifths Rule Employers can determine adverse impact by using the method outlined in the interpre- tive manual for the Uniform Guidelines on Employee Selection Procedures.

1. Calculate the rate of selection for each group (divide the number of people selected from a group by the number of total applicants from that group).

2. Observe which group has the highest selection. 3. Calculate the impact ratios by comparing the selection rate for each group with that

of the highest group (divide the selection rate for a group by the selection rate for the highest group).

4. Observe whether the selection rate for any group is substantially less (usually less than four-fifths, or 80 percent) than the selection rate for the highest group. If it is, adverse impact is indicated in most circumstances.


Job Applicants Number Hired Selection Rate Percent Hired

Step A Whites 100 52 52 / 100 52%5

Blacks 50 14 14 / 50 28%5

Step B The group with the highest selection rate is whites, 52%.

Step C Divide the black selection rate (28%) by the white selection rate (52%). The black rate is 53.8% of the white rate.

Step D Since 53.8% is less than four-fifths, or 80%, adverse impact is indicated.

Source: Adoption of Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform Guidelines on Employee Selection Procedures, Federal Register 44, no. 43 (March 2, 1979): 11998.

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Job Analysis and Job Design

Learning Outcomes After studying this chapter, you should be able to

Explain what a job analysis is and how it is used in conjunction with a firm’s HRM functions.

Explain how the information for a job analysis typi- cally is collected and incorporated into various sec- tions of a job’s description.

LO 1

LO 2

Provide examples illustrating the various factors that must be taken into account when designing a job, including what motivates employees.

Describe the different group techniques and types of work schedules used to broaden a firm’s job func- tions and maximize the contributions of employees.

LO 3

LO 4 Kz

en on

/S hu

tt er

st oc


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122 Part 2 Meeting Human Resources Requirements

O rganizations exist because people can accomplish more together than they can on their own. However, the actions of an organization need to be coordinated, and each person within it needs to do those things he or she does best. This

coordination is typically achieved by creating individual jobs. A job can be defined as an activity people do for which they get paid, particularly as part of the trade or occupation they occupy. But how exactly should the work be divided, and which people should do which tasks or jobs. These are questions businesspeople such as Henry Ford and scientific management researchers such as Frederick Winslow Taylor sought to answer at least a century ago, and ones managers still ask today.

The answers to the questions about what jobs an organization should have stem from a firm’s strategy. What good or service does the firm intend to provide and how much of it? What does the firm believe its competitive advantage is? Is the company trying to capture market share based on a new product it has developed? A lower-priced product? A higher-quality product? How and where will the prod- uct will be produced, and distributed, and with what technology? What types of people and skills will be needed to accomplish these tasks and how should they be organized?

A workflow analysis can help a company answer these questions. A workflow analysis helps a firm determine the best processes, types, and mix of jobs, and how they should ideally be organized to execute the firm’s mission. For example, both Apple and Lenovo make computers. However, Apple focuses on producing innovative products, whereas Lenovo has traditionally focused on producing low-priced products. As a result, how the companies are organized, their workflows, and numbers and types of jobs differ in significant ways. To develop and improve their workflows, large organizations often hire outside business analysts and operations management specialists who work in conjunc- tion with the firm’s top managers and HR personnel to do so. The resulting workflow analysis outlines the division of labor among employees, the degree to which they are specialized, to whom they report to, and that person’s authority, or span of control over his or her subordinates.

However, as the competitive environment changes, these elements have to change as well. Formerly Lenovo had a typical hierarchical organizational structure. (Recall from your introduction to business and management classes that tall organizational struc- tures are characterized by many managerial levels with narrow spans of control and jobs that are narrowly focused.) That structure worked well for the firm’s PC business, but to remain competitive, the company needed to improve its innovation capabilities and expand its product lineup to attract new types of customers.

So, a few years ago, Lenovo flattened its organization by dividing its PC-focused division into four separate business units: PCs, mobiles devices, servers and storage, and cloud computing systems. It also divided countries into emerging and mature markets and developed different strategies and personnel for each. Today, not only is Lenovo the biggest seller of PCs in the world, it also sells more mobile phones in China than any other company, including Apple.

job An activity people do for which they get paid, particularly as part of the trade or occupation they occupy.

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123Chapter 4 Job Analysis and Job Design

What will workflows and jobs look like in the near future? The biggest game changer is likely to be automation. Virtually all companies must compete on price, at least to some extent. And in the long run, automating repetitive tasks is cheaper than hiring people to do them. has developed a grocery store that allows peo- ple to walk in, load up their groceries, automatically pay for them, and leave without going through a checkout stand. In Japan, conveyor belts deliver sushi to customers almost as soon as they click on a menu to choose their selections. Computer chips in the plates sense when entrées have been chosen and the customer’s bill gets tallied up based on what they grab. U.S. restaurants are automating, too.

And it’s not just service jobs that are being replaced. In the oil and gas industry, thou- sands of workers who drilled and monitored wells have been replaced by robots and electronic equipment and sensors. “Pretty soon every rig will have just one worker and one robot,” says Eustasio Velazquez, a 44-year-old oil field worker who recently lost his job. Oil companies are hiring smaller numbers of high-tech workers, such as engineers, data scientists, and mathematicians, who often work in mission-control-like centers. Twenty-five-year old Andre Nel, a mechanical engineer with a computer science back- ground, is one of them. In addition to designing systems and software for his petroleum company, Nel can monitor the maintenance history and production trends of thousands of wells with just the click of a mouse.1

4.1 What Is a Job Analysis and How Does It Affect Human Resources Management?

Think about an organization you worked for or a job or position you have held. Did you ever think about ways to make the organization’s workflow better? If so, you were doing an informal work analysis. Likewise, did you analyze the tasks you were doing and conclude they should be done by someone else or vice versa? If so, you were doing an informal analysis of your job. A job analysis is the systematic process of collecting information about all of the parameters of a job—its basic responsibilities, the behaviors, skills, and the physical and mental requirements of the people who do it.

A job analysis should also outline the tools needed to do the job, the environment and times at which it needs to be done, with whom it needs to be done, and the outcome or performance level it should produce.2 Normally, a manager or an HR manager such as a job analyst is responsible for collecting the information for a job analysis. These people rely on the cooperation of employees and their supervisors to gather the information needed for the analysis of jobs.

How does a job analysis help facilitate a firm’s human resources efforts? As Figure 4.1 shows, the information in a job analysis is crucial to a number of HRM func- tions, including the following:

• Strategic HR planning. A job analysis is used to examine a company’s organiza- tional structure and strategically position it for the future. Does the firm have the right numbers and types of jobs and skills needed to cover the scope of its activities

job analysis The process of obtaining information about a job by determining its duties, tasks, or activities.

Are there any HR func- tions not affected by the job analysis process? If so, what are they?

LO 1

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124 Part 2 Meeting Human Resources Requirements

now and in the future? In addition, are the jobs aligned with one another, or do their purposes or duties conflict with one another? Are there tasks that need to be done in the organization that are not clearly assigned to a particular job? Conducting a job analysis helps ensure alignment.

• Workflow analysis and job design. The information generated by a job analy- sis can be used to analyze a company’s work processes—that is, how work is done. Would rearranging an organization’s workflow or jobs help a company better compete? Can the nature of the jobs be redesigned to improve the firm’s performance?

• Recruitment and selection. Some of the information provided in a job analysis is contained in job advertisements. The information and qualifications provide a basis for attracting qualified applicants and discourageing unqualified ones.

• Training and development. Any discrepancies between the abilities of jobholders and a firm’s job descriptions provide clues about the training jobholders need to succeed and advance into different jobs as well as the training the firm needs to provide.

• Performance appraisal and compensation. A job analysis provides the criteria for evaluating what constitutes a good performance versus a poor performance; the firm can then take steps to improve the latter.

• Compensation management. Conducting a job analysis helps HR managers fig- ure out the relative worth of positions so the compensation for them is fair and equitable, and employees want to remain with the firm rather than search for other jobs.

• Legal compliance. If the criteria used to hire and evaluate employees are not job related, employers are more likely to find themselves being accused of discrimi- nation. In decades past, before firms regularly analyzed jobs, non-job-related criteria were prevalent: For example, laborers were often required to have high

Alignment of: Job Description (TDRs) Job Specification (KSAOs)

• HR Strategy and Planning Nature of structure and work to achieve business results and goals

Supply and demand of labor, number and kinds of people needed to fill open positions

• Workflow Analysis and Job Design

Sequencing or grouping of related jobs, and the nature of interdependence

Enriching or expanding jobs to develop and motivate employees further

• Recruitment and Selection Posting advertisements, etc. of jobs to fill and the nature of responsibilities

Hiring criteria for evaluating candidates who apply for open positions

• Performance Appraisal Process

Setting goals, duties, and activities that define the desired performance

Attributes and demonstrated qualities used to assess performance and give feedback

• Compensation and Benefits Job evaluation of the job in terms of responsibilities and working conditions

Job evaluation of the skills, effort required, etc. that are rewarded

• Legal Compliance Equal employment requirements Fair treatment and valid employment practices

Job Analysis: The Cornerstone of HRM FunctionsFigure 4.1

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125Chapter 4 Job Analysis and Job Design

school diplomas; plumbers, electricians, and machinists were sometimes required to be male. As you learned in Chapter 3, these kinds of job specifications are discriminatory.

4.1a Major Parts of the Job Analysis Let’s look at the two major pieces of information that come out of a job analysis:

1. A job description, which is a written document that describes the overall pur- pose of the job, and tasks, duties, and responsibilities, or what human resources personnel refer to as TDRs, and the qualifications needed to do it. The following is an excerpt of the purpose and TDRs for a firefighter’s position posted by the city of Del Mar, California.


Responds to emergency calls to protect life and property; participates in training, drill and independent study activities; participates in the maintenance of fire depart- ment apparatus, equipment and facilities; performs various staff support assign- ments; and performs related work as assigned.

Tasks, Duties, and Responsibilities

• Responds to a wide variety of emergency alarms, such as structural and envi- ronmental fires, traffic accidents, natural gas leaks, medical emergencies, and hazardous material spills.

• Provides first-responder medical emergency response at the basic life support level, including initial patient and situation assessment, cardiopulmonary resus- citation and trauma emergency medical care; prepares patients and assists para- medics in advanced life support emergency medical care.

2. Job specifications, or qualifications, which are a part of the written job descrip- tion and outline the specific knowledge, skills, abilities, and other attributes (often referred to as KSAOs) required of the person performing the job. Knowledge refers to what you know. Your education is an example of knowledge. For example, some cities require firefighters to be certified paramedics. Other cities don’t. Skills are things you have learned to do. If you’re a firefighter, that experience could include knowing how to make minor repairs to fire equipment. Abilities are your innate aptitudes. You don’t have to be taught them or learn them on a job. Examples for a firefighter would include the ability to lift firefighting equipment and stay calm during an emergency. Other attributes refer to your personality, values, and so on. Helpfulness and the predisposition toward teamwork are examples of “other attri- butes” firefighters need.

Are you thinking you want to go into human resources management? If so, Highlights in HRM 2 later in the chaper will give you an idea of what a job description for an entry- level position in this field would look like. Note that a job description isn’t necessarily the information you would see in a job posting, which is used for advertising. The job description in Highlights in HRM 2 is an internal document used by the firm and HR personnel for their planning and staffing needs. For example, note that the job analyst who compiled the information and the date the job was analyzed are included at the top of the document. We will take a closer look at the parts of the document later in the chapter.

job description A statement of the tasks, duties, and responsi- bilities of a job to be performed.

job specifications A statement of the specific knowledge, skills, and abilities of a person who is to perform a job needs.

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126 Part 2 Meeting Human Resources Requirements

4.2 Sources of Job Analysis Information You have learned that a job analysis is an important HR building block. What you are probably wondering now is how a person does one. The first step is to collect informa- tion needed to analyze jobs. The most common methods of collecting this information are interviews, questionnaires, observation, and diaries.

• Interviews. A job analyst or supervisor interviews individual employees and their managers about the parameters of the job. Highlights in HRM 1 shows the types of questions asked as part of job analysis interviews. When a job is particularly complex, firms sometimes interview a panel of subject matter experts (SMEs). SMEs are job experts who actually do the job or train and supervise others to do the job.

• Questionnaires. The job analyst or supervisor circulates standard questionnaires for jobholders to fill out individually. The forms contain questions similar to those asked in an interview.

• Observation. The job analyst or supervisor learns about the job by observing and recording the activities associated with it on a standardized form.

• Diaries. Jobholders are asked to keep diaries of their work activities for an entire work cycle. The diaries are normally filled out at specific times of the work shift (such as every half hour or hour) and maintained for a 2- to 4-week period.

Job analysis software and templates available on the Web have greatly facilitated the job analysis process. They normally contain task statements that can apply to many different jobs. Managers and employees select those statements that best describe the job under review, indicating the importance of the task to the job.

Figure 4.2 shows the job analysis process. It includes how the information to be analyzed is collected and feeds back into the HRM functions we discussed in Figure 4.1.

4.2a Controlling the Accuracy of the Job Data Collected When interviewing employees or reviewing their questionnaires, a job analyst should look for any responses that contradict other facts or impressions he or she has received about the job. Sometimes employees exaggerate the difficulty of their positions to inflate their egos and their paychecks.3 Inflating a job’s responsibilities can also occur unintentionally. For example, people who have been in their jobs for a long time and are good at them sometimes mistakenly believe that the skills needed for their jobs are higher than they really are. As one job analyst noted, “When in doubt about the accuracy of employee responses, always dou- ble-check the data with others.”4 In other words, collect information from a representative sample of individuals doing the same job, not just one or two jobholders. Also, once a job analysis is done, it should be checked for accuracy by the jobholders and their managers.5

4.2b Other Sources of Job Analysis Information Do managers and job analysts have to start from scratch when it comes to designing questionnaires to gather job information and analyzing it? No, not necessarily, even if a position is a new one. Several different quantitative job analysis approaches already exist. Each has its own advantages and disadvantages.6 Five of the more popular methods are the functional job analysis, the position analysis system, the critical incident method, a task inventory analysis, and a competency-based job analysis.

Answer the questions in Highlights in HRM 1 based on the job you currently hold or most recently held. Then organize the informa- tion into the various job sections of a job description.

LO 2

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Job Analysis Interview Questions

The following are examples of interview questions HR pro- fessionals use to gather information for a job analysis.

1. Job’s purpose

�� What work do you essentially do? What is the job’s overall purpose?

�� How do you see your work contributing to the overall mission or purpose of the organization, now and in the future?

2. Job’s duties

�� Describe your duties in terms of what they are, how you do them, how often you perform them, and how long they each take.

�� Does the job have to be done in the way you were trained to do it, or do you see ways to improve it?

�� Are you performing duties not presently included in your job description? Describe them.

�� Are the instructions you receive from your supervi- sor clear and consistent with your job description?

3. Job criteria and results

�� Have work standards for the job been established (errors allowed, time taken for a particular task, etc.)? If so, what are they?

�� Describe the successful completion and/or end results of the job.

4. Background and knowledge

�� What personal attributes are needed to be success- ful in this position?

�� Describe the level, degree, and breadth of knowl- edge required for this position.

�� Indicate the education, certification, and license requirements for the job.

5. Training

�� Describe the orientation you received when you first began this job and its effectiveness.

�� What sort of on-the-job training and training period is needed for the position?

�� What tools, equipment, or other resources are needed to train people for this position?

�� What assessment tests are needed to determine if someone is competent in this position?

6. Abilities required

�� Do you use special software tools, equipment, or machines? If so, list them.

�� What manual skills are needed to operate the machines, tools, and equipment to do the job?

�� What reasoning or problem-solving ability must you have?

�� Are any supervisory or managing abilities required?

�� What physical abilities such as strength, coordina- tion, or visual acuity must you have?

7. Working conditions

�� Describe your working conditions.

�� Describe the frequency and degree to which you encounter working conditions such as these: con- tact with hazardous materials, strenuous physical labor, cramped quarters, moving objects, vibration, and inadequate ventilation.

8. Authority

�� What is the job’s level of authority, and to whom are you accountable?

�� What kinds of independent action are you allowed to take?

9. Responsibilities

�� Are you responsible for any confidential material? If so, describe how you handle it.

�� Are you responsible for any money or things of monetary value? If so, describe how you handle it.

10. Evaluation and compensation

�� In what ways and how often is your performance evaluated and feedback provided?

�� What criteria do you think should be used in the evaluation process?

�� Considering your level of productivity and the skill level required to fulfill your responsibilities, do you think you are compensated adequately?

�� Describe the criteria that should be used to determine the compensation for the position: responsibilities, skills, experience, knowledge, work environment, safety hazards, and so forth.

Sources: Michael G. Aamodt, Industrial/Organizational Psychology: An Applied Approach, 7th ed. (Mason, OH: Cengage Learning, 2012); David Ngo, “Job Analysis Questions,” (March 3, 2011), http://www.humanre -; “Job Analysis: Overview,” HR Guide to the Inter- net,; “Job Analysis: Asking Questions,” Department for Business Innovation & Skills, http://www

Highlights in HRM1

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128 Part 2 Meeting Human Resources Requirements

Functional Job Analysis System Developed by the U.S. Training and Employment Service, the functional job analysis (FJA) approach utilizes an inventory of the various types of work activities that can constitute any job. Basic activities called worker functions are used to describe what workers do with regard to “information, people, and things” as part of this system. For example, when it comes to people, the basic functions of a job might include coordinating and supervising them. Each job function is assigned a percentage in terms of its importance to the job. For example, supervising might be 75 percent of the job.

The U.S. Department of Labor has a comprehensive occupation-information web- site called O*NET Online that contains thousands of free job descriptions that can help match people’s interests and abilities with occupations as well as serve as a starting point for analyzing a job. The jobs on the site are classified into broader functional areas, from entry level to advanced, and across various specialties and contain comprehen- sive information about the tasks, tools and technology, KSAOs, education, interests, works styles, wages, and employment outlook associated with the jobs. Free job analysis questionnaires can be downloaded from O*NET. Although they are generic, they can be customized and used to collect occupational information from jobholders and their managers.

functional job analysis (FJA) A job analysis approach that utilizes an inventory of the various types of work activities that can constitute any job.

Source: U.S. Bureau of Labor Statistics


Interviews Questionnaires Observations Diaries


Recruitment Selection Training and development Performance appraisal Compensation management


Skill requirements Physical demands Knowledge requirements Abilities needed


Tasks Duties Responsibilities


Tasks Performance standards Responsibilities Knowledge required Skills required Experience needed Job context Duties Equipment used


Job analyst Employee Supervisor

The Job Analysis ProcessFigure 4.2

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129Chapter 4 Job Analysis and Job Design

The Position Analysis Questionnaire System The position analysis questionnaire (PAQ), which identifies approximately 300 different worker tasks, has been widely used for decades to collect and analyze job information. The PAQ seeks to determine the degree to which the different tasks are involved in doing a particular job. The results obtained with the PAQ are quantitative and can be statistically analyzed. Although a PAQ tends to be accurate, it requires a person to have a high level of reading ability.7 To obtain the best results, it should be administered to employees by a job analyst rather than having the employees complete the questionnaire alone. Also, the questionnaire isn’t free. Firms must pay for it.

The Critical Incident Method The objective of the critical incident method is to identify both desirable and undesir- able behaviors that resulted in either a very good outcome or a very bad outcome on the job. For example, a job analyst might ask a company’s customer service employees to describe incidents that led to either a good or bad outcome with a customer. The fol- lowing are examples of questions that might be asked:

• What happened? • How did the incident happen? • Did the incident have a good or bad outcome? • What led to the outcome? • What actions were effective or ineffective? • What would you do differently if the situation occurred again?

The information, which can be collected through interviews or surveys, helps pinpoint important behaviors for a job analysis. Figure 4.3 illustrates the critical incident. The incidents in the middle of the figure are associated with neutral outcomes. Most of the outcomes will fall into this area. The incidents on the ends of the figure are good and bad outcomes. Relatively fewer of the incidents will occur in these areas. Nonetheless, examining them is important because they can reveal critical job behaviors.

position analysis questionnaire (PAQ) A questionnaire that identifies approximately 300 different tasks to determine the degree to which each is involved in doing a job.

critical incident method A job analysis method used to identify both desirable and undesir- able behaviors that resulted in either a very good outcome or a very bad outome on the job.

Effectiveness of Behavior

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The Critical Incident Method IllustratedFigure 4.3

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130 Part 2 Meeting Human Resources Requirements

Task Inventory Analysis The task inventory analysis method was pioneered by the U.S. Air Force. Unlike the PAQ, which uses a standardized form to analyze jobs in different organizations, a task inventory questionnaire can be tailored for a specific organization. With the help of employees and their managers, a list of tasks and their descriptions for different jobs are developed and then rated based on how important they are. The goal is to produce a comprehensive list of task statements applicable to all jobs. Task statements then are listed on a task inventory survey form to be completed by the person analyzing the job under review. A task statement might be: “Monitors current supplies to maintain stock levels.” The job analysis would also note the importance of the task, frequency of occurrence, and time spent on the task to the successful completion of the job.

Competency-Based Approach The approaches to job analysis we have discussed so far focus on the tasks employees do, but not what they are capable of doing. The following statement by two HR profes- sionals highlights this concern: “Typically, job analysis looks at how a job is currently done. But the ever-changing business market makes it difficult to keep a job analysis up-to-date. Also, companies are asking employees to do more, so there is a question of whether ‘jobs’ as we know them are obsolete.” The risk is that in a dynamic environ- ment where job demands rapidly change, obsolete job analysis information will hinder an organization’s ability to adapt to change.

When organizations operate in a fast-moving environment, managers often adopt a competency-based approach to job analysis.8 This job analysis method relies on build- ing job profiles that look at not only the responsibilities and activities of jobs a worker does currently but the competencies or capabilities he or she needs to do them well and to adapt to new job challenges. How the work is done (and therefore can be improved) becomes more of the focus than just what work is done.9

The objective is to identify key competencies for the organization’s success. Compe- tencies can be identified through focus groups, surveys, or interviews and might include such things as interpersonal communication skills, decision-making ability, conflict resolution skills, adaptability, or self-motivation. Figure 4.4 shows a form used to gather information for a competency-based job analysis.

4.2c Parts of a Job Description Most job descriptions contain at least three parts: (1) the job’s title and location; (2) a job identification section, which contains administration information such a numerical code for the job, to whom the jobholder reports, and wage information; and (3) a job duties section. The other important outcome of the job analysis is the job specification, or the description of KSAOs. If the job specification is not prepared as a separate docu- ment, it is usually stated in the concluding section of the job description, as Highlights in HRM 2 shows. Next, let’s look at these sections.

Job Title Selecting a job’s title serves several purposes. First, the job title is psychologically impor- tant because it provides status to the employee. For instance, “sanitation engineer” is a more appealing title than “garbage collector.” Second, if possible, the title provides an indication of what the duties of the job entail. Titles such as meat inspector, electronics assembler, salesperson, and engineer obviously hint at the nature of the duties of these jobs.

task inventory analysis An organization-specific list of tasks and their descriptions used as a basis to identify compo- nents of jobs.

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131Chapter 4 Job Analysis and Job Design

The job title also should indicate the level of the job in the organization. For example, the title junior engineer implies that this job occupies a lower level than that of senior engineer.

Job Identification Section The job identification section usually follows the job title. It includes such items as the department and location of the job, the person to whom the jobholder reports, and the date the job description was last revised. Sometimes it also contains a payroll or code number, the number of employees performing the job, the number of employees in the department where the job is located, and the code assigned to the job using the O*NET system. A “Purpose” statement usually appears at the bottom of this section and distin- guishes the job from other jobs in the organization—something the job title might fail to do. Working conditions may also be listed.

Tasks, Duties, and Responsibilities Section Statements covering job duties are typically arranged in order of their importance. Sometimes the statements indicate the percentage of time devoted to each duty. The Civil Rights Act of 1991, the American with Disabilities Act (ADA), and landmark court rulings require employers to show that the job criteria they use to select employ- ees for a particular position are valid and relate specifically to the duties for that job. Moreover, the duties must be essential functions for success on the job. For example, if the job requires the jobholder to categorize materials or memorize stock codes, these requirements should be stated within the job description. Criteria that are vague or not job related are increasingly and successfully challenged.

Part B: Skill Matrix in a Dejobbed Organization

Job Title: XYZ

8 8 8 8 8 8

7 7 7 7 7 7

6 6 6 6 6 6

5 5 5 5 5 5

4 4 4 4 4 4

3 3 3 3 3 3

2 2 2 2 2 2

1 1 1 1 1 1

Technical Expertise

Communication & Interpersonal


Business Acumen & Decision


Leadership & Guidance

Planning & Organizing

Initiative & Problem Solving

➢ The numbers in the matrix describe each skill level. For example, for technical expertise (1) might read: basic knowledge of handling machine, while (8) might read: conducts and supervises complex tasks requiring advanced knowledge of a range of skills.

➢ The shaded boxes indicate the minimum level of skill required in each skill category for the position XYZ. ➢ The jobholder is required to move from the minimum level to higher levels. The appraisal and rewards are tied to this movement.

Form Used to Gather Information for a Competency-Based Job AnalysisFigure 4.4

Source: Feza Tabassum Azmi, “Job Descriptions to Job Fluidity: Treading the Dejobbing Path,” EBS Review, no. 23 (2007): 8. Reprinted by permission.

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An Example of a Job Description

Title: Employment Assistant Job Identification

Division: Southern Division

Department: Human Resources

Job Analyst: Antonio Floros

Date Analyzed: 1/3/18

Wage Category: Exempt

Report to: HR Manager

Job Code: 1117

Date Verified: 1/17/18

Purpose Performs professional human resources work in the areas of employee recruitment and selection, testing, orienta- tion, transfers, and maintenance of employee human resources files. May handle special assignments and proj- ects related to EEO/affirmative action, employee griev- ances, training, or classification and compensation. Works under general supervision. Incumbent exercises initia- tive and independent judgment in the performance of assigned tasks.

Working Conditions: This job is done in a professional office environment with the use of equipment such as lap- top computers, photocopiers, and smartphones. Working hours are Monday through Friday, 8:30 a.m. to 5:00 p.m. Evening, weekend work, and travel may be required occasionally.

Tasks, Duties, and Responsibilities 1. Maintains a daily working relationship with division

managers on human resource matters, including recruitment concerns, retention or release of proba- tionary employees, and discipline or discharge of per- manent employees. (25%)

2. Schedules and conducts personal interviews to deter- mine applicants’ suitability for employment. Includes reviewing applications and resumes. Supervises the administration of the applicant testing program.

Responsible for developing or improving testing instruments and procedures. (20%)

3. Presents orientation program to all new employees. Reviews and develops all materials and procedures for the orientation program. (15%)

4. Coordinates the division job posting and transfer pro- gram. Establishes job posting procedures. Responsible for reviewing transfer applications, arranging transfer interviews, and determining effective transfer dates. (10%)

5. Distributes new or revised human resource policies and procedures to all employees and managers through email, the company’s intranet, meetings, memorandums, or personal contact. (10%)

6. Prepares recruitment literature and job advertise- ments. (10%)

7. Performs related duties as assigned by the human resources manager. (10%)

Job Specifications �� Four-year college or university degree with major

course work in human resources management, business administration, or industrial psychology; OR a combination of experience, education, and training equivalent to a 4-year college degree in human resources management.

�� Detailed knowledge of the principles of employee selection and assignment of personnel.

�� Ability to express ideas clearly in both written and oral communications.

�� Ability to independently plan and organize one’s own activities.

�� Knowledge of HRIS applications desirable.

Physical Requirements: The employee is regularly required to talk and hear. Occasionally the employee is required to stand, walk, sit, and use hands and figures to control objects. Occasional lifting or movement of office products and sup- plies, up to 10 pounds is required.

Highlights in HRM2

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133Chapter 4 Job Analysis and Job Design

Job Specifications Section Typically, a job specifications section covers two areas of qualifications: (1) the skills required to perform the job and (2) the job’s physical demands. Skills relevant to a job include the education, experience, and specialized training it requires, and the personal traits or abilities and manual dexterities it requires. To comply with EEOC requirements, the physical demands of a job should refer to how much walking, standing, reaching, lifting, bending, or talking must be done on the job. Recall from Chapter 3 that an orga- nization is legally required to make a reasonable accommodation for disabled individu- als who would be able to do the functions if they were accommodated. The condition of the physical work environment and the hazards an employee might encounter in the position are also among the physical demands of a job.

The job specifications section should also include interpersonal skills if a compe- tency-based job analysis approach is used. For example, behavioral competencies might include the ability to make decisions based on incomplete information, handle multiple tasks, and resolve conflicts.

4.2d Writing Clear and Specific Job Descriptions Several problems are frequently associated with job descriptions, including the following:

1. If they are poorly written, using vague rather than specific terms, they provide little guidance to the jobholder.

2. They are sometimes not updated as job duties or specifications change. 3. They may violate the law or union agreements and lead to employee greivances. 4. They can limit the scope of activities of the jobholder, reducing an organization’s


When writing a job description, keep the items on it direct and simply worded. Unnecessary words or phrases should be eliminated. The term “occasionally” is used to describe duties that are performed once in a while. The term “may” is used in connec- tion with duties performed only by some workers on the job.

To help alleviate the problem of employees claiming that a task “is not my job,” organizations often include language in their job descriptions stating that the jobholder will perform “other duties” as needed. Notice that the job duties section in Highlights in HRM 2 contains the following language: Performs related duties as assigned by the human resources manager.

4.3 Job Design Job design, which is an outgrowth of job analysis, focuses on reconfiguring jobs to capture the talents of employees, improve their work satisfaction, and enhance an orga- nization’s performance.10 Companies such as Harley-Davidson and Banner Health are among the many firms that have revamped their jobs to eliminate unnecessary job tasks and find better ways of doing work. As Figure 4.5 shows, four basic approaches can be used to design jobs. Top-down approaches (industrial engineering and ergonomics) focus on the tasks of a job and how they can be done better. Bottom-up approaches (enrichment and empowerment) are more person focused. The idea behind these two approaches is to design jobs so that the people doing them are more motivated to do them well. Motivating people is especially important when you consider the fact that

job design An outgrowth of job analysis that improves jobs through techno- logical and human considerations in order to enhance organization efficiency and employee job satisfaction.

Can a firm’s managers control the process of job crafting? What chal- lenges does it present for them?

LO 3

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134 Part 2 Meeting Human Resources Requirements

people—not machines—are the most strategic asset companies have today. However, all four approaches need to be considered when designing a single job.

Industrial engineering, a top-down job design approach, is the study of work to determine which, if any, elements of work can be modified, combined, rearranged, or eliminated to reduce the time needed to complete the work cycle. Time standards are then established by recording the time required to complete each element in the work cycle, using a stopwatch or work-sampling technique. Industrial engineering dramati- cally changed how people worked around the beginning of the twentieth century and for decades to come, and continues to do so today. For example, consider the jobs done by pit crews in NASCAR races. It used to be that the members of NASCAR pit crews were mechanics who worked at the races on weekends. Changing the tires on a vehicle took about 30 seconds. Today, pit crews need to change the tires in under 12 seconds for teams to win. The jobs are now done by former athletes who are stronger and faster, work out, and watch tapes to speed up the 70-plus moves they need to make during a pit stop.11

4.3a Ergonomics Ergonomics, a top-down approach in Figure 4.5, is the process of studying and design- ing equipment and systems that are easy and efficient for employees to use so that their physical well-being isn’t compromised and work gets done more efficiently in the organization. In other words, in contrast to industrial engineering, which focuses on time and efficiency, ergonomics focuses on the well-being of workers so as to improve efficiency. Factors such as the climate employees work in, the temperatures of facili- ties, noise and lighting conditions, and the length of schedules and fatigue factors are examined. UPS developed an ergonomic simulator to help train its drivers to walk on ice without injuring themselves.12 Even just sitting for long periods of time like office

industrial engineering A field of study con- cerned with analyz- ing work methods and establishing time standards.

ergonomics The process of studying and designing easy- to-use equipment and systems so the physical well-being of employees isn’t compromised and work gets done more efficiently.


Enrichment Empowerment

Industrial Engineering

Focus on Task

Focus on Person

Top-Down Approaches

Bottom-Up Approaches

Top-Down versus Bottom-Up Job Design Approaches Figure 4.5

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135Chapter 4 Job Analysis and Job Design

workers do can be hazardous to one’s health. Doing so slows down a person’s metabo- lism and can lead to diabetes and heart problems. Standing desks and treadmill desks have been developed to help alleviate this problem.

Ergonomics efforts need not be that complicated though. They can be as simple as rearranging the flow of work so workers need to take fewer steps or organizing items so they are within easier reach of workers. Part of ergonomics involves looking at the design of equipment and the physical abilities of the different operators who use it. That could include lowering shelves so female workers are more easily able to reach items or redesigning hand controls to make them easier for women use. Or it could include encouraging employees to wear fitness trackers that electronically prompt them to move around after sitting for long periods of time. Fitbit Inc. has contracted with more than a thousand firms, including Target, IBM, and Gonzaga University, to outfit their employ- ees with Fitbit trackers.13 Ergonomics will be discussed in more detail in Chapter 12.

4.3b Enrichment Would you find it motivating if your supervisor timed to the minute each of the tasks associated with your job and then asked you to meet those times? Probably not. Such an approach would get mind-numbing. After a while, you would begin to feel like a machine. In an effort to counter the motivational problems that occur when workers do standardized, repetitive tasks, researchers began proposing theories they believed could improve both the efficiency of organizations and the job satisfaction of employees.14

Any effort that makes work more rewarding or satisfying by adding more variety and meaning to a job is called job enrichment. Job enrichment was pioneered by Frederick Herzberg in the 1960s.15 Its goal is to enrich a job so that it is intrinsically motivating to employees versus extrinsically motivating. Extrinsic motivators are external rewards such as money and bonuses. But most employers want their employees to do more than just work for a paycheck. When people are intrinsically motivated they take pride in their work and want to do a good job because it’s interesting and they feel they are making a difference by doing it.

job enrichment Enhancing a job by add- ing more meaningful tasks and duties to make the work more rewarding or satisfying.

Although not inexpen- sive, standing desks

and treadmills can improve a workplace’s


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136 Part 2 Meeting Human Resources Requirements

The job characteristics model is a more recent theory proposed by Richard Hack- man and Greg Oldham.16 According to this model, the following three psychological states of a jobholder result in improved work performance, internal motivation, and lower absenteeism and turnover:

1. Experiencing the meaningfulness of the work performed 2. Experiencing responsibility for work outcomes 3. Knowing the results of the work performed.17

Hackman and Oldham believe that five core job dimensions produce the three psycho- logical states. The five job characteristics are as follows as well as illustrated in Figure 4.6:

1. Skill variety. The degree to which a job includes a variety of activities, which demand the use of a number of different skills and talents by the jobholder.

2. Task identity. The degree to which a jobholder is able to complete a whole and identi- fiable piece of work—that is, do a job from beginning to end with a visible outcome.

job characteristics model A job design theory that purports that three psy- chological states (expe- riencing meaningfulness of the work performed, responsibility for work outcomes, and knowing the results of the work performed) result in a jobholder’s improved work performance, internal motivation, and lower absenteeism and turnover.

Source: Richard Hackman and Greg R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance 16, no. 2 (August 1976).

Skill variety

Task identity

Task significance



Experienced meaningfulness of the work

High internal work motivation

High quality work performance

High satisfaction with work

Low absenteeism and turnover

Experienced responsibility for outcomes of the work

Core Job Dimensions

Critical Psychological


Individual’s Need for Growth

Personal and Work Outcomes

Knowledge of the actual results of the work activities

Job Characteristics ModelFigure 4.6

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137Chapter 4 Job Analysis and Job Design

3. Task significance. The degree to which the job has a substantial impact on the lives or work of other people in one’s organization or elsewhere.

4. Autonomy. The degree to which the job provides a person the freedom and discre- tion to schedule his or her work and determine how to do it.

5. Feedback. The degree to which a person is given direct and clear information about the effectiveness of his or her job performance.

Other techniques to enrich jobs include job enlargement and job rotation. Job enlargement is the process of adding a greater variety of tasks to a job. Maytag, IBM, and AT&T are some of the firms that have used job enlargement to motivate their employees.18 Job rotation is a process whereby employees rotate in and out of different jobs.

Job enlargement and job rotation help prevent the boredom people experience where they perform narrow, specialized jobs. Rotating people in and out of different jobs can also help employees who do repetitive physical tasks avoid health problems and on-the-job injuries. For instance, after a number of hours on his feet, a drugstore cashier might move to the store’s photo department and process photos while sitting down.

Empowerment The techniques we have described are ones in which managers change the jobs of employees. A less-structured method is to allow employees to initiate their own job changes through the concept of empowerment. Employee empowerment encourages workers to become innovators and managers of their own work, and it involves them in their jobs in ways that give them more control and autonomous decision-making capabilities.

AT&T and Dick’s Sporting Goods are companies that have decentralized their work units and allowed decisions to be made by employees who are directly involved in the pro- duction of the products or services being delivered.19 The objective is to develop jobs and basic work units that are adaptable enough to thrive in a world of high-velocity change. The cosmetics maker Avon empowered its minority managers to improve the sales and service the company offers in inner-city markets. Grounded in the belief that minority manag- ers better understand the culture of inner-city residents, Avon turned unprofitable mar- kets into highly profitable ones. See Highlights in HRM 3 for more examples of employee empowerment.

Employee empowerment succeeds when the culture of an organization is open and receptive to change.20 Workers with innovative ideas need to be encouraged to explore new paths and take reasonable risks at reasonable costs. An empowered environment is created when curiosity is as highly regarded as technical expertise. Employees also must have access to a wide range of information within their firms and be held accountable for the results of their empowerment.

Employee empowerment won’t work without the support of an organization’s senior managers though. They set the tone of the organization. If they are honest, confident, trusting, receptive to new ideas, and respect employees as partners in the organization’s success, it’s more likely the firm will be able to empower its employees.

Closely related to employee empowerment is workplace democracy. Workplace democracy is the utilization of democratic principles such as voting and debate to give employees more say on how an organization is run and the direction it will take. The

job enlargement The process of adding a greater variety of tasks to a job.

job rotation The process whereby employees rotate in and out of different jobs.

employee empowerment Giving employees the power to initiate change, thereby encouraging them to take charge of what they do.

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grocer Whole Foods allows its employees to vote on issues both large and small. W.L. Gore & Associates, which makes Gore-Tex fabric, surgical, aerospace, and other products, asked its employees to help choose its current CEO. But like empowerment initiatives, with workplace democracy, managers have to be willing to give up some decision-making authority.21

Another type of empowerment technique that occurs at the individual level is job crafting. According to Amy Wrzesniewski at the Yale School of Management, job crafting is a naturally occurring phenomenon whereby employees mold their tasks to better fit their individual strengths, passions, and motives.22 Dorothy Galvez, an administrative assistant at the W. P. Carey School of Business at Arizona State Uni- versity is an example. Galvez found a way to make her job more meaningful by doing a lot more than traditional administrative work. She expanded her role by planning college activities and events, preparing special college reports, and serving as the dean’s representative at college and business events.

job crafting A naturally occurring phenomenon whereby employees mold their tasks to fit their individ- ual strengths, passions, and motives better.

Empowered Employees Achieve Results

By empowering their employees, Home Depot, Walmart, Cigna HealthCare, Costco, AutoZone, Disney, and Applebee’s have reduced costs, successfully modified products, and cre- ated new ones.

�� Kraft Foods employees at the company’s Sussex, Wisconsin, food plant redesigned their work, which increased the plant’s productivity, reduced its over- head, and cut assembly times.

�� Employees at Ford Motor Company’s assembly plant in Wayne, Michigan, saved $115,000 a year on protective

gloves used to handle sheet metal and glass. The group figured out how to have the gloves washed so they could be used more than once.

�� Home Depot’s Special Project Support Teams (SPST) improved the company’s business and information services. Employees with a wide range of backgrounds and skills collaborated to address a variety of strategic and tactical business needs.

�� The American Airlines “Rainbow Team” of employees brought in $192 million in annual revenue by target- ing the gay community.

Highlights in HRM3

To help spark innova- tion at Microsoft, the company created “Microsoft Garage” by renovating an older building. The building has whiteboards, 60 touchscreen monitors, comfortable chairs, 3D printers, laser cutters, and other gadgets. The goal is to encourage employees as well as people from the com- munity to hang out and to tinker at Micro- soft on their own time like they would their own garages at home.

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139Chapter 4 Job Analysis and Job Design

One study found that employees who are proactive like Galvez are more likely to job craft.23 But whether their managers want them to or not, employees of all types often reshape their jobs, Wrzesniewski says. And in many cases, job crafting results in significantly more employee engagement, which we briefly discussed in Chapter 1. Employee engagement is a situation in which workers are enthusiastic and immersed in their work to the degree that it improves the performance of their companies.

4.4 Employee Teams and Flexible Work Schedules

Do you enjoy working teams? If not, you might want to work on learning how to enjoy the arrangement. Increasingly, teams are how work gets done in organizations. There’s a sense among firms that the traditional ways of organizing are too rigid for today’s dynamic marketplace and that they don’t meet employees’ needs. In addition, companies are seeing advantages of tinkering with and redesigning work schedules to make them more flexible, and adding flexibility to where employees can work.

4.4a Employee Teams An employee team can be defined as a group of employees working together toward a common purpose, in which members have complementary skills, members’ work is mutually dependent, and the group has discretion over tasks performed. Organizations of all types—Federal Express, Trek Bikes, Calvin Klein, and Lucasfilm, the producer of the Star Wars and Indiana Jones films—are using employee teams to solve unique and complex problems and improve the collaboration among workers and their morale.24 Even the U.S. Army has turned to teams. Early on in the Iraq war, the army’s hierar- chical structure hindered its operations. General Stanley McChrystal’s solution was to learn something from the insurgents the army was fighting: decentralize authority to self-organizing teams.25

Part of the reason why employee teams exist is that employees, not managers, are closest to the work that’s actually being done in an organization. Thus, they are often in a better position to see how the work can be done better. Teamwork also can result in synergy. Synergy occurs when the interaction and outcome of team members is greater than the sum of their individual efforts.26 Synergy in teams does not automatically hap- pen, though. Figure 4.7 lists the behaviors that can help a team develop synergy.

Teams can operate in a variety of structures, each with different strategic purposes or functional activities. Figure 4.8 describes common team forms. They include cross-functional teams, project teams, self-directed teams, task-force teams, process-improvement teams, and virtual teams. Self-directed teams are often championed as being the highest form of teams. Also called autonomous work groups, self-managed teams, or high-performance teams, they consist of groups of employees who are accountable for an entire work pro- cess or segment that delivers a product or service to an internal or external customer. For example, in a manufacturing environment, a team might be responsible for a whole product such as a computer screen or a clearly defined segment of the production process, such as the building of an engine for a passenger car. Similarly, in a service environment, a team is usually responsible for an entire group of products and services. Or a team might be responsible for serving clients in one particular geographical area.

employee engagement A situation in which workers are enthusiastic and immersed in their work to the degree that it improves the performance of their companies.

employee team A group of employees working together toward a common purpose, in which members have complementary skills, members’ work is mutu- ally dependent, and the group has discretion over tasks performed.

Describe the types of teams you have worked in. Were some more successful than others? If so, why? How might what you have learned from being a team member be applied in an HR context?

LO 4

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140 Part 2 Meeting Human Resources Requirements

Typical team functions include setting work schedules, dealing directly with exter- nal customers, training team members, setting performance targets, budgeting, inven- tory management, and purchasing equipment or services. To operate efficiently, team members generally acquire multiple skills so that they are able to perform a variety of tasks as part of the team. Job rotation is also often used in work teams so members can trade off doing different tasks as needed.

Closely associated with teams is dejobbing. Dejobbing refers to a process of struc- turing organizations not around jobs but around projects that are constantly changing and have different team members. In a dejobbed organization, a skills matrix like the one shown in Figure 4.4 is likely to be used instead of a traditional job description that defines specific work. Hackman and Oldham predict that this type of organizational structure will be the norm in the future.27

dejobbing Refers to a process of structuring organiza- tions not around jobs but around projects that are constantly changing.

Team synergy is heightened when team members engage in the following behaviors. • Support. The team exhibits an atmosphere of inclusion. All team members speak up and feel free to offer constructive

comments. • Listening and Clarification. Members honestly listen to others and seek clarification on discussion points. The team

members summarize discussions held. • Disagreement. Disagreements are seen as natural and are expected. The members’ comments are nonjudgmental and

focus on factual issues rather than personality differences. • Consensus. The team’s members reach agreements through consensus. Proposals that are acceptable to all team

members are adopted, even if they are not the first choice of some of the individual members. Common ground among ideas is sought.

• Acceptance. The team members value one another as individuals. They recognize that each person brings a valuable mix of skills and abilities to the team.

• Quality. Each team member is committed to excellence. There is emphasis on continuous improvement and attention to detail.

Synergistic Team CharacteristicsFigure 4.7

Cross-Functional Team. A group staffed with a mix of employees from an organization’s marketing, production, engi- neering departments, and so forth and is formed to accomplish a specific objective. Project Team. A group formed specifically to design a new product or service. The members are assigned by their managers on the basis of their ability to contribute to the team’s success. The group normally disbands after the task is completed. Self-Directed Team. Groups of highly trained individuals performing a set of interdependent job tasks within a natural work unit. The team members rely on consensus-type decision-making to perform their work duties, solve problems, or deal with internal or external customers. Task Force Team. A group formed by management to immediately resolve a major problem. Process-Improvement Team. A group made up of experienced people from different departments or functions. The group is charged with improving quality, decreasing waste, or enhancing the productivity of processes that affect all departments or functions. The members are normally appointed by management. Virtual Team. A team that utilizes telecommunications technology to link team members who are geographically dispersed—often worldwide across cultures and across time zones.

Forms of Employee TeamsFigure 4.8

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141Chapter 4 Job Analysis and Job Design

To be sure, it is hard to imagine a world without jobs. Nonetheless, dejobbed organizations do exist. There are no bosses at W.L. Gore or traditional jobs per se. All employees are hired as “associates” and assigned to “sponsors” in the functional groups in which they work. The structure has helped create a culture of innovation within the company that has repeatedly landed it on Fortune magazine’s annual list of the U.S. “100 Best Companies to Work For.” Zappos, the online shoe seller, is an extreme example of dejobbing. A few years ago the company did away with all of its hierarchical structures. There are no jobs, no bosses, or sponsors at the company. Case Study 1 at the end of the chapter explains what Zappos did and how well it’s working.

Virtual Teams Virtual teams utilize telecommunications technology to link team members who are geographically dispersed—often worldwide across cultures and across time zones. The technology virtual teams use includes wikis, document sharing platforms such as Google Docs, online chat and instant messaging, web- and videoconferencing, and elec- tronic calendar systems, to name a few. People and firms working virtually in hundreds of countries worldwide helped design the U.S. Defense Department’s latest and greatest fighter jet, the F-35. Microsoft used a virtual team of top scientists around the world to improve the functionality of the Windows 10 Cortana product.28

Virtual teams do not have to work for just one organization, though. Many virtual teams consist of members from different organizations. For example, to improve work- flows in supply chains, it is not uncommon for manufacturers to have their employees team up with the employees of their suppliers and the employees of the retailers who buy the manufacturers’ products.

Although virtual teams have many benefits, they are not without their problems.29 They include language and cultural barriers, unclear objectives, time conflicts due to diverse geo- graphical locations, and members’ ability to work in a collaborative setting.30 NASA encoun- tered an extreme problem of this type when it lost a $125 million space probe as a result of its team members around the world using different units of measurement—the English system versus the metric system.

Navi Radjou, an expert in network innovations, notes, “One problem with dis- tributing work is that you lose the intimacy of talking things through at the local café.” To help virtual teams “gel,” more companies are beginning to use online collaborative meeting spaces that allow the members of a team to share pho- tos of themselves, their bios, links to the social media sites they fre- quent, and engage with one another via private chat. Go-To-Meeting and iMeet are exam- ples of online meet- ing spaces designed to create more intimacy among team members. At Nokia, team mem- bers are encouraged to

virtual teams Teams that utilize telecommunications technology to link team members who are geo- graphically dispersed— often worldwide across cultures and across time zones.

Online services such as Skype and iMeet allow

virtual workers to get better acquainted

with one another and have face-to-face con-

versations across any distance.

ve ct

or fu

si on

ar t/

Sh ut

te rs

to ck

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142 Part 2 Meeting Human Resources Requirements

network online and to share their pictures and personal biographies. Gathering the members of a team together, especially when the team is first launched and at intervals, can also help a team build trust among the members and “gel.”

Facilitating Teams Regardless of the structure or purpose of the team, the following characteristics have been identified with successful teams:

• A commitment to shared goals and objectives • Motivated and energetic team members

Specialization and employees solely dedicated to well- defined tasks may work well in large corporations, but small businesses can’t really afford that luxury. In an entre- preneurial business setting, employees typically wear mul- tiple hats. They need to understand what their coworkers do and how they do it so that the business can always continue to function, regardless of the circumstances. That’s why a team environment—where a small number of employees are cross-trained to perform a variety of roles—is an ideal strategy for the small-business owner.

In some ways, establishing a team environment within a small business may be easier because it’s so obvious how individuals are contributing to the whole—a key component of success in team building. Adds human resources and management development consultant Susan M. Heathfield, “Fostering teamwork is creating a work culture that values collaboration. In a teamwork environment, people understand and believe that think- ing, planning, decisions, and actions are better when done cooperatively.” To nurture this kind of environment, Heathfield recommends holding regular discussions about collaboration and its purpose, recognizing and rewarding teamwork both publicly and privately, and finding ways to build some fun into team activities in addition to doing the hard work.

Of course, a successful team starts with an effective leader. Some teams have a single leader while others are structured so that members take turns leading. Business strategist Rick Johnson says that team managers need to know how to communicate expectations clearly, how to avoid micromanaging, and how to build confidence in team members, which empowers them to perform well. This means team leaders will need to learn how to act as facilitators. “Coaching is a skill set that should be required training for all managers to improve team management,” adds Johnson.

Small Business Application

Craig Wagganer, a speaker and trainer who special- izes in team building, has developed an easy-to-remember method for effectively leading teams, which he calls the CARE method. He suggests that team leaders:

• Consider each team member’s strengths, goals, and relationship to the team. A good leader will not only capitalize on what the team member has to offer, the leader will help the member realize his or her potential.

• Appreciate each team member’s gifts and contribu- tions, and express that appreciation often.

• Respect differences among team members so that conflicts can be resolved fairly and impersonally and mistakes can be handled with grace, not blame.

• Encourage team members, individually and as a group, in their efforts.

Wagganer goes on to describe the ripple effect of a healthy team environment under expert leadership: “When the heart of each team member is encouraged first by the team leader, then the team will be poised to cheer on each other. It starts at the top. And when a person feels encouraged, their outlook changes and becomes one of enthusiasm for the cause and excitement for the team making a positive difference and being successful in its endeavors.” That kind of optimism goes a long way in the small business environment.

Sources: Stephane Kasriel “Three Team-Building Secrets of Suc- cessful Small-Business Owners,” Entreprenuer (May 2, 2016), https://; “Building a High-Performance Sales Team,” Atlanta Journal-Constitution (January 30, 2014),; Chuck Stinnett, Evansville Courier Press (February 26, 2011), http://www.cou-; Rick Johnson, “The Six Principles of Effective Team Man- agement,”; Susan M. Heathfield, “How to Build a Teamwork Culture,”; Craig Wagganer, “Team Building Starts with Team Member Building,” www

Building Teams in the Small Business Environment

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143Chapter 4 Job Analysis and Job Design

• Open and honest communication • Shared leadership • Clear role assignments • A climate of cooperation, collaboration, trust, and accountability • The recognition of conflict and its positive resolution

Unfortunately, not all teams succeed or operate at their full potential. Richard Hackman (who helped develop the job characteristics model discussed earlier in the chapter) once said, “I have no question that when you have a team, the possibility exists that it will gener- ate magic, producing something extraordinary … But don’t count on it.”31 Power struggles, uncertainty about the roles members should play, a lack of resources, conflicts of inter- est, and personality differences are common team problems. Another difficulty with work teams is that they alter the traditional manager–employee relationship. Managers sometimes feel threatened by the growing power of the team and the reduced power of management.

Organizations can help prevent some of the problems a team experiences. First the firm should determine when and when not a team is needed. It’s not unusual for teams to be assembled for tasks that could be better done by individuals working alone or working separately and collaborating only occasionally with one another. To determine whether a team is appropriate, researcher Jeffrey Polzer suggests firms do a process analysis to evaluate the work by looking at its complexity and the interdependence of the tasks that need to be done. Complex tasks include projects that are large, uncertain, and for which there are no standard procedures for completing. Interdependent tasks require people to rely closely on one another to execute. Teams are ideal for projects that are both highly complex and require a high degree of interdependence.32

Once it’s been determined a team is a needed, a company can help it succeed by designing the compensation so that the team’s members individually and jointly work for its achievements and have the members undergo team training. Complete training for the team would cover the importance of skills in (1) team leadership, (2) mission/ goal setting, (3) how to conduct meetings, (4) team decision-making, (5) conflict resolution, (6) effective communication, and (7) diversity awareness.33 In addition, research shows that teams are more effective when they initially establish  “ground rules” for how they should operate and their members should behave. HRM Experi- ence, at the end of the chapter, presents an exercise to set team ground rules.

4.4b Flexible Work Schedules Employers sometimes depart from the traditional workday or workweek to improve their productivity and the morale of their employees by giving them more control over the hours they work.34 Fifty-five percent of companies recently survey by the Society for Human Resources offer their employees flexible working options.35 As we explained earlier in the book, flexible work schedules can be used to attract and retain employees when a company is facing tough times or is unable to offer the benefits or pay a competitor would. In one survey, 42 percent of employers who were unable to provide raises to their employees said they were willing to offer them flexible hours instead.36 The more common flexible work schedules are the compressed workweek, flextime, job sharing, and telecommuting.

Flextime Flextime, or flexible working hours, give employees the option of choosing daily starting and quitting times, provided they work a certain number of hours per day or week. With flextime, employees are given considerable latitude in scheduling their work. Often there

flextime Flexible working hours that give employees the option of choosing daily starting and quitting times, provided that they work a set number of hours per day or week.

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144 Part 2 Meeting Human Resources Requirements

is a “core period” during the morning and afternoon when all employees are required to be on the job.

Flextime provides both employees and employers with several advantages. By allow- ing employees greater flexibility in work scheduling, employers can reduce some of the traditional causes of tardiness and absenteeism.37 Employees can adjust their work to accommodate their particular lifestyles and, in doing so, gain greater job satisfaction. Employees can also schedule their working hours for the time of day when they are most productive. In addition, variations in arrival and departure times can help reduce traffic congestion at the peak commuting hours, so employees spend less time on the road.

Younger workers in particular want flexibility on the job. A lack of it was making it difficult for PricewaterhouseCoopers, a Big-4 accounting firm, to retain millennials, especially during the busy tax auditing season. So, the company implemented a pro- gram that encourages employees to customize their schedules to avoid burnout. Kathie Lingle, national director of work/life at KPMG, a competing Big-4 accounting firm, says flextime is the number-one driver of retention for her firm.38

Besides being a good employee recruiting and retention tool, flextime allows orga- nizations that want to improve their service to customers or clients to extend their operating hours. CenturyLink, a telecommunications company, uses flextime to keep its business offices open for customers who cannot get there during the day. Research demonstrates that flextime can have a positive impact on the performance measures of reliability, quality, and quantity of the employee’s work.

There are some disadvantages to flextime. First, it is not suited to some jobs, such as those that require specific workstations to be staffed at all times. Second, it can create problems for managers trying to supervise and schedule meetings with employees who aren’t onsite when they are. To keep in closer touch with employees when they are work- ing offsite, some firms utilize work-oriented social media tools such as Slack, Yammer, and Workplace by Facebook.

Compressed Workweek A compressed workweek is one in which the number of days in the workweek is short- ened by lengthening the number of hours worked per day. So, for example, employees might work 10 hours a day for 4 days a week. Or, they might work 80 hours over 9 days and take 1 day off every other week.

Compressed workweeks have been shown to reduce absenteeism and make recruiting and retaining employees easier.39 Many workers like the arrangement because it lengthens their weekends and decreases the time and money they spend getting ready for work and commuting back and forth to it. The major disadvantage of the compressed workweek involves federal laws regarding overtime. The Fair Labor Standards Act has stringent rules requiring the payment of overtime to nonsupervisory employees who work more than 40 hours a week. (See Chapter 9.) Another disadvantage of the compressed workweek is that it can increase the stress employees experience because long workdays can be exhausting.

Job Sharing An arrangement whereby two part-time employees do a job normally held by one full-time employee is called job sharing. People who have families or want to work part time, and older workers who want to phase into retirement by shortening their workweeks, often find job sharing desirable.40 After her doctor warned that the stress of her 100-mile round- trip daily commute could shorten her life, Mary Kaye Stuart decided to pursue a job- sharing situation. “I had been wanting more balance in my life, and this was the answer,”

job sharing An arrangement whereby two part-time employees do a job nor- mally held by one full- time employee.

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145Chapter 4 Job Analysis and Job Design

says Stuart, 63, an account executive in Austin, Texas.41 Job sharing can also reduce layoffs in hard economic times. Companies with job sharing programs include Sprint, American Express, and Kaiser Permanente, one of the nation’s largest health organizations.

Telecommuting Globalization and technology are drastically changing how we do our jobs and the offices we do them in. Telecommuting is the use of smartphones, tablets, personal computers, and other communications technology to do work traditionally done in the workplace.42 Telecommuting, which is also referred to as working from home or remote working, is increasing. It is fairly prevalent in states like California, where commute times are long.

A survey by the Hudson Group, a global consulting firm, found that most workers believe that telecommuting at least some of the time is the ideal work situation. Telecommut- ing may also reduce stress. According to a study conducted by the University of Wisconsin– Milwaukee, employees who telecommute are more satisfied with their jobs because they experience fewer interruptions and less office politics.43 However, telecommuters often end up working a few more hours per week than people who don’t telecommute.44

How does telecommuting help firms? The better work-life balance employees expe- rience can help firms attract and retain valuable employees who otherwise might quit. Telecommuting can also dramatically lower a firm’s real estate costs by reducing the amount of office space it needs and restructuring it. At a major publishing company in Boston, employees telecommute on a regular basis. No one is assigned a cube or office. Instead, open arrangement desks and other spaces allow employees to sit where they want when they come to the office. Community areas with couches, small meeting rooms, and a food court are places employees can congregate.

Not all employees have the self-discipline to work alone at home, however. In addition, collaboration and communication within an organization can suffer because employees are not interacting face to face with one another on a regular basis. For reasons such as these, some companies require employees to work at least a couple of days of week in the office.45 Other companies, including large ones such as Yahoo, IBM, and Best Buy, have curtailed the practice altogether. Case Study 2 at the end of this chapter explains why. Figure 4.9 presents suggestions for establishing a successful telecommuting program.

telecommuting The use of personal computers, networks, and other communica- tions technology to do work in the home that is traditionally done in the workplace.

• Determine the Jobs Suitable for Telecommuting. Jobs that require face-to-face contact with customers or the use of spe- cialized equipment, or require a physical presence, such as security guards aren’t candidates. Also, determine eligibility criteria to assess who is or who is not eligible to telecommute based on their types of jobs or collective bargaining agreements, for example.

• Establish formalized telecommuting guidelines. The guidelines could cover hours of availability, office reporting periods, performance expectations, and weekly progress reports or email updates.

• Identify the equipment. The equipment needed for telecommuting should be specified. What equipment is the firm provid- ing? What equipment is the teleworker providing? Who provides technical assistance in the event of equipment disruption?

• Keep telecommuters informed. Physical separation can make telecommuters feel isolated and invisible. Department and staff updates, including telecommuters on project teams, requiring their attendance at meetings, and “chat room” dis- cussions can keep telecommuters “in the loop.”

• Recognize when telecommuting is not working. State in telecommuting policies that the arrangement can be terminated when it no longer serves the company’s needs or if the employee’s performance declines.

Keys for Successful TelecommutingFigure 4.9

Sources: Barbara Hemphill, “Telecommuting Productivity,” Occupational Health and Safety 73, no. 3 (March 2004): 16; U.S. Office of Personnel Man- agement, “Guide to Telework in the Federal Government” (April 2011), I.D. No.: ES/WLW-04-11,

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146 Part 2 Meeting Human Resources Requirements

A job analysis is the systematic process of col- lecting information about all of the parameters of a job—its basic responsibilities, the behaviors, skills, and the physical and mental requirements of the peo- ple who do it. A job analysis should also outline the tools needed to do the job, the environment and times at which it needs to done, with whom it needs to be done, and the outcome or performance level it should produce. The information a job analysis collects serves many HRM functions, including a firm’s workflow and design of jobs, its legal compliance efforts, and the recruitment, selection, training and development, performance appraisal, and compensation of employ- ees. To comply with the law, human resources deci- sions must be based on criteria objectively collected by analyzing the requirements of each job.

Job analysis information can be gathered in several ways—via interviews, questionnaires, observa- tions, and diaries. Other more quantitative approaches include the U.S. Department of Labor’s job analysis system, the Position Analysis Questionnaire system, the critical incident method, a task inventory analysis, and a competency-based analysis. The format of job descriptions varies widely, often reflecting the needs of the organization and the expertise of the writer. At a minimum, job descriptions should contain a job title, a job identification section, the purpose of the job, the tasks, duties, and responsibilities of the job, and the job’s specifications (KSAOs). Job descriptions should be written in clear and specific terms with consider- ation given to their legal implications.

LO 1

LO 2


Job design, which is an outgrowth of job analy- sis, focuses on restructuring jobs in order to capture the talents of employees, improve their work satisfac- tion, and an organization’s performance. Top-down job design techniques such as industrial engineering and ergonomics focus more on tasks; bottom-down techniques such as enrichment and empowerment focus more on workers and how to motivate them to do their jobs better. In the job characteristics model, five job factors affect employees’ satisfaction: job skill variety, task identity, task significance, autonomy, and feedback. All factors should be built into jobs, since each factor affects the psychological state of employees.

Increasingly, firms are using employee teams to solve unique and complex problems, enhance the collaboration among workers, improve their morale and performance, and make the most of a firm’s scarce resources. An employee team is a group of individuals working together toward a common purpose, in which members have complementary skills, members’ work is mutually dependent, and the group has discretion over the tasks it performs. The types of teams commonly used are cross-functional teams, project teams, self- directed teams, task-force teams, process-improvement teams, and virtual teams. Employers sometimes depart from the traditional workday or workweek to improve their productivity and the morale of their employees by giving them more control over the hours they work. Compressed workweeks, flextime, job sharing, and telecommuting allow employees to adjust their work periods to accommodate their particular lifestyles.

LO 3

LO 4

critical incident method


employee empowerment

employee engagement

employee team



functional job analysis (FJA)

industrial engineering


job analysis

job characteristics model

job crafting

job description

job design

job enlargement

job enrichment

job rotation

job sharing

job specification

position analysis questionnaire (PAQ)

task inventory analysis


virtual teams

Key Terms

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HRM Experience

Establishing Ground Rules for a Team’s Success 6. Prepare thoroughly before meetings.

7. Make team members feel at ease during discussions.

8. Encourage members to ask questions when they do not clearly understand tasks or procedures.

9. Outline the pros and cons of decisions faced by the team.

10. Follow through on task assignments.

11. Help other members when they need assistance.

12. Treat all team members as equals.

13. Paraphrase or restate what someone else says in order to check its meaning.

14. Openly voice opinions and share ideas.

15. Be flexible in arranging meeting schedules.

16. Compliment others for things they have said or done.

17. Be willing to meet whenever it is necessary to discuss a problem.

18. Bring conflicts to the attention of the team and deal with them directly.

19. Express enthusiasm about what the team is doing.

20. Encourage budgeting of the team’s time.

21. At the end of a meeting, have members restate their own responsibilities to check for agreement.

22. Be serious about the team’s work.

23. Arrive on time for regularly scheduled meetings.

24. Be willing to listen to other team members’ ideas.

25. Get the team’s approval on important matters before proceeding.

Ground rules—or team norms—are agreed-on formal rules that guide the behavior of a team’s members, including how they want to be treated and agree to treat others. Ground rules help teams maintain order, promote positive behavior, and can be used to correct undesirable actions.

Assignment 1. Divide your class into teams.

2. Using the list below, have each team member silently select 10 behaviors they believe are most critical for a team’s success. The first list of 10 behaviors (each per- son’s A list) should consist of those most important for group conduct. The second list of 10 behaviors (each person’s B list) should consist of those that are desirable.

3. Next, have the members of your team select a final list of 10 behaviors from both lists. These will become your team’s ground rules. The items can be modified or combined to meet your team’s specific needs.

Behaviors List While working in our team, individuals should:

1. Do their fair share of the work.

2. Check to ensure that everyone clearly understands what is to be done.

3. Encourage planning, including short-range agendas as well as long-range goals.

4. Encourage open and candid opinions about issues.

5. Listen willingly and carefully to other people’s ideas, even if those people have a different viewpoint.

Assume you are the general manager of a service department. How might formally written job requirements help you manage your work unit?

Discuss the various ways in which a job analy- sis can be completed. Compare and contrast these methods, noting the pros or cons of each.

Why is employee motivation such an important aspect of designing today’s jobs? The job char- acteristics model has five components—skill

LO 1

LO 2

LO 3

variety, task identity, task significance, auton- omy, and feedback. Provide an example of how each component can be used to improve an organization and the job of an employee. (Suggestion: Consider your present or a recent job to answer this question.)

Figure 4.8 shows the different forms of employee teams. Provide an example of where each type of team can be used. How do teams create synergy?

LO 4

Discussion Questions


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148 Part 2 Meeting Human Resources Requirements

CASE STUDY The Zappos Experiment1

There are many different ways in which firms can organize themselves: There are flat organizations and there are tall organizations. There are organizations structured by products, divisions, and geography. But one thing nearly all structures have in common is a chain of command, or hierarchy.

Do companies have to set up that way? Tony Hsieh doesn’t think so. Hsieh is the CEO of Zappos, the online seller of shoes. Hsieh is a guy who thinks outside of the box. When he started Zappos in 1999, no one was selling shoes online. It seemed like a crazy idea—you can’t try on shoes online to see if they fit. But Zappos made the business work by offering good product, free shipping and returns, and great cus- tomer service.

Hsieh believes it’s not just the Zappos business model that has led to its success. Employees and their satisfaction are, too. To keep workers happy and pas- sionate about their jobs, the company offers top-of- the-line and unusual perks: Good pay, free health care, and employees can bring their dogs to work if they are well socialized. Quirky celebrations and parties are the norm at the company, which routinely makes Fortune’s “Best Places to Work” List.

Happy Zapponians and a booming business weren’t enough for Hsieh though. He had noticed that most companies on the Fortune 500 list in 1955 were no longer on it today. In fact, many of them no longer existed.

Hisieh figured it was because as firms grow, they become slow and lose touch with their customers. Executives at the top make the decisions, but they don’t really understand what customers want, how products can be improved, or have a lot ideas for transforming the business. Lower-level employees— the people closest to the work— often do, but their suggestions rarely make it up the food chain. He didn’t want that to happen at Zappos.

So what did Hsieh do? In 2014, he instituted a new type of self-management system. There are no managers at Zappos anymore. Everyone is an equal, and no one can tell anyone else what to do.

Employees at Zappos don’t have job titles. They have “roles” and their coworkers are their “partners.” They work together in “circles” (or teams) of their choosing. The members of a circle meet regularly to

talk about improvements and ideas. A “chit chat” is held at the beginning of each meeting. Everyone is required to speak, which ensures even the quietest employee is heard. A software system then tracks the circle’s goals and who agreed to do what and when. “Really what we’re trying to do is turn each employee into a mini entrepreneur who has the abil- ity to sense ideas and do something about it,” says John Bunch, who oversees the Zappos self-governing system.

There are also no performance appraisals at Zap- pos. If you’re doing a poor job, your coworkers will let you know. Each employee gets 100 “people points” to distribute to the members in their circles. If an employee doesn’t get enough points, the person may get booted from a circle—like contestants get voted off of the island in Survivor. And if the person has no circle to work in, he or she is out of job. Pay raises are based on new skills a person develops, a system called “badging.” For example, a person might earn a badge for Java coding or merchandising.

If ditching the old corporate structure for something new sounds simple, it turned out to be anything but that for Zappos. First, there were all kinds of rules and meet- ings required to set up the system: “Tactical” meetings focused on the workflows, and “governance” meetings focused on hashing out processes and eliminating road- blocks. Second, employees had trouble understanding the new system and weren’t sure what they were sup- posed to be doing. Former managers felt diminished. They no longer had any power or status, and they never would. So much for having climbed the corporate lad- der. Writer/editor Roger Hodge referred to the new Zap- pos organizational structure as “a radical experiment … to end the office workplace as we know it.”

Hsieh knew the transition wouldn’t be easy, so he offered employees who didn’t like the new system a buyout, which amounted to about 5 months’ pay. Eighteen percent of the workforce, or 1,600 employ- ees, took it. Another 15 percent or so quit later. Morale fell, and Zappos dropped off of Fortune’s “Best Companies to Work for List” for the first time in its history.

Does Hshieh have any regrets about implement- ing such a radical change at an already successful company? No, although he admits he was surprised

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149Chapter 4 Job Analysis and Job Design

how hard it was for people to leave their bureaucratic baggage behind. “In retrospect, I would have probably ripped off the Band-Aid sooner,” he says.

Employees say Zappos is running more smoothly now and that things improved after their coworkers who didn’t like the system left. The company also implemented a program to better screen and prepare new employees to manage themselves. And reportedly the firm’s profit margins are holding up.

Derek Noel, an employee with Zappos, says the new system has let his ideas be heard and allowed him to take on a more substantive role in the company. “My worst day at Zappos is still better than my best day anywhere else,” he says. “I can’t imagine going back to traditional hierarchy anymore.”

CASE STUDY Are Firms Moving Away from Telecommuting?2

Telecommuting has been on the rise for years. Accord- ing to the Bureau of Labor Statistics, about a quarter of workers do all or some of their work at home. And about 40 percent of people who hold management, business, financial operations, and professional jobs do. Sixty-eight percent of workers say that they expect to work remotely in the future.

But not all firms are jumping on the telecommut- ing bandwagon. In fact, some firms are jumping off it. In 2013, Marissa Mayer, who at the time had just been named Yahoo’s new CEO, ended telecommuting at the struggling Internet-search company. Yahoo’s decision surprised people because telecommuting is prevalent in high-tech industries, particularly in Silicon Valley, where Yahoo is located. How could the firm hope to compete for employees in the area if it ended telecom- muting? One tech news outlet called it “the worst deci- sion Marissa Mayer has made in her tenure as Yahoo CEO.”

Yahoo had been struggling. It’s likely that Mayer thought some synergy was being lost by telecommut- ing because it left fewer Yahoo employees communi- cating face to face with one another. Mayer had also learned that many of Yahoo’s telecommuters weren’t logged onto Yahoo’s intranet when they were sup- posed to be and that the company’s offices were nearly empty on Fridays.

The memo Yahoo sent its employees announcing telecommuting would be discontinued read: It is critical that we are all present in our offices. Some of the best deci- sions and insights come from hallway and cafeteria discus- sions, meeting new people and impromptu team meetings.

Shortly after Yahoo ended telecommuting, Best Buy and Hewlett-Packard did the same. More recently, Honeywell and IBM ended the practice, citing the same reasons as Yahoo: Being in the office fosters teamwork and idea sharing. The move by IBM was particularly surprising because the company was an early champion of telecommuting. It published stud- ies on the practice and persuaded its clients that its benefits more than made up for the loss of in-person interaction. The company also developed software to facilitate communications with remote workers.

One thing notable about the companies was that they were all facing tough competitive challenges when they ended telecommuting. Some employees suspected their employers were just trying to coerce them to quit so they wouldn’t have to downsize them. However, there may be a less sinister reason: The CEOs who ended remote working may not think it’s necessarily a bad practice, but that a firm’s HR and other policies can’t be set in stone. In other words, firms have to tailor their HR strategies and the design of jobs to meet the conditions they are facing.

Discussion Questions 1. Is a self-managing organization a good idea?

Why or why not? 2. Could Zappos have done anything to make the

transition to the new system smoother? If so, what?

Sources: Zack Guzman, “Zappos CEO Tony Hsieh on Getting Rid of Managers: What I Wish I’d Done Differently,” CNBC (September 13, 2016),; Yuki Noguchi, “Zappos: A Workplace Where No One and Everyone Is the Boss,” NPR (July 21, 2015), http://; Jennifer Reingold, “How a Radical Shift Left Zappos Reeling,” Fortune (March 4, 2017),; Camille Sweeney and Josh Gosfied, “No Managers Required: How Zappos Ditched the Old Corporate Structure for Something New,” Fast Company (January 6, 2014),

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150 Part 2 Meeting Human Resources Requirements

Cassidy Solis, a workplace flexibility program specialist with the Society for Human Resource Man- agement, agrees. “It depends on the business’s cir- cumstances,” Solis says. “And telecommuting is not the only flex work arrangement that an employer can offer.”

Solis notes that shortly after ending telecom- muting, Yahoo began offering employees gener- ous amounts of time off and more parental leave. “The beauty of a flexible work arrangement is that it matches both the employees’ and the employer’s needs,” she says. And although the company won’t comment on it, Yahoo has begun allowing employees to work offsite again. Time and changing conditions will tell whether Best Buy, Hewlett-Packard, IBM, and Honeywell do the same.

Discussion Questions 1. How can a firm know when it’s a good idea to

implement telecommuting or not? 2. Can you think of any other pros and cons related to

telecommuting that aren’t mentioned in this case?

Sources: Erika Morphy and Noreen Seebacher, “IBM Reportedly Ends Remote Working as Layoff Rumors Grow,” CMS Wire (February 15, 2017),; Laura Shin, “Work from Home in 2017,” Forbes (January 31, 2017),; Dee DePass, “Honeywell Ends Telecommuting Option,” Star Tribune (October 21, 2016), http://; James Surowiecki, “Face Time,” The New Yorker (March 18, 2103),; Chris Isidore and Paul Stein- hauser, “Americans Say Telecommuting Works,” CNNMoney (March 14, 2013),; “Best Buy Copies Yahoo, Reigns in Tele- commuting,” USA Today (March 6, 2013),; John Challenger, “Yahoo’s Telecommuting Ban Shows Mayer Is Work- ing,” MarketWatch (March 4, 2013),

Notes and References

1. Anna M. Tinsely, “Jobs Are Left Behind as Texas Oil Fields Turn to Automation,” Fort Worth Star-Telegram (February 21, 2017): 1A.

2. Rehman Safdar, Ajmal Waheed, and Khattak Hamid Rafiq, “Impact of Job Analysis on Job Performance: Analysis of a Hypothesized Model,” Journal of Diversity Management 5, no. 2 (Summer 2010): 17–36.

3. Fredenick P. Morgeson, Kelly Delaney-Klinger, Melinda S. Mayfield, Philip Ferrara, and Michael A. Campion, “Self- Presentation Processes in Job Analysis: A Field Experiment Investigating Inflation in Abilities, Tasks, and Competencies,” Journal of Applied Psychology 89, no. 4 (August 2004): 674.

4. Interview with job analyst Carol Tucker, Mesa, Arizona, (May 10, 2006).

5. Angela R. Connell and Satris S. Culbertons, “Eye of the Beholder: Does What Is Important About a Job Depend on Who Is Asked?” Academy of Management Perspectives 24, no. 2 (May 2010): 83.

6. A detailed description of different job analysis techniques is beyond the scope of this text. For those interested in more comprehensive information or job analysis tools, see Michael T. Bannick, Edward L. Levine, and Frederick P. Morgeson, Job and Work Analysis: Methods, Research, and Applications for Human Resource Management, 2nd ed. (Thousand Oaks, CA: Sage, 2007).

7. V. S. Rama Rao, “Quantitative Job Analysis Techniques,” The Cite Man Network (March 4, 2011),

8. Piers Steel and John Kammeyer-Mueller, “Using a Meta- Analytic Perspective to Enhance Job Component Validation,” Personnel Psychology 62, no. 3 (2009): 533.

9. Eric Klas, Alexandros Papalexandris, George Ioannou, and Gregory Prastacos, “From Task-Based to Competency- Based,” Personnel Review 39, no. 3 (2010): 325–346, DOI: 10.1108/0048348101103052.

10. Gensheng Liu, Rachna Shah, and Roger G. Schroeder, “Link- ing Work Design to Mass Customization: A Socio-technical Systems Perspective,” Decision Sciences 37, no. 4 (November 2006): 519; Nicolai J. Foss, Dana B. Minbaeva, Torben Ped- ersen, and Mia Reinholt, “Encouraging Knowledge Shar- ing among Employees: How Job Design Matters,” Human Resource Management 48, no. 5 (2009): 871.

11. Jay Heizer and Barry Render, Operations Management, 11th ed. (Upper Saddle River, NJ, Pearson: 2013), 396.

12. Ibid. 13. Christina Farr, “How Fitbit Became the Next Big Thing in

Corporate Wellness,” Fast Company (April 18, 2016), http://

14. Pooja Garg and Renu Rastogi, “New Models of Job Design: Motivating Employees’ Performance,” The Journal of Manage- ment Development 25, no. 6 (2006): 572.

15. Narasimhaiah Gorla, Ravi Chinta, and Tam Wai Chu, “An Enhanced Business Process Re-engineering Model for Sup- ply Chain Management and a Case Study,” Journal of Infor- mation Technology Case and Application Research 9, no. 2 (2007): 5.

16. For the original article on the job characteristics model, see J. Richard Hackman and Greg R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organiza- tional Behavior and Human Performance 16, no. 2 (August 1976): 250–79.

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151Chapter 4 Job Analysis and Job Design

17. Jed DeVaro, Robert Li, and Dana Brookshire, “Analyzing the Job Characteristics Model: New Support from a Cross-Sec- tion of Establishments,” The International Journal of Human Resource Management 18, no. 6 (June 2007): 986.

18. O. C. Ferrell, Geoffrey Hirt, and Linda Ferrell, Introduction to Business (Burr Ridge, IL: McGraw-Hill, 2008), 309.

19. For Herzberg’s important article on job enrichment, see Fred- erick Herzberg, “One More Time: How Do You Motivate Employees?” Harvard Business Review 46, no. 2 (January– February 1968): 53–62.

20. To come 21. Rachel Emma Silverman, “Workplace Democracy Catches

On,” Wall Street Journal (March 28, 2016): B5. 22. To come 23. Judith Plomp, Maria Tims, Svetlana Khapova, Paul Jansen,

and Arnold Baker, “Proactive Personality and Well-Being: The Mediating Role of Job Crafting and Career Competen- cies,” Academy of Management Proceedings (January 2016), DOI: 10.5465/AMBPP.2016.11411abstract.

24. Feza Tabassum Azmi, “Job Descriptions to Job Fluid- ity: Treading the Dejobbing Path,” EBS Review 2, no. 23 (2007): 8.

25. “Team Spirit,” The Economist (March 19, 2016), http://www.

26. Brian Hindo, “The Empire Strikes at Silos,” Business Week (August 20, 2007): 63.

27. Leigh Thompson, “Improving the Creativity of Organiza- tional Work Groups,” Academy of Management Executive 17, no. 1 (February 2003): 96.

28. Matt Weinberger, “How the Forgetfulness of One of Micro- soft’s Top Scientists Inspired a Killer New Feature for Win- dows 10,” Business Insider (February 9, 2017), http://www

29. Laura A. Hambley, Thomas A. O’Neil, and Theresa J. B. Klien, “Virtual Team Leadership: The Effects of Leadership Style and Communication Medium on Team Interaction Styles and Outcomes,” Organizational Behavior and Human Deci- sion Processes 103, no. 1 (May 2007): 1.

30. Interview with Paulette Tichenor, Arizona State University, Tempe, Arizona, (January 18, 2007).

31. “Team Spirit,” The Economist (March 19, 2016), http://www

32. Jeffrey T. Holzer, Leading Teams (HBS 9-403-094) (Cam- bridge, MA:Harvard Business School), 1–23.

33. Jay F. Nunamaker Jr., Bruce A. Reinig, and Robert O. Briggs, “Principles for Effective Virtual Teamwork,” Communications of the ACM 52, no. 4 (2009): 113; Stephen B. Knouse, “Build- ing Task Cohesion to Bring Teams Together,” Quality Progress 40, no. 3 (March 2007): 49.

34. Michelle Conlin, “Smashing the Clock,” Businessweek (December 11, 2006): 60.

35. Mark Fadden, “Workplace Trends,” Fort Worth Star-Telegram (February 19, 2017): E1.

36. “Employers Willing to Negotiate Salary,” OfficePro 7, no. 1 (2011): 4.

37. Rita Zeidner, “Bending with the Times,” HR Magazine 53, no. 7 (July 2008): 10.

38. Mark Fadden, “Workplace Trends”, Fort Worth Star-Telegram (February 19, 2017): E1.

39. Lori L. Wadsworth and Rex L. Facer, “Work–Family Balance and Alternative Work Schedules,” Public Personnel Manage- ment 45, no. 4 (December 2016): 42; Kathy Gurchiek, “Good News for Moms Reconsidering Work,” HR Magazine 51, no. 7 (August 2006): 39.

40. “Have You Considered Job Sharing as a Retention Tool?” HR Focus 83, no. 9 (September 2006): 10.

41. Vivian Wagner, “Take This Job and Share It,” AARP (January 27, 2017),

42. 43. Wendell Joice, “Implementing Telework: The Technology

Issue,” Public Manager 36, no. 2 (Summer 2007): 64. 44. Megan Scudellari, “The Downsides of Telecommuting,” Bos-

ton Globe (February 10, 2017),

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Expanding the Talent Pool: Recruitment and Careers

Learning Outcomes After studying this chapter, you should be able to

Describe how a firm’s strategy affects its recruiting efforts, and outline the elements that are part of a strategic recruiting strategy.

Describe the methods firms use to recruit externally and internally.

List some of the ways firms can improve their recruiting and the metrics they use to do so.

LO 1

LO 2

LO 3

Explain how career management programs integrate the needs of individual employees and their organizations.

Explain why diverse recruitment and career development activities are important to companies.

LO 4

LO 5

H er

o Im

ag es

/G et

ty Im

ag es

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153Chapter 5 Expanding the Talent Pool: Recruitment and Careers

I n this chapter, we will discuss the many strategies and techniques organizations use both internally and externally to recruit the talent they need. The competition for top talent requires firms not only to look for talented pools of employees but also to figure

out what they want, determine how to develop relationships with them, and establish the firm as an employer of choice. In this chapter, we will also discuss the approaches organizations take toward helping employees manage their careers. This is important because, unlike physical assets, human assets (employees) can decide to leave the firm. Finally, at the end of the chapter, we devote special attention to the recruitment and career development of diverse employees.

5.1 Business Strategies and Their Link to  Strategic Recruiting

Suppose you’re an entrepreneur trying to capitalize on the next “big idea.” You have developed a strategic vision for your firm, analyzed its workflows, and determined the jobs you will need and how many of them. Now where do you begin to look for talent?

The decisions you make about talent—regardless of whether they pertain to recruit- ing, transferring, promoting, developing, or deploying people—need to be considered within the context of your business’s strategies and priorities. Consider the decision to outsource and offshore work: Most American clothing makers have outsourced or offshored work because labor costs are cheaper outside the United States. (Nearly all of the clothing purchased in the United States today is imported. Just check your clothing labels.) But that’s not the strategy Round House Workwear, based in Oklahoma, and All American Clothing, based in Ohio, have pursued. These companies have managed to carve out a niche by selling products with the “Made in America” label to appeal to people who see it as a sign of prestige or national pride. The point of this story is that recruiters always have to consider the firm’s strategy.

5.1a Elements of a Recruiting Strategy Figure 5.1 shows the various elements a firm has to consider as part of its recruitment strategy. The elements include the strength of the firm’s employment “brand,” the types of positions the company is recruiting for, where it needs them, when it needs them, and who is responsible for doing the recruiting and making the recruiting decision. We will talk about each of these factors next.

Note that at any given time a firm might need to use multiple recruiting strate- gies. Moreover, a strategy that works for one firm or one job might not work for another firm (or job). For example, an engineering firm might place a premium on finding highly qualified applicants, whereas an amusement park ramping up for a new season might place a premium on hiring quickly. Recruiting strategies and their effectiveness can change over time as well. As a result, firms need to continuously examine their recruiting efforts and refine them. So, for example, if the engineering firm landed a huge construction contract, being able to hire engineers quickly could become a priority.

This section describes some of the major fac- tors that can affect a firm’s recruiting. What other factors might play a role? Hint: Refer to Chapter 1.

LO 1

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154 Part 3 Developing Effectiveness in Human Resources

Brand: How Do We Attract Talent? Whomever and wherever a firm is recruiting, it wants to be the employer of choice to attract and hire top candidates before its competitors do. Branding can help organiza- tions do this. Branding refers to a company’s efforts to help existing and prospective workers understand why it is a desirable place to work as opposed to its competitors. A LinkedIn survey found that the hiring costs for firms with strong employer brands are two times lower than the hiring costs of firms with weaker employer brand rankings. Companies with strong employer brands also experienced less turnover.1

So how does a company “burnish” its employment brand? One way is to think of applicants as consumers and focus on what they want in terms of jobs and careers as opposed to what an organization has to “sell” them, says Diane Delich, with the Kansas City, Missouri-based recruiting company Executive Pursuits. Delich advises companies to listen to and reach out to applicants just like they do consumers. In fact, some firms make their customers their employers. A high percentage of the people the Container Store recruits are customers who like doing business with the storage-solution company. “Basically we have mini human resources departments in each of our stores. We chal- lenge each of our 4,000 employees to be recruiters and refer us to great people,” says the Container Store’s Director of Recruiting Karyn Maynard.2

Another way is by reaching out to people via social networks. Firms are creating pages on websites like LinkedIn, Facebook, and Google1 to promote their organiza- tions and careers they have to offer. The sites allow recruiters to strike up conversa- tions with potential applicants on those pages and give them a preview of what it is like to work for their firms. Writing blogs and articles for industry publications is another way.

branding A company’s efforts to help existing and prospective workers understand why it is a desirable place to work.



What sources are best for �nding talent?

Where do we need talent?

What positions and KSAOs are most important?

Why does someone want to work for us?

Who is responsible for the decision?

Is our need immediate or in the future?



Elements of a Recruitment StrategyFigure 5.1

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155Chapter 5 Expanding the Talent Pool: Recruitment and Careers

Using the Internet and social networks is an inexpensive way to brand and recruit. The strategy can be particularly effective for small companies that can’t afford to pay for a lot of job advertising to promote their firms and attract candidates. Luke’s Lobster, a chain that began as a small restaurant in New York City, uses all the social media tools it can—Facebook, LinkedIn, YouTube, Twitter, Tumblr, Pinterest, and Vimeo—to post photos and videos about the restaurant and its employees and make announcements about specials, contests, and job openings. This has made it easy to recruit great employees, each of whom are featured in colorful profiles on the com- pany’s website. We will talk more about social networks as a recruiting tool later in the chapter.

In the global arena, branding can be enormously helpful because locals are often unfamiliar with foreign firms. In India, the firms people work for are very important to applicants and their families. U.S. firms often set up “storefronts” in major Indian cities to promote their employment brands. Candidates can walk in and chat with company representatives about what these firms do and the kinds of opportunities they offer.

Online games are good branding and recruiting tool as well. Barclays Investment Bank has a free online stock-trading game that uses real-time market data. More than 4,500 people, mostly college students, have played the game, and about 8 percent of them have applied for jobs with the company.3 Philanthropic activities can help bur- nish a company’s employer brand, too, especially among Generation Z and millennial employees, who want more out of life than just a job and a paycheck. The accounting firm Deloitte sponsors volunteer spring-break programs for undergraduate students, who work alongside the firms’ employees to help communities in need. Highlights in HRM 1 shows how Marriott lives up to its brand in order to recruit talent.

Focus: What Types of Positions Are Needed? As you learned from Chapter 2, a major responsibility of human resources managers is knowing what jobs a firm needs now and in the future as well as the KSAOs required for those jobs. Given those needs, the condition of the labor market can have a big effect on a firm’s recruiting plans. During periods of high unemployment, an organization might be able to maintain an adequate supply of qualified candidates by accepting unsolicited

Luke’s Lobster uses social networking to

promote its brand.

Lu ke

’s Lo

bs te

r H ol

di ng


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Marriott’s Recruitment Principles: Living Up to the Employment Brand

1. Build the Employment Brand. Marriott attracts employees the same way it attracts customers. Just as consumers buy experiences, not just products, poten- tial employees are looking for a great work experience when they shop for jobs. As the company’s founder, J. W. Marriott, put it: “For more than 70 years, we’ve lived by a simple motto: If we take care of our associates, they’ll take care of our guests.”

2. Get It Right the First Time. Marriott “hires friendly” and “trains technical.” It is better to hire people with “the spirit to serve” and train them to work than hire people who know business and try to teach them to enjoy serving guests. Marriott hires cooks who love to cook and housekeepers who love to clean. They have learned that this approach works both for delivering excellent service and for retaining their employees.

3. Money Is a Big Thing, But… The top concern of Mar- riott associates is total compensation. But intangible factors taken together, such as work-life balance, leadership quality, opportunity for advancement, work environment, and training, far outweigh money in their decisions to stay or leave. From flexible sched- ules to tailored benefit packages and development

opportunities, Marriott has built systems to address nonmonetary factors.

4. A Caring Workplace Is a Bottom-Line Issue. When employees come to work, they feel safe, secure, and welcome. Managers are accountable for associate satis- faction ratings and for turnover rates. Every day, associ- ates in each of Marriott’s full-service hotels participate in a 15-minute meeting to review basic values such as respect and encourage associates to raise their personal concerns. They take the time to celebrate birthdays and anniversaries. Practices such as these build loyalty among associates and repeat business from customers.

5. Promote from Within. More than 50 percent of Mar- riott’s current managers have been promoted from within. All associates are given the opportunity to advance as far as their abilities will carry them. Elevat- ing employees who have continually served the com- pany to positions of leadership helps Marriott pass on the soul of its business—its corporate culture—from one generation to the next.

Sources: J. W. Marriott, “Competitive Strength,” Executive Excellence 18, no. 4 (April 2001): 3–4; J. W. Marriott, “Our Competitive Strength: Human Capital,” Executive Speeches 15, no. 5 (April/May 2001): 18–21.

Highlights in HRM1


résumés and applications and from internal labor markets. Internal labor markets are associated with “promotion within” policies, where workers are hired into entry-level jobs and higher-level jobs are filled from within.4 By contrast, a tight labor market (one with low unemployment) might force the employer to advertise heavily and/or seek assistance from recruiting and employment agencies. Keep in mind that the actual labor market a company faces depends upon the industry in which the firm operates and the types of positions it is seeking to fill. In one industry, the supply of qualified individuals might be plentiful for a particular position. In another industry, they may not be.

Location: Where Do We Need the Talent, and Where Will We Find It? The two primary locations in which to find candidates are those internal to the firm (internal candidates) and those external to the firm (external candidates), each of which are recruited somewhat differently.

Internal versus External Recruiting Markets. Recruiting internally is generally eas- ier, faster, and less expensive. However, not all positions can be filled internally. Jobs that require specialized training and experience cannot always be easily filled from within and may need to be filled from the outside. This is especially common in small

internal labor markets Labor markets in which workers are hired into entry-level jobs and higher-level jobs are filled from within.

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157Chapter 5 Expanding the Talent Pool: Recruitment and Careers

organizations in which the existing talent pool is limited. Moreover, in rapidly changing industries there may not be time for a company’s employees to develop completely new skill sets. Consequently, hiring from the outside makes sense.

Applicants hired externally can also be a source of new ideas and creativity, and may bring with them the latest knowledge acquired from their previous employers. It is not uncommon for firms to attempt to gain secrets from their competitors by hiring away their employees. was sued by Walmart, which accused the online retailer of hiring away employees who had in-depth knowledge about Walmart’s sophis- ticated inventory systems. Tesla Motors sued a former employee for allegedly stealing its self-driving car technology and trying recruit dozens of the company’s engineers for a startup firm.5

Some applicants bring more than knowledge to their new employers. They bring revenue. Talented salespeople, doctors, accountants, lawyers, and hairdressers are exam- ples. When these people leave their organizations, their clients often go with them. Recruiting externally in this case makes sense. Reaching an employer’s diversity goals is another factor that can lead a firm to recruit externally.

Regional Recruiting Markets. Have you ever noticed that competing firms are often located in the same areas? Oil and gas companies are plentiful in the Houston area. Film and television companies are clustered around Los Angeles. This is not a coinci- dence. These “business clusters” occur because the resources these firms need—both human and natural—are located in some areas and not others. Many manufacturers have located to the South because lower-cost labor is plentiful there and unions are less prevalent than they are in the North. Likewise, because nearby Stanford University has one of the top computer science schools in the country, high-tech companies have flocked to Silicon Valley in California.6

Global Recruiting Markets. To stay apace of their competitors and expand their opera- tions around the world, companies not only look globally for goods and services, but also for labor. Firms aren’t doing this just to save on labor costs. They are doing it to attract the best talent wherever it may be. Firms in countries such as China and India have heated up the competition for talent to staff the growing high-tech industries in these nations. It is not just technical positions firms are trying to fill either. It is lower- skilled positions, too. Resorts and vacation areas, and cruise lines are among the busi- nesses that frequently have trouble finding employees to staff their operations and must hire globally.

Recruiting abroad can be very complicated, however. In addition to having to deal with a myriad of local, national, and international laws, as well as visas and work per- mits, employers also have to take into account the different labor costs, preemployment and compensation practices, and cultural differences associated with the countries in which they are recruiting. In volatile areas of the world, security is a concern. Recruiting globally is likely to become even more difficult as U.S. immigration laws tighten. To help them navigate challenges such as these, many companies utilize firms such as Genpact and Robert Half International, which specialize in global recruiting.

Timing: When Do We Need the Talent? You have probably heard the saying “Timing is everything.” This is especially true for recruiters. HR professionals shouldn’t just engage in recruiting when a position comes open. Instead, they need to understand their firm’s business strategies, the

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158 Part 3 Developing Effectiveness in Human Resources

talent the company currently has by studying succession plans and what it will need in the future, and then translate these into ongoing recruiting plans. Is the firm rap- idly expanding? If so, how many positions will be needed and in what areas? How many applicants will need to be recruited to result in a single hire? If a firm waits too long to hire, its competitors may capitalize on emerging business opportunities before it can.

In addition, HR managers have to consider which jobs have the biggest impact on the firm’s financial results and prioritize filling them. It may be possible for a firm to leave an administrative position unfilled for a few months by assigning some of the job’s duties to other people. By contrast, leaving open a salesperson’s position in a sales territory that generates a lot of revenue and is highly competitive could take a serious toll on a company’s revenues.

Timing also comes into play in terms of the recruiting process. Some jobs, such as the job of an administrative assistant, can be advertised and filled relatively quickly. Other jobs, such as a search for a CEO, can take months. These factors have to be taken into consideration when recruiting and moving applicants through the various hiring stages.

Method: How Do We Find the Talent? Firms use different methods to try to recruit different types of people for different jobs. The methods also change over time as technology changes and the sources of candi- dates change. Recruitment ads on the Internet and social media sites like LinkedIn have replaced the bulk of print advertisements.

UPS needs to recruit more than 50,000 temporary workers to help deliver the mil- lions of extra packages the company ships during the holiday season. Using mobile apps the company reached a broader talent pool. City youths who used to have to go to a library or school to search for UPS jobs and fill out forms once they were hired can now do so on their mobile devices.

Decision: Who Does the Recruiting and Makes the Final Hiring Decision? The size of an organization often affects who performs the recruitment function. Most large firms have full-time, in-house HR recruiters. In smaller organizations, the recruit- ing might be done by an HR generalist. If the organization has no HR function, man- agers and supervisors recruit their own employees. At companies such as Macy’s and Williams-Sonoma, the members of work teams help select new employees for their groups.

Organizations that want to focus on their core functions, including small businesses that lack time or HR personnel, sometimes outsource their recruiting functions to out- side firms. This practice is known as recruiting process outsourcing (RPO). Organiza- tions also sometimes use RPO providers when they need to hire a lot of employees or hire employees quickly. RPO providers can also be useful when a firm has had trouble finding suitable candidates in the past or needs a different way to tap different talent pools, perhaps to find more diverse candidates.

Regardless of who does the recruiting, they must have a good understanding of the knowledge, skills, abilities, experiences, and other characteristics required for the  job and be personable, enthusiastic, and competent. Recruiters can often enhance  the perceived attractiveness of a job and an organization—or detract from it. They are often a major reason why applicants select one organization over another.

recruiting process outsourcing (RPO) The practice of outsourc- ing an organization’s recruiting function to an outside firm.

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159Chapter 5 Expanding the Talent Pool: Recruitment and Careers

5.2 External and Internal Recruiting Methods When you graduate, what sources do you expect to use to search for a job? Conversely, what is the best source, or method, a firm should use to find talented people like you to hire? In essence, these two questions are really different sides of the same coin. Employ- ers are searching for the right employees and the right places to find them. Conversely, people searching for work are looking for the best companies they can find and ways to connect with them.

5.2a External Recruiting Methods Figure 5.2 shows the major external recruitment methods. The “active” and “passive” labels indicate that some methods take more effort on the part of the applicant and/or the recruiting firm than others. The sources from which employers recruit externally will vary with the type of position to be filled. A computer programmer, for example, is not likely to be recruited from the same source as a machine operator. Trade schools can be a good source of applicants for entry-level positions. Firms also keep detailed statistics by job type on the sources from which their employees are hired. This helps human resource managers make better decisions about the places to begin recruiting when different job openings arise. We will talk more about recruiting statistics later in the chapter.

Advertisements Advertising job openings on websites, social media, and in newspapers and trade jour- nals is a common way to attract candidates. But help-wanted signs, billboards, and even Craigslist are sometimes used. In countries in which literacy rates are low, radio and television ads can be more effective. places ads on bus stop benches

Sometimes firms do not post internal open- ings for which anyone may apply. Instead, they select someone to promote. Why might a firm do this and what drawbacks could result?

LO 2

Job Fairs

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Sources of External RecruitmentFigure 5.2

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160 Part 3 Developing Effectiveness in Human Resources

to alert prospective applicants to job openings at its distributions center. Job postings that include videos describing the firm and the positions it offers are particularly effec- tive. According to the job website CareerBuilder, ads such as these get viewed more frequently and generate significantly more applicants.7

Advertising has the advantage of reaching a large audience of possible applicants. However, some degree of selectivity can be achieved by choosing among the sources to use. Professional and trade journals, blogs, the professional social networking groups on LinkedIn, and the publications of unions and various fraternal or nonprofit organi- zations will attract different types of candidates than help-wanted signs, for example.

Preparing recruiting advertisements not only is time consuming; it requires creativ- ity in terms of developing their design and message content. Well-designed advertise- ments highlight the major assets of the position while showing the responsiveness of the organization to the job, career, and lifestyle needs of applicants. Among the informa- tion typically included in advertisements is that the recruiting organization is an equal opportunity employer. Advertisements also need to be written so as to attract diverse candidates and avoid bias. For example, because it can discourage good candidates, experts on HR diversity advise firms to delete from their job descriptions (and postings) wording such as “degree from a top-tier school required.”

Also, there appears to be a correlation between the accuracy and completeness of information provided in job advertisements and an organization’s recruitment success. The more information disclosed, the better. However, even when a job opening is described thoroughly in an advertisement, many unqualified applicants will still apply. Later in the chapter we will talk about how firms go about screening the many applications they get.

Walk-Ins and Unsolicited Applications and Résumés Walk-in jobseekers looking for jobs that pay hourly wages are common in smaller orga- nizations. Employers also receive unsolicited applications and résumés. Walk-in appli- cants and individuals who send unsolicited résumés to firms may or may not be good

Textio is a Web-based product that checks job posting for bias. You paste in a post, and the software suggests how to rephrase it to attract more diverse candidates.

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161Chapter 5 Expanding the Talent Pool: Recruitment and Careers

prospects for employment. However, they are a source that should not be ignored. In fact, it is often believed that individuals who contact employers on their own initiative will be better employees than those recruited through advertisements.

Any person contacting an organization for a job should be treated with courtesy and respect. SkipTheDishes, a chain that delivers restaurant food to people’s businesses and homes, found this out the hard way: In 2017, a candidate who had interviewed with the company politely emailed her interviewer to find out what the job’s hourly wage and benefits were. She was essentially told her questions were inappropriate and her second interview was cancelled as a result. People on Twitter expressed anger after the candidate posted the exchange. The CEO publicly apologized and offered to resched- ule the interview.8 The moral of this story is that hiring is no longer a one-way street: Companies are realizing they need to improve the “candidate experience,” which is the idea that to attract candidates (and customers), they need to make the recruiting process a positive experience for people, whether they get hired or not. Not doing so directly harms a company’s brand.

The Internet Looking on the Internet is the most commonly used search tactic by jobseekers and recruiters to connect with one another. Both companies and applicants find the approach cheaper, faster, and potentially more effective. There are tens of thousands of indepen- dent job boards on the Web. Widely used jobs boards include Monster, CareerBuilder, Indeed, GlassDoor and Google for Jobs. Staffing experts say it is also a good idea to post your firm’s jobs at free association and trade group sites, where your specific talent pool is most likely to congregate.9

Specialty Internet recruiting sites such as Medzilla (for the pharmaceutical indus- try), AMFMJobs (for radio personnel), and JobsInLogistics (for supply-chain jobs) are common, too. “Niche job boards are particularly useful for cutting through the clutter and finding talent for hard-to-fill roles, specialized positions, specific industries—or to tap into unique candidate audiences, such as military veterans,” says Susan Vitale, the chief marketing officer at Matawan, a N.J.-based recruitment software provider.10 Of course, most large companies post job openings on their own corporate websites, usually under a “careers” link, along with information about the benefits of working for their firms.

Other companies are taking Internet recruiting to a whole new level. Instead of recruiters trying to figure out where to place individual ads and when to take them down, they are using big data, robots, and software to do the job. Appcast is software that trolls the Internet looking for candidates who are well suited for positions based on the interests they express, where they go on the Web, and whether or not they appear to be looking for jobs. Job ads then appear on their screens—just like ads for prod- ucts do when you are shopping online. The software recruiting company FirstJob has developed a chatbot named “Mya” to help recruit candidates for jobs. Mya converses with candidates online to encourage them to apply—or not to apply—for certain jobs, reviews their applications, and can even schedule interviews with them, among other things.11

Social Media As we indicated, to help establish their employer brands as well as recruit talent, firms are utilizing social media websites, where they can create company pages, post and advertise jobs, showcase their company’s attractive features, and join groups that target certain types of professionals. Potential applicants can then “follow” companies they

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162 Part 3 Developing Effectiveness in Human Resources

are interested in working for. The online shoe seller Zappos no longer accepts résumés. Instead, it uses social media to recruit applicants. By using social media, recruiters at UPS say they were able to access a new applicant pool—namely, millennials—and sig- nificantly increase the number of them applying with the company. UPS engages them with conversations with other UPS employees and unscripted “day in the life” videos of employees and interviews with senior managers explaining how they first started with the company and possible career paths.12

LinkedIn has become the social media site of choice for recruiters—so much so that it’s disrupting the market for job boards, advertisers, recruitment service firms, and recruitment software companies. For a subscription fee, firms can use Linke- dIn Recruiter to search its 400-million-plus member database for talented passive jobseekers. Passive jobseekers are people who are not looking for jobs but could be persuaded to take new ones given the right opportunity. Software developers such as TalentBin and ZoomInfo have created applications that search the Web for passive job candidates based on information they post on industry blogs, social networking sites, and so forth.

Facebook has made it easier to find passive jobseekers, as well. Recruiters can create job postings targeted at certain types of people’s newsfeeds and contact them via Mes- senger if they want. Those who are interested in the job can simply click on the “Apply Now” button, and their applications are automatically populated with information from their Facebook profiles.13

A potential drawback of using social media, and the Internet in general, is that some groups of people, including older adults and people with less than a high school education, are less likely to go online. A study by the Kessler Foundation and National Organization on Disability (NOD) found that only a little over half of adults with dis- abilities go online. As a result, relying too heavily on electronic recruiting could hurt a company’s diversity efforts.14

Mobile Recruiting Mobile recruiting is the process of recruiting candidates via their mobile devices. People around the world are glued to their mobile phones. For this reason, whatever social networking or Internet platform an organization uses should have a mobile application tied to it that people can use to search for jobs and apply for them.

Recruiters are also using text messages, sometimes to announce job openings and to communicate information about interview schedules and speed up the recruitment process. Text messages work well because they are inexpensive, easy to send, and fast. Plus, because most people have their mobile devices on all of the time, they get the mes- sages immediately instead of having to launch applications on their phones to get to a site such as Facebook or LinkedIn.

Job Fairs Job fairs can be a good way to cast a wide net for diverse applicants in a certain region. At a job fair companies and their recruiters set up booths, meet with prospective applicants, and exchange employment information. Often the fairs are industry specific.

Although job fairs often attract a lot of applicants, many of them might not be qualified. Another problem is that they only attract applicants in the regional area in which they are held.

One way to get around the latter problem is to hold an online virtual job fair and use networks such as LinkedIn, Facebook, and Twitter to inform potential candidates about

passive jobseekers People who are not look- ing for jobs but could be persuaded to take new ones given the right opportunity.

mobile recruiting The process of recruit- ing candidates via their mobile devices.

virtual job fair Job fairs conducted online.

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163Chapter 5 Expanding the Talent Pool: Recruitment and Careers

it. During a virtual job fair, recruiters man “virtual booths” online, where they provide links to their career resources, collect résumés, and talk with candidates via online chat functions and webcams. Holding a virtual job fair can also be cost effective for both recruiters and attendees because they do not have to pay travel costs.

Some larger companies, such as Procter & Gamble, host virtual fairs on their own websites. Others, including Boeing and Citigroup, join virtual job fairs hosted by other companies such as the job board Monster and, which is a company that hosts virtual job fairs designed to attract new graduates.15

Employee Referrals The recruitment efforts of an organization can be greatly aided when its employees refer potential candidates. In fact, word-of-mouth recommendations are the way most job positions are filled. (Apparently there is truth to the phrase “It is not what you know, but who you know.”) A number of studies have found that employee referrals are the best source of applicants. Referred employees have much higher retention rates than employees who are not referred and are hired in less than half the time as other candi- dates, one study found.

Research shows that once hired, applicants referred by an employee tend to remain with the organization longer, as well.16 Some firms have created referral pages on their intranets to make it easier for employees to refer candidates and to track their progress through the hiring process.17 Highlights in HRM 2 shows some additional ways firms can encourage employee referrals.

There are some negative factors associated with employee referrals and profiles, though. They include the possibility of corporate “inbreeding.” Because employees and the people they refer tend to have similar backgrounds, firms that rely heavily on refer- rals may intentionally or unintentionally screen out, and thereby discriminate against, protected classes. In 2016, the U.S. Labor Department sued Plantir, a Silicon Valley data- mining company, for not hiring enough Asians. It wasn’t that Plantir had intentionally discriminated against Asians; it had simply relied too heavily on applicants its employees had referred, most of whom weren’t Asian.

Some researchers have found that inbreeding occurs gradually as part of a three- stage trend: According to the attraction–selection–attrition (ASA) model, in the first stage (attraction) people with values similar to an organization are attracted to it and become employees. In the second stage (selection), these employees then choose applicants similar to themselves. In the final stage (attrition) employees who do not fit in leave. The result is an ultra-homogenized organization.18 One way to remedy the problem is by offering employees larger referral bonuses for underrep- resented groups. Intel was able to increase the portion of women in its workforce this way.19

Nepotism, which is the preference for hiring the relatives of employees, can invite charges of favoritism. Various anti-nepotism laws exist at the local, state, and federal levels. However, in other cultures, including Asia and the Middle East, nepo- tism is the norm, and hiring managers need to be aware of it. But even in the United States, nepotism gets mixed reviews, in part because family members are in an ideal position to pass job knowledge and skills on to one another. Many corporate dynas- ties (Ford Motor Company and the Rockefeller Foundation among them) have been built on nepotism. Labor unions would not have flourished without it. In recent years, a number of law firms and universities have dropped restrictions against hir- ing spouses on the basis that they are prejudicial.20

nepotism A preference for hiring the relatives of current employees.

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Making Employee Referral Programs Work

�� Educate employees about the kinds of people the organization wants to hire.

�� Acknowledge referrals promptly. Not doing so makes employees feel as if their suggestions are poor ones or are being ignored. Let the candidate and the refer- ring employee know right away when a referral has entered the system.

�� Reward employees with something they value such as bonuses and recognition within the company for referrals. Small rewards can be given for candidates that meet the company’s requirements but are not selected and larger rewards for successful matches. Consider offering larger rewards for referrals that improve a firm’s diversity.

�� Give employees the right tools. Make it easy for employees to post or tweet information about job openings to their online network of associates.

�� Measure results after the program is implemented and study them in terms of the volume of referrals, qualifications of candidates, and success of new hires on the job.

Sources: Stephen V. Burks, Bo Cowgill, Mitchell Hoffman, and Michael Housman, “The Value of Hiring through Employee Referrals,” Quarterly Journal of Economics 130, no. 2 (February 2015): 805–39; “How a Talent Management Plan Can Anchor Your Company’s Future,” HR Focus 81, no. 10 (October 2004): 7–10; Susan M. Heathfield, “You Can Inspire Great Employee Referrals,”; John Sullivan, “Advanced Employee Referral Programs—Best Practices You Need to Copy,”

Highlights in HRM2


Re-recruiting Re-recruiting is the process of keeping track of and maintaining relationships with former employees to see if they would be willing to return to the firm. Former employees that return to their former firms are sometimes referred to as “boomerang” employees. At the accounting and consulting firm Deloitte, over 75,000 former employees are kept track of via an online alumni network. Alumni networks are often hosted on Facebook and LinkedIn or on the employees’ former firms’ websites.

Re-recruiting is an attractive option for recruiters. They don’t have to sift through scores of résumés to find qualified applicants and have a better idea of how boomerang employees will perform. Boomerang employees also tend to have better retention rates.21

Executive Search Firms In contrast to public and private employment agencies, which help jobseekers find the right job, executive search firms (often called “headhunters”) help employers find the right person for a job. Firms such as Korn Ferry International, N2Growth, and Heidrick & Struggles are top recruiting firms for executives. Executive search firms do not adver- tise in the media for job candidates, nor do they accept a fee from the individual being placed. The fees charged by search firms can range anywhere from 25 to 40 percent of the annual salary for the position to be filled. A large number of CEOs are hired with the help of executive search firms. However, newer data suggest that CEOs who are pro- moted from within their organizations actually outperform those hired from the outside.

Educational Institutions Educational institutions typically are a source of young applicants with formal training but little full-time work experience. High schools are often a source of employees for clerical and blue-collar jobs. Community colleges, with their various types of specialized

re-recruiting The process of keeping track of and maintaining relationships with for- mer employees to see if they would be willing to return to the firm.

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165Chapter 5 Expanding the Talent Pool: Recruitment and Careers

training, can provide candidates for technical jobs. These institutions can also be a source of applicants for a variety of white-collar jobs, including those in the sales and retail fields and some management trainee jobs. For technical and managerial positions, companies generally look to colleges and universities. Campus recruiting is a win–win for companies that need talent and schools trying to place students.

Rather than recruiting students from dozens of schools, which can be expensive, more companies are targeting smaller numbers of colleges and forming closer part- nerships with them. Employees guest lecture at the schools and develop relationships with instructors, who then recommend students for jobs. Some companies are sending their CEOs to campus because they have found that it puts a “face” on the company and attracts more applicants.22 Figure 5.3 shows some of the steps firms can take to strengthen their on-campus recruiting relationships.

Work-Study Programs and Internships. To attract high-demand graduates, in addi- tion to offering higher pay, firms sometimes use work-study (co-op) programs and offer low-interest loans for promising recruits, scholarships, and internships. Internships can be a great way for firms to “try out” college students who want to work in their fields and for students to decide if they want to work for an organization long term.

However, many internships are not as successful as they should be because the spon- soring firms haven’t thought through how to effectively utilize their interns. This can lead to bored interns who can, in turn, become disillusioned about their fields. Highlights in HRM 3 shows steps companies can take to ensure their internships are successful.

Firms also have to be careful about whether or not their internships should be paid. In recent years, interns have sued companies for wages claiming they did the work of employees and should have been compensated as such or were promised full-time jobs once their internships were over but were not hired. Figure 5.4 shows the criteria that must be met if an intern is not to be paid, according to the U.S. Department of Labor.

Professional Associations and Labor Unions Many professional associations and societies offer a placement service to members as one of their benefits. For the mutual benefit of employers and job seekers, placement centers are usually included at the national meetings of professional associations. The

• Invite professors and advisers to visit your office and take them to lunch. • Invite them to bring a student group to the office. • Send electronic press releases to students and bring them up to date on the firm’s latest

news and innovations. • Provide guest speakers for classes. • Conduct mock interviews, especially in years when not interviewing for full-time or

internship positions. • Provide scholarships to students. • Attend the campus career fair, even when the firm is not going to be hiring, so that its

name becomes known by the faculty and students. • Offer job-shadowing programs for students.

Steps for Strengthening a Firm’s On-Campus Recruiting RelationshipsFigure 5.3

Sources: Bruce Busta, D’Arcy Becker, and Jane P. Saly, “Effective Campus Recruiting: The Faculty Perspective,” CPA Journal 77, no. 7 (July 2007): 62–65; Deborah J. Sessions, “Recruiting Made Easy,” Journal of Accountancy 201, no. 5 (May 2006): 31–34.

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Making Your Internship Program a Success

�� Build relationships with colleges and universities. Let the career advisors at these schools know what you are looking for and what you have to offer the interns on an ongoing basis.

�� Make it clear the type of candidate you’re looking for—for example, the required GPA, preferred or required major, specific skills, attributes, and other experience.

�� Develop a work-learning plan for each intern. Give interns actual work related to their majors.

�� Create an internship handbook or website that includes information on intern orientation, mentor- ing, executive engagement, project work, and cross- functional activity opportunities. Provide this to all of

the supervisors and mentors in the program as well as the interns.

�� Set up a system for providing interns with feedback on their performance, preferably at the midpoint of their internship and again at the conclusion.

�� Survey interns and conduct interviews with them after their internships to find out what went well and what could be improved.

Sources: Michelle Bradford, “Follow Practical Advice to Limit Legal Chal- lenges Regarding Internship Programs,” Campus Legal Advisor 16, no. 5 (2016): 6; “Getting the Most from Internship Programs,” Supply Chain Management Review 13, no. 8 (2009): 34; Audrey Watters, “5 Tips for Cre- ating an Internship Program for Your Startup,”; Jean Scheid, “Designing Internship Programs,”; Penny Loretto, “Developing an Internship Program,”

Highlights in HRM3

Society for Human Resource Management (SHRM), for example, helps employers and prospective HR employees come together.

Labor unions have been a principal source of applicants for blue-collar and some professional jobs. Some unions, such as those in the maritime and construction indus- tries, maintain hiring halls that can provide a supply of applicants, particularly for short- term needs. Unions also offer their members training and in some cases apprenticeship programs, making these organizations a good source of candidates.

Public Employment Agencies Each of the 50 U.S. states maintains an employment agency that administers its unemployment insurance program. The agencies work with employers to post their openings in online job banks such as America’s Job Exchange and America’s Career InfoNet (ACINet) and match unemployed qualified workers to the jobs so they can

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.

2. The internship experience is for the benefit of the intern. 3. The intern does not displace regular employees but works under close supervision of

existing staff. 4. The employer that provides the training derives no immediate advantage from the activi-

ties of the intern, and on occasion its operations may actually be impeded. 5. The intern is not necessarily entitled to a job at the conclusion of the internship. 6. The employer and the intern understand that the intern is not entitled to wages for the

time spent in the internship.

Unpaid Internship Guidelines Figure 5.4


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167Chapter 5 Expanding the Talent Pool: Recruitment and Careers

apply for them. In addition to matching unemployed applicants with job openings, public employment agencies sometimes assist employers with apprenticeship programs, employment testing, job analysis, evaluation programs, and community wage surveys.

Private Employment Agencies Private employment agencies are companies that, for a fee, match people with full-time jobs. The fee may be paid by the employer, the jobseeker, or both. It is not uncommon for private employment agencies to charge an employer a 25 to 30 percent fee, based on the position’s annual salary, if the employer hires an applicant found by the agency.

Private employment agencies often specialize in serving specific occupational or geographic areas. When recruiting abroad, companies frequently use local employment agencies because they understand a country’s culture, labor market, and better how to recruit workers there. Companies also sometimes use private employment agen- cies when they are trying to recruit many people or when they have had trouble in the past recruiting enough applicants, finding applicants with the right skills, finding diverse applicants, or finding the time or personnel needed to recruit, screen, and hire applicants.

Staffing Agencies Staffing agencies are firms that hire and place workers in temporary positions. Adecco, ManpowerGroup, and Kelly Services are among the major U.S. staffing agencies. “Temps” are typically used for short-term assignments or to help when managers cannot justify hiring a full-time employee, such as for vacation fill-ins, for peak work periods, or during an employee’s pregnancy leave or sick leave. A firm contracts with a staffing agency, and the employees hired are paid by the staffing agency itself and are available to work for multiple organizations.

Temps give organizations added flexibility because they can be used when needed. In addition, the employment costs of temporaries are often lower than those of perma- nent employees because temps are not provided with benefits and can be let go without the firm having to file unemployment insurance claims. Many temporary employees are eventually hired full time. Temping allows them and the firms they contract with to try one another out before a permanent commitment is made.

One concern related to using temps is that they have less of an incentive to be loyal to an employer and its clients or to go the extra mile to help a company achieve success. Instead of hiring temps, the Hilton hotel chain sends full-time employees from one hotel to another to address temporary spikes in demand. This strategy not only makes efficient use of the hotel chain’s staff but also has helped it to develop an agile workforce.23

Independent Contractors Independent contractors are workers who are self-employed and do project work on a contract basis for organizations. Often these workers are referred to as “freelanc- ers” because they are “free” to work for multiple organizations on multiple projects at the same time. Independent contractors can be found on freelance job boards, staffing agencies, and websites such as Former and retired employees who want to work on a freelance basis are also a good source of independent contractors for a firm because they are familiar with its business, its personnel, and how work gets done in the organization. Employers face similar concerns with contractors as they do tempo- rary workers. Some experts believe the national security leaks the United States has

independent contractors Workers who are self- employed and do project work on a con- tract basis for different organizations.

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168 Part 3 Developing Effectiveness in Human Resources

experienced were due to the fact that leakers like Edward Snowden were independent contractors and not actual employees of the agencies they worked for. Consequently, they were less loyal to the agencies.

As with temps, a firm can use independent contractors as needed, and they don’t receive benefits. In addition, companies don’t pay social security, unemployment, or workers’ compensation taxes when they hire independent contractors. The independent contractors must pay these taxes themselves. However, numerous companies, including Lowe’s, Lufthansa, Microsoft, and FedEx, have been fined millions of dollars for mis- classifying permanent workers as independent contractors in an effort to cut employ- ment-related costs. To prevent such abuses, Congress and the U.S. Department of Labor have established criteria companies should follow when deciding how to characterize their workers. Highlights in HRM 4 offers some guidance firms can use to make this determination.

However, the U.S. Supreme Court has ruled that there is no single test to determine whether an employee is an independent contractor or not. To avoid any hint of impro- priety, companies are increasingly requiring independent contractors to sign up with staffing agencies and then hiring the contractors through them.

Employee Leasing Employee leasing by professional employer organizations (PEOs) has grown rapidly since the passage of the Tax Equity and Fiscal Responsibility Act of 1982. As we explained in Chapter 1, more than 150,000 businesses and roughly 3 million U.S. workers are involved in PEO arrangements, according to the National Association of Professional Employer Organizations (NAPEO). Basically, a PEO—typically a larger company—takes over the management of a smaller company’s HR tasks and becomes a coemployer to its employees. The PEO performs all the HR duties of an employer—recruiting, background checks, hiring, payroll, performance appraisal, benefits administration, and other day-to-day HR activities—and in return is paid a placement fee of normally 4 to 8 percent of payroll cost plus 9 to 20 percent of gross wages. Unlike temporary agencies, which supply workers only for limited periods, employee leasing companies place their employees with subscribers on a permanent basis.

Because PEOs can coemploy a large number of people working at many different companies, they can provide employees with benefits such as 401(k) and health plans that small companies cannot afford. (The average client of a PEO is a business with 19 employees.) The Society of Human Resources Management reports that companies with fewer than 50 employees can save anywhere from $5,000 to $50,000 in time and labor costs annually by hiring a PEO.24

5.2b Internal Recruiting Methods Most companies try initially to fill job vacancies above the entry-level position through promotions and transfers. Internal candidates are readily available, get up to speed faster, and there is less uncertainty about how they will perform. You also do not have to run advertisements to find them, which can be costly.

By filling vacancies internally, an organization can capitalize on the investment it has made in recruiting, selecting, training, and developing its current employees. Promoting employees rewards them for their past performance and encourages them

employee leasing The process of dismiss- ing employees who are then hired by a leasing company (which handles all HR-related activities) and contracting with that company to lease back the employees.

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to continue their efforts. This can improve morale within the organization and sup- port a culture of employee engagement. Promotion-from-within policies at Marriott, Nordstrom’s, Nucor Steel, and Whole Foods have contributed to the companies’ overall growth and success.25

However, at least one research study has found that managers often hire external candidates rather than promote their current employees because they have a tendency to overvalue unfamiliar candidates and undervalue known ones.26 This may be because the managers are not yet as familiar with the external candidates’ flaws as they are with internal candidates’ flaws. At other times, extremely good employees are prevented from being promoted to other departments because their current managers are reluctant to lose them.

Research by Matthew Bidwell suggests that internal candidates are likely to outper- form external candidates. Bidwell looked at seven years of data and 5,300 employees in different jobs in the financial industry. Even though external hires got paid nearly 20 percent more, they received significantly lower marks on their performance reviews for their first two years on the job. External hires were also 61 percent more likely to be fired. In addition, the productivity of business units and groups with a new hire suffered because it took time for the groups to help the new employees learn their jobs and become proficient at them.27

When qualified employees are passed over for external candidates (often whom they are asked to train), a firm’s current employees can become disillusioned to the point where they begin looking elsewhere for jobs, even when the external candidates hired end up being very qualified for their positions. Employee surveys and other research show that a lack of career advancement is a major reason why people quit their jobs.28

When experienced employees leave an organization they take with them years of corporate knowhow that is hard to replace. Some signs that the firm needs to work harder at grooming internal talent are shown in Figure 5.5. To lessen the chances of losing top performers, some managers actively identify “at risk” employees and take steps to retain these people.

Is a Worker an Independent Contractor—or Not?

Signs of independent contractor status include a person who:

�� Is free from direct supervision and control

�� Has an established business

�� Keeps a place of business and invests in facilities, equipment, and supplies

�� Pays his or her own expenses

�� Assumes the risk for profits or losses

�� Sets his or her own schedule

�� Sets or negotiates his or her own pay rate

�� Offers services to other businesses (competitive or noncompetitive)

�� Is free to refuse work offers

�� May choose to hire help

�� Carries insurance

�� Advertises in the electronic and/or print media

�� Uses business cards, stationery, and billheads

Source: Adapted from “Independent Contractor,” New York Department of Labor,

Highlights in HRM4


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170 Part 3 Developing Effectiveness in Human Resources

Internal Job Postings Internal job postings are a quick way to find qualified employees interested in a posi- tion. A small business might simply post a notice on a bulletin board in its break room. Larger companies generally post their openings on their intranet sites. The intranets of some companies alert employees about jobs in which they may be interested. As a posi- tion becomes available, a list of employees interested in that position is retrieved, and the records of these employees are reviewed to select possible candidates for interviews. The employees can be electronically notified about interview schedules and track their progress electronically through the various hiring stages.29

Identifying Talent through Performance Appraisals Successful performers are often good candidates for a promotion. Identifying and devel- oping all employees is a role that all managers should take seriously. A tool called a nine-box grid is helping firms such as General Electric, Novartis, and others do this. The grid helps managers by compiling appraisal and assessment data into a single visual reference so they can see both an employee’s actual performance and potential per- formance. This can then help managers determine what the developmental needs of the employee are and what the person’s next steps within the organization might be. Figure 5.6 is an example of a nine-box grid.

Skills Inventories and Replacement Charts Recall from Chapter 2 that firms utilize talent reviews, or strategic meetings, to determine if a company has the human resources it needs to compete in the future. The chapter also discussed skills inventories, which help track an employee’s education, past work experi- ence, vocational interests, specific abilities and skills, compensation history, and job tenure to see how they can best be used. Procter & Gamble and HSBC are among the firms that track their employees this way to locate capable employees who can be recruited to fill open positions. Along with skill inventories, replacement charts are an important tool for succession planning. At GE, for every position at or above a director level, two or three people are usually identified who can easily step in when the current jobholder moves on.30

As we also discussed in Chapter 2, more firms are electronically capturing the quali- fications of each of their employees. Companies such as Oracle and SAP have developed automated staffing and skills management software that allow an organization to rapidly screen its entire workforce to locate suitable candidates to fill an internal opening. The data can also be used to predict the career paths of employees and to anticipate when and where promotion opportunities might arise.31

nine-box grid A comparative diagram that includes appraisal and assessment data to allow managers to eas- ily see an employee’s actual and potential performance.

1. It takes a long time to fill key positions. 2. Key positions can be filled only by hiring from the outside. 3. Key positions cannot be filled with confidence in the abilities of those chosen for them. 4. Replacements for positions often are unsuccessful in performing their new duties. 5. Promotions are made on the basis of whim, favoritism, or nepotism.

Warning Signs of a Weak Talent “Bench”Figure 5.5

Sources: Adapted from William Rothwell, Effective Succession Planning (New York: AMACOM, 2000); Victor Lipman, “Why Employee Development Is Important, Neglected, and Can Cost You Talent,” Forbes (January 29, 2013),

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171Chapter 5 Expanding the Talent Pool: Recruitment and Careers

5.3 Improving the Effectiveness of Recruiting

How can a firm improve its effectiveness when it comes to recruiting? First, recruiters need an accurate job analysis. What skills and abilities are they truly recruiting for? Have they been precisely defined? Firms often neglect to update their job descriptions, which in turn results in job postings that aren’t accurate and the wrong candidates applying for jobs. Second, line managers and employees need to be intimately involved in the process. Without their input, the hiring process is far more likely to fail. Third, a job-starting date that works for both the organization and the potential new hire needs to be established. Fourth, after the person has been hired, the firm should conduct a “debrief ” and identify any lessons learned to improve the recruiting process.

Other questions a firm needs to ask itself are the following: How well is a company doing when it comes to recruiting talent from all sources? Are some sources more effec- tive than others? Have the firm’s recruiters been able to hire enough employees to meet the company’s needs, including key personnel? Are the recruiters slow or fast when it comes to filling positions? Are line managers happy with the process and the quality of the people hired? Are the people who have been hired happy with their jobs and likely to remain with the firm and advance in the organization? HR managers have many tools available to them to gauge their efforts and improve their recruiting. Let’s now look at a few of them.

5.3a Using Realistic Job Previews One way organizations may be able to increase the effectiveness of their recruitment efforts is to provide job applicants with a realistic job preview (RJP). An RJP informs applicants about all aspects of the job, including both its desirable and undesirable

realistic job preview (RJP) Informing applicants about all aspects of the job, including both its desirable and undesir- able facets.

If you’re employed, ask your boss what methods he or she has most successfully used to recruit employees. Compare your findings with your classmates. Does the recruiting source seem to depend upon the type of job?

LO 3

Source: © 2000–2008

Novice showing high potential/has

demonstrated high potential in previous roles

Novice new in company/role. Test in role. Has potential to

improve performance

Risk performance issues

Below Target

L o

w M

e d

iu m

H ig


On Target


P o

te n

ti a l

Above Target

Capacity and/or capability for progression after further

potential has been released

Developer may have potential to do more through lateral move/bigger responsibility.

Needs to be tested to ensure capability is maximized

Highly valued, possibly a specialist

Capacity and/or ability for immediate advancement;

clear potential beyond current role

High performer, ready for additional challenge. Potential to perform in another role at same

level (transferable skills)

High performer, hard to replace, possibly a specialist

An Example of a Nine-Box GridFigure 5.6

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172 Part 3 Developing Effectiveness in Human Resources

facets. In contrast, a typical job preview presents the job in only positive terms. The RJP might also include a tour of the working area, combined with a discussion of any nega- tive health or safety considerations and time to talk candidly with the firm’s employees about the upsides and downsides of the job.

Boeing posts video versions of its RJPs on YouTube. SunTrust Banks cut its recruit- ment costs in half and upped its retention of tellers with an online RJP. At their con- venience, candidates can perform various simulated teller tasks, such as looking up account information and entering customer data, to see if they might like the job. Online job previews can help candidates get a better feel for the work than a written description provides.32

Proponents of RJPs believe that applicants who are given them are more likely to remain on the job and be successful because they will experience fewer unpleasant surprises. Yet some companies avoid RJPs because they worry that presenting both the positive and negative aspects of a job could discourage applicants. However, downplay- ing the negative aspects is likely to be counterproductive, because (1) it is more likely to result in turnover, and (2) postings on social media sites such as Glassdoor and LinkedIn enable applicants to research what current and ex-employees are saying about companies and the jobs.

5.3b Surveys and Employee Profiles Another way to improve a company’s recruiting is to survey managers about how satis- fied they are with the process. Are managers happy with the time it takes to hire new employees, the degree to which they need to be involved in the process, and the overall quality of the people recruited? Why or why not? To find ways to reach out to and recruit the right kinds of candidates some companies develop employee profiles by surveying their top performers about what they like to do, what events they attend, what websites they visit, and how they like to be contacted and recruited. New hires can also be sur- veyed to see how satisfied they are. Last, candidates who turned down jobs often can provide valuable information about why they did not accept the firm’s offer.

5.3c Recruiting Metrics As we explained earlier in the chapter, recruiters should keep statistics on the sources from which candidates are recruited and hired as well as the costs of each source. The time it takes to recruit various employees from various sources as well as the qual- ity of employees are other statistics recruiters collect and study. Doing so helps them understand which recruiting sources work best for different employees, which allows them to find better employees faster and at a lower cost. The following are some of the metrics used.

Time to Fill The time-to-fill metrics refer to the number of days from when a job opening is approved to the date a person accepts and/or begins the job. Figure 5.7 shows how time-to-fill metrics are calculated. Generally speaking, lower time-to-fill statistics are better. How- ever, a trade-off has to be made between the time to fill a position and the quality of the candidates needed for the position.

employee profiles A profile of a worker developed by studying an organization’s top performers to recruit similar types of people.

time-to-fill Metrics that refer to the number of days from when a job opening is approved to the date a person accepts the job and begins it.

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173Chapter 5 Expanding the Talent Pool: Recruitment and Careers

Quality of Fill Hiring quality employees is also a primary concern of recruiters. Firms have attempted to develop a quality-of-fill metric that measures how well new hires have gotten “up to speed,” are performing, and their retention levels. The quality-of-fill metric can be calculated as follows:

5 1 1 4Quality of fill (PR HP HR ) N

where 5PR Average job performance rating of new hires

HP Percentage of new hires reaching acceptable productivity within acceptable timeframe


5HR Percentage of new hires retained after 1 year

5N Number of performance indicators

Example: 5 5PR Average 3.5 on a 5.0 scale 70%

5 5HP of 100 new hires, 75 are meeting acceptable productivity levels 75%

5HP 80% of new hires have been retained

5N 3

5 1 1 4 5Quality of fill (70 75 80) 3 75%

Yield Ratio Yield ratios help indicate which recruitment sources are most effective at producing qualified job candidates. A yield ratio is the percentage of applicants from a particular source that make it to the next stage in the selection process. For example, if 100 résumés

quality-of-fill A metric that measures how well new hires have gotten “up to speed,” are performing, and their retention levels.

yield ratio The percentage of appli- cants from a particular source that make it to the next stage in the selection process.

Position Date Position

Approved Date Offer Accepted

Date Started Work Selection Time

Time to Start

Engineer 10/10/18 11/30/18 12/15/18 51 15

Marketing Manager

10/11/18 11/24/18 12/16/18 44 22

Salesperson 10/12/18 11/13/18 11/20/18 32 7

Administrative Assistant

10/13/18 11/7/18 11/14/18 25 7

Clerk 10/13/18 10/30/18 11/14/18 17 15

Averages 33.8 13.2

Time-to-Fill CalculationsFigure 5.7

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174 Part 3 Developing Effectiveness in Human Resources

were obtained from an employment agency and 17 of the applicants submitting those résumés were invited for an onsite interview, the yield ratio for that agency would be 17 percent 4(17 100).

Yield ratios help firms determine which sources produce the most qualified appli- cants. Yield ratios can also be used to determine how many total applicants a firm typically needs to attract and advance to different stages in the hiring process to fill different jobs.

Acceptance Rate The acceptance rate is the percentage of applicants who accept a firm’s jobs after being offered them. So, if over the course of a year a firm offers 100 applicants jobs, 90 of whom accept them, the firm’s acceptance rate is 90 percent. A firm can track its accep- tance rate for the company overall or particular jobs. Normally, high acceptance rates are better.

If a firm has lower acceptance rates or declining acceptance rates, the firm and its HR personnel must determine why employees are declining offers. Is the pay not competitive? Does the firm have a problem with its branding? Are its recruiters, man- agers, and employees doing a good job of “selling” the firm to potential applicants? Is the firm looking toward the right sources to recruit applicants? If acceptance rates are low, a firm may want to consider hiring a private employment agency to help improve its recruiting.

Cost of Recruitment The average cost of recruiting a new hire can be computed rather simply. The firm’s total recruiting costs from all sources—including advertising, travel expenses, refer- ral bonuses, and so on—are summed up and then divided by the number of people hired:

Total recruiting costs Number of people hired Average recruiting cost per hire4 5

The same calculation can be used to determine the cost of recruiting from a single source, such as employee referrals. To calculate this metric, the firm would divide the total referral bonuses it paid employees by the number of people hired. So, if the firm spent $10,000 on referral bonuses and hired 40 people in a given year, the average cost of recruitment in terms of referral bonuses paid that year would be:

10,000 40 $250 per hire4 5

When combined with information about yield ratios, these calculations can pro- vide valuable information to managers about the usefulness of different approaches and sources of recruitment. For example, although ads and employee referrals may both yield qualified applicants, managers may find that referral bonuses are a more economical alternative.

An applicant tracking system (ATS) enables recruiters to electronically post job openings, screen the uploaded profiles and/or the résumés of appli- cants, rank them, and contact them via email for interviews. An ATS also tracks the sources of applicants—from the various websites they use to apply for jobs and how far they got in the process—and the time and costs related to hiring

acceptance rate The percentage of appli- cants who accept a firm’s jobs after being offered them.

applicant tracking system (ATS) A system recruiters use to post job openings, screen résumés and uploaded profiles, con- tact via email potential candidates for inter- views, and track the time, costs, and other metrics related to hiring people.

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175Chapter 5 Expanding the Talent Pool: Recruitment and Careers

people. Looking at this data can help recruiters fine-tune where and how they are recruiting.33

Rather than employing an ATS, Google has used reams of data and analytics to fig- ure out why it was having problems recruiting diverse candidates, particularly women engineers. The company also developed an algorithm to predict which candidates have the highest probability of succeeding once hired. Spokespeople for Google say the com- pany is determined to bring the same level of rigor to personnel decisions as it does its engineering decisions.34 Moreover, Google isn’t waiting for great candidates to come for it. It’s a search-engine company after all. The company is using machine learning and big data to suggest opportunities at Google aligned to a jobseeker’s skill sets and interests.35

5.3d Retention: How Do We Keep Our Talent? The flipside of recruiting is retaining employees. You’ve burnished your brand and enticed people to join your organization. But what will make them remain with your firm? Turnover drags down morale among a firm’s staff and takes a toll on productivity. Replacing employees is extremely costly and time consuming. Yet a recent Dale Carnegie Training study estimated that nearly a quarter of U.S. employ- ees are planning to look for new jobs in the coming year, and 15 percent are already doing so.36

Why are so many employees planning to leave their jobs? And, what, if anything, can be done about it? Many managers believe employees leave their organizations for better pay and benefits they can’t match. Google offers employees free massages and rides back and forth to work. Some organizations are attracting and retaining employees by offering them student-loan repayment assistance. The insurer Aetna is one of them. Aetna will match $2,000 per year of an employee’s payments, for up to $10,000 total. Programs such as these are helping companies retain Generation Z and millennial work- ers, who tend to switch employers frequently.

But for many firms, especially smaller ones, matching pay and benefits such as these isn’t possible. Perks that don’t cost a lot can go a long way toward retaining employees though. Flextime, telecommuting, relaxed dress codes or no dress codes, summer hours, and modest performance bonuses are examples. Requiring employees to shut off their mobile phones after hours is another work-life balance perk firms are increasingly giv- ing their employees.

However, contrary to what managers believe, factors other than pay and benefits are usually what prompt employees to quit: They quit their jobs because they think their input isn’t valued, they were a poor fit for the job in the first place, or they have too few growth and advancement opportunities.

The Carnegie study found that leadership is the key reason for turnover. Supervi- sors have to demonstrate interest in and empathy toward their employees but too few do. Supervisors also need to help employees grow and develop, a topic that’s discussed in the next section.

Some firms conduct “stay” interviews with longtime employees to determine why they have remained with the firm for as long as they have. What do they like about it, and what needs improving? Human resource managers can then use that information to develop retention strategies.

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176 Part 3 Developing Effectiveness in Human Resources

5.4 Career Management: Developing Talent over Time

As a manager or owner of firm, why might you want to help employees develop their careers over time when you can just hire people in from the outside as you need them, especially since they can quit their jobs at any time? Too often firms do just that. Their career development and recruiting are reactive processes they engage in periodically when a position needs to be filled.

Proactive companies see career development and recruiting functions as strategic imperatives and, therefore, as an ongoing process designed to maximize the talents of their employees and retain them. These companies study their firms’ strategies in conjunction with their organizational charts, job analysis information, and external factors such as the labor market and the competition, and then recruit proactively and continually. At the Container Store, which regularly tops Fortune’s “100 Best Companies to Work For,” store managers spend a couple of hours a week identifying potentially good candidates for future potential openings.

Regardless of the source from which employees are recruited—internally or externally—managers play a key role in expanding the talent pools of firms. Good man- agers “grow” talent by listening to their employees’ aspirations, act as coaches, identify their strengths and areas for improvement, and offer them continual feedback. Good managers also ensure employees receive training, self-assessment tools, and information about the organization and possible career paths within it. As you have learned, internal recruiting is highly effective. It also builds loyalty between firms and their employees, something that seems to be in short supply in today’s transaction-based labor market.

Figure 5.8 shows the steps in the career management process. For example, to plan their careers, employees need organizational information—information that strategic planning, forecasting, succession planning, and skills inventories can provide. Similarly, as they obtain information themselves and use it to plan their careers, employees need to know what the career paths within their organizations are and how managers view their performance.

5.4a The Goal: Matching the Needs of the Organization to the Needs of Employees

A career development program should be viewed as a dynamic process that matches the needs of the organization with the needs of employees as those needs change. Each party has a distinct role to play in the process.

The Employee’s Role Because having a successful career involves creating your own career path—not just fol- lowing a path that has been established by the organization—employees need to take an active role in planning their careers, especially in light of how fast the world of work is changing. This includes identifying their knowledge, skills, abilities, interests, and values and seeking out information about career options in conjunction with their managers. Managers can help with the process by offering their subordinates continual feedback about their performance and providing them with self-assessment tools, training, and information about the organization and possible career paths within it. General Motors, for example, has prepared a career development guide that groups jobs by fields of work such as engineering, manufacturing, communications, data processing, financial, HR,

Why should both employees and their employers be concerned about career management programs?

LO 4

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177Chapter 5 Expanding the Talent Pool: Recruitment and Careers

and scientific. These categories give employees an understanding of the career possibili- ties in the various fields and logical ways to move from one area into another.

The Organization’s Role: Establishing a Favorable Career Development Climate Ideally, senior line managers and HR department managers should work together to design and implement a career development system that reflects the goals and culture of the organization. Says Karyn Maynard of the Container Store: “There is constant, consistent communication with management on growth opportunities. Rather than follow one career path, the company works to leverage employees’ talents for new and different roles, as well as giving them as much exposure as possible to other positions and responsibilities in the company to ensure they’re challenged.”37

Blending the Goals of Individual Employees with the Goals of the Organization As Figure 5.9 shows, the organization’s goals and needs should be linked with the indi- vidual career needs of its employees in a way that improves the effectiveness of workers and their satisfaction as well as achieves the firm’s strategic objectives. For example, if





The Goal: Matching

• Create a supportive environment.

• Communicate the direction of the company.

• Establish mutual goal setting and planning.


Career Development Initiatives

• Provide self-assessments and workshops.

• Provide career counseling. • Provide career self-management training.

• Give developmental feedback.



Opportunities and Requirements

• Identify future competency needs.

• Establish job progressions/career paths.

• Balance promotions, transfers, exits, etc.

• Establish dual career paths.


Gauge Employee Potential

• Measure competencies (appraisals).

• Establish talent inventories. • Establish succession plans.

Steps in the Career Management ProcessFigure 5.8

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178 Part 3 Developing Effectiveness in Human Resources

the technology of a business is changing and new skills are needed, will the firm retrain its employees to meet this need or hire new talent? Is there growth, stability, or decline in the number of employees needed? If employees don’t have a good understanding the goals of their firms, they could end up setting career goals that are a poor match for the firm.

5.4b Identifying Career Opportunities and Requirements To identify career opportunities and requirements managers have to continually analyze the competencies required for jobs, progression among related jobs, and supply of ready (and potential) talent available to fill those jobs. In Chapter 4, we discussed a variety of ways this can be done, such as via questionnaires and interviews. Informal discussion with different groups, such as new employees, managers, longtime employees, minority employees, and technical and professional employees, is another way. Identifying the needs and problems of these groups provides the starting point for the organization’s career development efforts.

Begin with a Competency Analysis In Chapter 4, we also discussed how firms analyze jobs carefully to identify and assign weights to the knowledge and skills that each one requires. The system one major retailer uses measures three basic competencies for each job: knowhow, problem-solving, and accountability. Knowhow is broken down into three types of job knowledge: technical, managerial, and human relations. Problem-solving and accountability also have several dimensions. Scores for each of these three major competencies are assigned to each job, and a total value is computed for each job. This information is then used to make certain that a transfer to a different job provides an employee with the following experiences:

Blending the Needs of Individual Employees with the Needs of Their OrganizationsFigure 5.9


Strategic Operational

• Current competencies • Employee turnover • Future competencies • Absenteeism • Market changes • Recruiting • Mergers, etc. • Outsourcing • Innovation • Productivity • Growth • Downsizing • Restructuring


Personal Professional

• Age/tenure • Career stage • Family concerns • Education & training • Spouse’s employment • Promotion aspirations • Ability to relocate • Performance • Outside interests • Current career path


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179Chapter 5 Expanding the Talent Pool: Recruitment and Careers

(1) an increase in at least one skill area on each new assignment, (2) an increase of at least 10 percent in total points on each new assignment, and (3) assignments in several different functional areas.38

Identify Job Progressions and Career Paths Once the skill demands of jobs are identified and weighted according to their impor- tance, it is then possible to plan job progressions. A new employee with no experience is typically assigned to a “starting job.” After a period of time in that job, the employee can be promoted to one that requires more knowledge and/or skill. While most orga- nizations concentrate on developing job progressions for managerial, professional, and technical jobs, progressions can and should be developed for all categories of jobs.

Job progressions then can serve as a basis for developing career paths—the lines of advancement within an organization—for individuals. Figure 5.10 illustrates a typical advancement for an HR associate for a large multinational corporation.

Career development and planning systems were once primarily focused on promo- tions. However, in today’s flatter organizations and more dynamic work environment, an individual’s career advancement can move along several different paths via promotions, transfers, demotions, and even exits. A promotion is a change of assignment to a job at a higher level in the organization. The new job normally provides an increase in pay and status and demands more skill or carries more responsibility. To retain employees and improve their promotability, many larger firms offer to reimburse employees for getting advanced degrees and remaining with the company for a certain period of time. “Corporate universities”—special facilities where employees receive training—are also utilized. (We will talk more about these programs in Chapter 7.)

In flatter organizations, there are fewer promotional opportunities, so many individ- uals find career advancement through lateral moves. A transfer occurs when an employee is placed in another job for which the duties, responsibilities, status, and pay and benefits

job progressions The hierarchy of jobs a new employee might experience, ranging from a starting job to jobs that successively require more knowledge and/ or skill.

career paths Lines of advancement in an occupational field within an organization.

promotion A change of assignment to a job at a higher level in the organization.

transfer The placement of an employee in another job for which the duties, responsibilities, status, and pay and benefits are approximately equal to those of the previous job the person held.

Vice president, HR

Corporate HR director

Division HR director

Corporate HR manager Asst. division HR director

Plant HR manager

Regional HR manager Asst. plant

HR manager HR

supervisor Regional HR

associate HR


Typical Line of Advancement in HR ManagementFigure 5.10

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are approximately equal to those of the previous job he or she held (although as an incen- tive to make a transfer, organizations sometimes offer transferred employees small pay increases). Individuals who look forward to change or want a chance to learn more about their organizations and obtain different skills often seek out transfers. Frequently these employees do so to augment their skills so they will be more promotable in the future.

A transfer sometimes requires the employee to change work group, workplace, work shift, or organizational unit; it may even necessitate moving to another geographic area. Thus, transfers make it possible for an organization to place its employees in jobs where there is a greater need for their services and where they can acquire new knowledge and skills.

A downward transfer, or demotion, moves an individual into a lower-level job that can provide developmental opportunities. Although a demotion is ordinarily considered unfavorable, some individuals actually may request it to return to their “technical roots.” Engineers and computer programmers who get promoted to man- agers but end up missing their former jobs are examples. It is also not uncommon for organizations to appoint temporary leaders (especially in team environments) to positions with the understanding that they will eventually return to their former jobs.

Transfers, promotions, and demotions require individuals to adjust to new job demands and usually to a different work environment. A transfer that involves moving to a new location within the United States or abroad requires the person to not only adapt to a new work environment but to new living conditions. Employees with families have the added responsibility of helping family members adjust to the new living arrange- ments. Even though some employers provide all types of relocation services—including covering moving expenses, help selling a home, and providing cultural orientation and language training—there is always some loss in the employee’s productivity during the relocation process. Pretransfer training, whether it’s related to job skills or to the lifestyle changes required is one of the most effective ways to reduce lost productivity.

Of course, many employees choose to exit their organizations as part of their career development. When a person’s career opportunities within a firm are limited and his or her skills are in demand externally, the best career options could be for the individual to switch companies or to work as a freelancer, consultant, or entrepreneur. Although some employees leave voluntarily, other employees are forced to leave. Larger organizations often provide outplacement services to help terminated employees find jobs elsewhere.

Rather than laying off employees if it can help it, Scripps Health, a California-based hospital group, has created a career center for workers who might otherwise lose their jobs.39

demotion A downward transfer that moves an individual into a lower-level job that can provide developmental opportunities.

outplacement services Services provided by organizations to help ter- minated employees find a new job.

Career Path of Jeff Bezos, Founder of

1986—Graduated from Princeton University with a B.S. in electrical engineering and computer science

1986—Hired by Fitel, a telecommunications and informa- tion technology firm that created software for tracking international stock trades

1988—Hired by Bankers Trust, Co., a financial firm that specialized in risk management utilizing new sophisticated computer systems

1990—Promoted to vice president

1990—Hired by D.E. Shaw, an investment and hedge fund company

1992—Promoted to senior vice president


Highlights in HRM Box5


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181Chapter 5 Expanding the Talent Pool: Recruitment and Careers

(See Case Study 1 at the end of the chapter.) However, even with the best career planning, it is almost impossible for people to have perfect certainty about where their careers are going. People change over time, and because of that, their needs and interests change. Moreover, successful career paths often do not proceed in a lockstep manner. As Highlights in HRM 5 mentions, before founding, Jeff Bezos spent a number of years in the financial industry. In terms of their career advancements, many people note that they were either “in the right place at the right time” or carved out entirely new career paths for themselves.

Track Employees’ Career Stages A person’s knowledge, skills, abilities, and attitudes as well as career aspirations change with age and maturity. The challenges and frustrations people face at the same stages in their careers are remarkably similar. A model describing these stages is shown in Figure 5.11. The stages are (1) preparation for work, (2) organizational entry, (3) early career, (4) midcareer, and (5) late career. The typical age range and the major tasks of each stage are also presented in the figure.

The first stage—preparation for work—encompasses the period prior to entering an organization, often extending until age 25. It is a period in which individuals must acquire the knowledge, abilities, and skills they need to compete in the marketplace. The second stage, typically from ages 18 to 25, is devoted to soliciting job offers and selecting

Stage 5: Late Career (ages 55–retirement):

Continue to improve one’s productivity, mentor other employees, and prepare for retirement.

Stage 4: Midcareer (ages 40–55):

Reappraise early career and early adulthood goals, reaf�rm or modify goals, continue to improve one’s productivity, and mentor other employees.

Stage 3: Early Career (ages 25–40):

Learn job, learn organizational rules and norms, �t into chosen occupation and organization, increase competence, pursue goals.

Stage 2: Organizational Entry (ages 18–25):

Obtain job offer(s) from desired organization(s), select appropriate job based on complete and accurate information.

Stage 1: Preparation for Work (ages 0–25):

Develop occupational self-image, assess alternative occupations, develop initial occupational choice, pursue necessary education.

Stages of Career DevelopmentFigure 5.11

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182 Part 3 Developing Effectiveness in Human Resources

appropriate jobs. During this period, a person might also be involved in preparing for work. The next three stages entail fitting into a chosen occupation and organization(s), modifying one’s goals, continuing to improve one’s productivity, helping groom other employees, and finally preparing for retirement.

Offer Different Career Paths As we have indicated, one of the ironies of organizations is that people in technical careers—successful engineers, scientists, and so on—are often promoted right out of their area of specialization into management. Instead of doing what they are good at, they end up in jobs they aren’t well suited for or don’t enjoy.

The solution has been to develop dual career paths, or tracks, that provide for progression in special areas such as information technology, finance, marketing, and engineering, with compensation that is comparable to that received by managers at different levels. As we explained in Chapter 2, Microsoft offers software engineers both a management-focused and technical-specialist career track and allows them to move back and forth between the two.

Fast-track programs are another way to give employees exposure to different types of jobs, particularly younger employees with high potential who seek meaningful training assignments whom a firm is trying to retain. In fast-track programs, “HIPOs” (high-potential employees) progress rapidly through a number of managerial positions designed to expose them to different functions within the organization. GE has an

Many new grads and seasoned professionals alike are choosing to work for less-than-500-employee firms because of the many advantages they offer, and smaller firms are welcoming these workers with open arms. For midterm and advanced career professionals, a smaller company often means jumping straight into the limelight. The change is rejuvenating because they find themselves taking on more diverse responsibilities, getting involved in new arenas, and seeing more clearly how their own efforts impact the company’s results. “You are more likely to be lis- tened to, and to feel that you are an important part of the company and that your ideas really matter,” says Lindsey Pollak, a management expert of next-generation career trends. That’s what happened to Mike Barnes, a logistics executive who went to work at Halton Co., a construction equipment provider in Portland, Oregon. Barnes says the closer connection to the mission of the business gave him a level of job satisfaction he had not felt in a long time.

However, employees who opt for working in a small firm cannot expect to find everything they might get in a larger corporation. Tighter budgets mean smaller

Small Business Application

companies sometimes cannot afford to pay salaries equal to those of big firms, and they often cannot provide the support systems or perks, like generous expense accounts, hefty bonuses, and company-paid smartphones. But many small employers provide alluring trade-offs such as shorter workweeks, less travel, and work-life balance incentives, including telecommuting and flextime.

Where people decide to work really comes down to determining how they are going to meet their career and life goals. Notes management author and analyst Tony Jacowski, “Your choice of organization should be based on the quality of work experience you will gain rather than the size of the organization.”

Sources: Michael Mazzeo, Paul Oyer, and Scott Schaefer, “What Small Businesses Do Better than Corporate America,” Fortune (June 10, 2014),; Sarah E. Needleman, “Moving to a Small Company Can Lead to Big Rewards,” Wall Street Journal (March 5, 2008),; Lindsey Pollak, “The Advantages of Working for a Small Company,”; Tony Jacowski, “Benefits of Working in a Small Company vs a Corporation,”; Jacqueline Parks, “The Benefits of Working for a Small Business,”

Small Companies Often Offer Big Rewards

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183Chapter 5 Expanding the Talent Pool: Recruitment and Careers

intensive two-year program of this type. Employees in the program might, for example, spend a number of months in the company’s energy division in Atlanta, its aviation division in Cincinnati, and in Brazil working for GE’s oil and gas division.

However, proactive companies try to make the most of all of their talent rather than just high-potential employees. It’s not uncommon for an employee to do poorly in one position but be an excellent fit for another, or an employee who is burned out to be reinvigorated by a different job role.

One way to help rank-and-file employees learn new skills, identify new roles they might aim for in the future, and retain them is by allowing them to exchange or swap jobs. Virgin America and PricewaterhouseCoopers have programs that allow flight attendants and junior staffers, respectively, to swap jobs with their counterparts in the United States and Australia. BNSF Railway allows employees to switch jobs in different areas and in different locales. The swaps are referred to as “career development moves.”40

5.4c Career Development Initiatives Workers today are not waiting to get laid off. They are taking charge of planning their career paths and getting the skills and development they need to go from one job (and employer) to the next. Employers who understand this trend can take preemptive action by having career conversations with employees and implementing career management programs to prevent them from leaving. Next, let’s look at some of them.41

Career Counseling A key part of developing your talent pool is talking to your employees about their current job activities and performance, personal and career interests and goals, per- sonal skills, and suitable career development objectives. This can be provided by HR staff members, managers and supervisors, or outside consultants. Often it is done as part of the performance appraisals. Once the conversation has begun, how those goals can be achieved and fit in with the organization’s goals can be discussed and a career “action” plan for the employees established. The telecommunications company Verizon has rolled out a program whereby career advisors counsel employees one on one and hold periodic webinars and workshops about the career and education opportunities the company offers. The firm also has an online career center with careers maps to help employees chart possible job progressions.42

Some organizations have instituted “career self-management” programs to help employees learn to continuously gather feedback and information about themselves and their careers. Employees typically undertake self-assessments to increase their awareness of their own career attitudes and values and attend workshops. In addition, they are encour- aged to widen their viewpoint beyond the next company promotion to broader opportu- nities in the marketplace, attend conferences, and develop good long-term relationships with their bosses and colleagues. General Electric has developed an extensive set of career development programs to help employees explore life issues that affect career decisions.43

Mentoring Programs People often mention coworkers who positively influenced them early on in their careers. Individuals who coach, advise, and encourage employees of a lesser rank are called mentors. Millennials consistently say they want coaching and feedback. When Deloitte surveyed millennials, it found the ones who planned to stay with their employ- ers more than 5 years were twice as likely to have a mentor as those who did not.44

mentors Individuals who coach, advise, and encourage employees of a lesser rank.

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Mentors need not be more senior employees, however. Reverse mentoring is a program whereby younger employees are called on to mentor older employees and executives about social media trends, new technology, and marketplace trends. Hewlett-Packard, Cisco, and the advertising agency Ogilvy & Mather are among the companies that have implemented reverse mentoring. Spencer Osborn, an executive with Ogilvy and Mather, said his younger mentors helped him jazz up his Twitter posts, which had a reputation for being boring. At Cisco, when the word got out that some executives had younger mentors, other executives wanted mentors, too. Reverse mentoring programs help younger employees feel valued and “heard” and can increase their retention.45

Mentoring relationships don’t have to be formal though. Informal mentoring goes on daily within every type of organization. Generally, the mentor initiates the rela- tionship, but sometimes an employee will approach a potential mentor for advice. Most mentoring relationships develop over time on an informal basis. They frequently end that way, too. A study of 15 high-ranking executive women found that although many of them lacked formal mentors, they had successfully engaged in a kind of “360-degree” networking: The women made it a point to form and maintain relation- ships with people above, below, and at the same level as themselves, which helped advance their careers.46 Highlights in HRM 6 shows some of the myths about men- toring relations. Highlights in HRM 7 shows how, as an employee you can take the initiative to form a relationship with a mentor, even if your firm doesn't have a formal mentoring program.

Not surprisingly, mentoring and networking are being done electronically. “A lot of our people work virtually, and [electronic] mentoring can erase geographic and busi- ness-unit borders,” explained one IBM manager.47 At Rockwell Collins, a communica- tion and aviation electronics company, nearly 6,000 employees utilize an e-mentoring software solution. The software can connect to a firm’s existing talent management software, gauge competency gaps, and match mentors and mentees based upon their knowledge and learning needs.48

reverse mentoring A program whereby younger employees are called on to mentor older employees and execu- tives about social media trends, new technology, and marketplace trends.

Myths about Mentors

�� Mentors exist only for career development. Sometimes the mentor focuses on formal career development. Sometimes the mentor is teacher, counselor, and friend.

�� You need only one mentor. We can have multiple men- tors in our lives. Different mentors provide different things.

�� Mentoring is a one-way process. Learning flows both ways. The mentor often learns from the protégé, so the growth is reciprocal.

�� A mentor has to be older than the protégé. Age does not matter. Experience and wisdom matter.

�� A mentor has to be the same gender and race as the protégé. Seek mentors who are different from you.

�� Mentor relationships just happen. Being in the right place at the right time can help, but don’t be afraid to actively seek a mentor.

�� High-profile people make the best mentors. Prestige and success can help, but good mentors are people who challenge you according to your needs, readiness, and aspirations.

�� Once a mentor, always a mentor. Over time, the men- tor should let the protégé go his or her own way but maintain contact. The relationship changes over time.

Highlights in HRM6


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Tuition Assistance Programs Large corporations often offer their employees tuition assistance to help them further their careers if they take courses related to the firms’ businesses. For example, manag- ers or would-be managers might be reimbursed for taking postgraduate classes such as MBA courses or other courses related to their professional development. The terms of the programs vary as do the amounts employees are reimbursed annually. Sometimes the amount of reimbursement depends on the grade an employee earns in class. Com- panies often require employees who are reimbursed for courses to remain with their firms for a certain amount of time after completing the courses.

Career Plateau Initiatives Career plateaus are common obstacles in the career development of employees. A career plateau is a situation in which, for either organizational or personal reasons, the probability of moving up the career ladder is low. There are three types of plateaus: structural, content, and life. A structural plateau marks the end of promotions. A content plateau occurs when a person has learned a job too well and is bored with day-to-day activities. A life plateau is more profound and may feel like a midlife crisis. People who experience life plateaus often have allowed work or some other major factor to become the most significant aspect of their lives, and they experience a loss of identity and self-esteem when they are no longer advancing in their careers. Figure 5.12 lists some probing questions managers can ask themselves if they think their employees are expe- riencing a career plateau.

Organizations can help individuals cope with plateaus by providing them with opportunities for lateral growth or allowing them to choose their own assignments when opportunities for advancement do not exist. Companies with international divisions

career plateau A situation in which for either organizational or personal reasons the probability of moving up the career ladder is low.

Establishing a Relationship with a Mentor

1. Research the person’s background. The more you know about your potential mentor, the easier it will be to approach him or her and establish a relationship that will work for both of you.

2. Make contact with the person. Introduce yourself or have a mutual friend or acquaintance do it. Alter- nately, get involved with your potential mentor in business settings. That will help the mentor see your skills in action.

3. Request help on a particular matter. Let the mentor know that you admire him or her, and ask for help in that arena. For example, you might say, “You’re good at dealing with customers. Would it be ok if I came to you for advice on my customers from time to time?”

4. Consider what you can offer in exchange. Mentoring is a two-way street. If you can do something for your potential mentor then, by all means, tell him or her.

5. Arrange a meeting. Prepare a list of questions for the meeting. Listen closely.

6. Follow up. Try some of your potential mentor’s sugges- tions and share the results. Ask to meet on an ongoing basis. Express appreciation and suggest that you meet with your mentor regularly, or ask permission to get help on an ad hoc basis.

Sources: Mattia Martin and Dario Cavenago, International Journal of Training & Development 21, no. 1 (March 2017), 18–34; Jeff Barbian, “The Road Best Traveled,” Training 39, no. 5 (May 2002): 38–42; Kathleen Barton, “Will You Mentor Me?” Training and Development 56, no. 5 (May 2002): 90–92.

Highlights in HRM7


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186 Part 3 Developing Effectiveness in Human Resources

can encourage employees to take assignments abroad to expand their horizons, lead philanthropic and volunteer activities for their firms, or take sabbaticals. A sabbatical is an extended period of time during which an employee leaves an organization to pursue other activities before returning to the firm. A sabbatical can help prevent employee burnout and increase a person’s loyalty to a company. Some but not all sabbaticals are paid. About 20 percent of companies on Fortune’s “100 Best Companies to Work For” list offer paid sabbaticals. Some smaller companies do, too. The convenience-store chain QuickTrip does for employees with 20 years of service.49 That might sound like a long time to wait, but due its great employment practices, many QuickTrip employees end up working for the firm for decades.

5.5 Developing a Diverse Talent Pool As an employer, would you like to hire people who are extremely loyal to your firm and likely to remain with it? Are their groups of employees you might have over- looked who could help you grow your business? Firms look to diverse talent not only for these reasons but to meet their legal obligations to provide equal employment opportunities. Employers often develop formal EEO/affirmative action policies to recruit and promote members of protected classes so that their representation at all levels within the organization approximates their proportionate numbers in the labor market.

However, the reasons to develop a diverse talent pool are not merely legal ones— not by a long shot. Today, ethnic minorities represent approximately 30 percent of the total U.S. population. In 2060, they are expected to comprise 60 percent of the population. These groups have a growing amount of buying power. Some researchers predict that companies that fail to diversify their talent pools will have a hard time identifying with their target customers and competing with firms that do. But per- haps most importantly, as companies face tougher competition in the United States and abroad, they will need all the leadership, productivity, innovation, and creativity the talent pool has to offer. A diverse talent pool increases the range of human capital available to the firm.

sabbatical An extended period of time in which an employee leaves an organization to pursue other activities and later returns to his or her job.

“No” answers may indicate an employee is facing a career plateau.

1. Does the employee accept high visibility assignments

2. Has the employee continued to advance his or her education, both formal and vocational?

3. Is the employee recognized by leaders in the organization, routinely promoted, and rewarded?

4. Does the employee get high performance ratings and larger-than-normal raises?

5. Does the employee have a career plan with measurable objectives that has been updated recently?

How are the career challenges of minori- ties both similar to and different from those of women in your opinion?

LO 5

Career Plateau QuestionsFigure 5.12

Source: John Rosche, “Who’s Managing Your Career?” Contract Management 44, no. 2 (February 2004): 20–22.

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187Chapter 5 Expanding the Talent Pool: Recruitment and Careers

5.5a Women Women make up a little under half of the total U.S. labor force and are the largest of the protected classes. A major employment obstacle for women, both skilled and unskilled, is the stereotyped thinking that persists within our society. Women traditionally have been at a disadvantage because they have not been part of the so-called “good old boys’ network.” That network is an informal one of interpersonal relationships that has tra- ditionally provided a way for senior (male) members of the organization to pass along news of advancement opportunities and other career tips to junior (male) members as well as to recommend them.

In the past, women were not as likely as men to have professional training and preparation for entrance or advancement into management positions. But that’s not the case today. Now, three of five U.S. college graduates are women, and according to the U.S. Census Bureau, more women hold bachelor’s degrees than do men. Women also hold 51.5 percent of management, professional, and related positions. At IBM, scores of women run $100-million-plus divisions.

Still, the entire picture is not necessarily a rosy one. Women still make less than men, on average, and sometimes feel as if the workplace is a “man’s world,” and the proportion of women in top echelons of management, although growing, still remains extremely low.50 In 2017, only 29 of the companies in the Fortune 500 were run by women. But that is 26 more than there were in 2000. Although these data suggest that there has been some progress, there is much left to do to break the “glass ceiling.”

Eliminating Women’s Barriers to Advancement Glass ceiling audits are conducted by the U.S. Department of Labor to identify practices that appear to hinder the upward mobility of both qualified women and minorities. Black women in particular are at risk of not being promoted relative to other groups, say labor economists.

Organizations are increasingly conducting their own glass ceiling audits prior to government review to avoid fines and externally imposed corrective action. These audits can document any ceilings and the reasons they exist. Self-audits are one step toward tapping the potential of a diversified workforce. Following the largest class-action suit ever brought in the United States, Walmart began conducting self- audits. The company now has certain promotion goals for women and minorities. For example, if 40 percent of the qualified people who apply for assistant store manager positions are women, 40 percent of those hired should be women. JCPenney created advisory teams to help increase the representation of women and minorities at the senior management level and to find ways to make the company’s affirmative action plan more effective. Each team is composed of 16 to 18 management associates. Firms are establishing professional groups within their organizations to help minorities, including women, connect with one another and combat their difficulty in advanc- ing in organizations. At BNSF Railway, a women’s network serves as a system for encouraging and fostering women’s career development and for sharing information, experiences, and insights. Women in lower levels of the company are mentored by women at higher levels. Corporate officers are invited to regularly scheduled network meetings to discuss such matters as planning, development, and company perfor- mance. Minorities and women are also breaking through the glass ceiling by starting their own businesses. As one entrepreneur put it, “It’s not hard to break through the glass ceiling when you own it.”

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188 Part 3 Developing Effectiveness in Human Resources

Accommodating Families One of the major problems women have faced is balancing their careers with their families. This is particularly true of single mothers, who are a growing segment of the population. Women with young children often experience conflict between their responsibility to the children and their duty to the employer. If the conflict becomes too painful, they may decide to forgo their careers, at least temporarily, and leave their jobs.

In recent years, many employers, including AFLAC, SunTrust Banks, Quaker Oats Company, Abbott Labs, Bristol-Myers Squibb, IBM, and the accounting firm KPMG, have launched programs mutually advantageous to the career-oriented woman and the employer. The programs, which include alternative career paths, extended leave, flex- time, job sharing, and telecommuting, provide new ways to balance career and family. AFLAC offers families hot take-home meals at their onsite cafeterias to ease the burden of employees’ having to prepare dinner after leaving the office for the day. The company also subsidizes babysitting for parents on Saturday nights so they can spend some free time together.51 These efforts are paying off. Both IBM and KPMG, for example, report that their programs have helped them retain and increase their numbers of women workers.

Retaining employees who are part of dual-career couples can also be a challenge, especially if an employee needs to be relocated or travel extensively. To help make the transition easier, organizations now offer job-finding assistance for spouses of employ- ees who are relocated, including payment of fees charged by employment agencies, job counseling firms, and executive search firms.

Organizations are also developing networking relationships with other employers to find jobs for the spouses of their relocating employees. These networks can provide a way to “share the wealth and talent” in a community while simultaneously assisting in the recruitment efforts of the participating organizations.52

Mary Barra broke through many barriers on her way to becom- ing the CEO of GM.

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189Chapter 5 Expanding the Talent Pool: Recruitment and Careers

Relocating dual-career couples to foreign facilities is a major issue that international employers face. Fewer employees are willing to relocate without assistance for their spouses. Many employers have developed effective approaches for integrating the vari- ous allowances typically paid for overseas assignments when husband and wife work for the same employer. Far more complex are the problems that arise when couples work for two different employers. The problems associated with overseas assignments of dual-career couples will be examined in greater detail in Chapter 15.

5.5b Minorities Since the passage of the Civil Rights Act of 1964, many members of minority groups have substantially improved their economic well-being. However, for many minorities, employment opportunities still remain limited because of educational and societal dis- advantages. The unemployment rates for minority youths are particularly high.

Black Collegian Online and Diversity Employers are two online job boards aimed at minority jobseekers and companies that want to hire them. Facebook and LinkedIn have functions that allow recruiters to create targeted advertising campaigns designed to reach diverse groups. Community action agencies, civil rights organizations, and church groups within communities can help recruiters reach inner-city residents.

Internships are another way in which organizations are building relationships with prospective minority employees. The Chicago Tribune offers a newsroom training program for aspiring minority journalists who want to work as news reporters. ABC, NBC, CBS, and Fox networks work with the Emma L. Bowen Foundation to provide internships, college scholarships, and postgraduate employment for minorities. The defense contractor Lockheed Martin teamed up with Operation Enterprise, the Ameri- can Management Association’s summer program for high school and college students, to offer 10-week paid internships to students of America’s historically black colleges and universities.53

Like with women’s networks, larger firms often have networks, or groups, minori- ties can join to help them advance their careers. General Electric’s African-American Forum (AAF) began informally but has grown into a major initiative.54 The company also has forum networks for employees who are Asian and Pacific Americans, women, Hispanics, gays, lesbians, bisexuals, and transgenders. Highlights in HRM 8 shows how to design a tailored approach to diversity planning.

5.5c People Who Are Disabled If someone told HR managers where they could find millions of working-age people who are proven problem-solvers, provide a tax benefit for their companies, and have higher retention rates than average employees, they likely would ask: “What’s the catch?” Not only is there no catch, but such a group of potential employees also currently exists. The group is those individuals with disabilities.55

According to the U.S. Census Bureau, more than 50 million Americans of working age have a disability. Currently, about 18 percent of disabled workers are unemployed, according to the Bureau of Labor Statistics.56 Of those who do not work, most would like to. They often aren’t working because employers mistakenly believe there are no jobs they might be able to do.

The Job Accommodation Network (JAN), sponsored by the U.S. Department of Labor, is a site that connects disabled jobseekers with employers. JAN also provides

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information about how to accommodate different types of disabilities in the workplace. According to data from the U.S. Department of Labor’s Office of Disability Employment, 15 percent of accommodations cost nothing; 51 percent cost between $1 and $500; 12 percent cost between $501 and $1,000; and 22 percent cost more than $1,000.57 Many managers are unaware of how low cost most accommodations can be overall.

IBM hired its first disabled employee in 1914. This is not surprising, since the company makes software and other products that help eliminate workplace barriers for individuals with disabilities. IBM’s viewpoint is that no employee should be over- looked because of a disability, thinking he or she may be the person to develop the next generation of hardware or software from which the company will profit. Several of the company’s researchers have a hearing impairment; they are responsible for world-class work with innovations such as voice recognition technology.

IBM also participates in mentoring and internships for people with disabilties. The Workforce Recruitment Program for College Students with Disabilities (WRP) is one internship organization. WRP puts together profiles of thousands of college students and recent graduates seeking summer internships or permanent employment nation- wide with federal agencies. These profiles are then made available free of charge to busi- ness owners. Similarly, the American Association for the Advancement of Science has a program called Entry Point, which has placed hundreds of science and engineering students with disabilities in internships in the public and private sectors.

Tips for Enhancing a Firm’s Diversity

�� Ascertain whether diversity is adequately represented in the firm’s workforce by comparing company data to the statistics on diversity within the general workforce in the region. Diversity data within a firm should be broken down and measured across various specific categories, such as management, customer service, accounting, and so forth.

�� Clearly define the goals of the diversity recruitment and retention program, and ensure managers at all levels understand its significance and support its motives.

�� Understand demographic changes in the workforce.

�� Build long-term relationships with minority organiza- tions, colleges, and other strategic resources.

�� Become the employer of choice for a diverse work- force by developing a diversity-friendly corporate culture and fostering a culturally sensitive work environment. Showcase the fact with a diversity statement on social media and your website. Include diversity stats and photos, and testimonial videos of minority employees at various levels.

�� Establish a presence among minority communities by participating in job fairs, targeting recruitment adver- tising to minority publications such as Diversity Inc., and monitoring websites where résumés of diverse individuals are more likely to be found.

�� Use internal employee resource groups. Demonstrate the organization’s commitment to diversity by making it a formal part of the employee referral program.

�� Train hiring managers to ensure diverse applicants are not discounted in the interviewing process because they are different.

�� Measure the efficacy of these recruitment efforts, and use the results to improve the program.

Sources: Condensed from Patricia Digh, “Getting People in the Pool: Diversity Recruitment That Works,” HR Magazine 44, no. 10 (October 1999): 94–98; Sungjoo Choi, “Workforce Diversity and Job Satisfaction of the Majority and the Minority,” Review of Public Personnel Administration 37, no. 1 (March 2017): 84–107; John Sullivan and Sally Baack, “Diversity Recruiting Is a Failure: It’s Time to Raise the Bar,” http://www.multicultur-; Aaron Green, “Diversity Recruiting: Getting It Right,”

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191Chapter 5 Expanding the Talent Pool: Recruitment and Careers

5.5d Veterans The federal government requires firms that do business with it to hire a certain per- centage of workers who are veterans. But firms aren’t recruiting military personnel just because they do business with the government and have to, but because it’s good business. AT&T, Starbucks, Amazon, Capital One, and Lowe’s are among the many companies that have found veterans to be a valuable source of candidates. Employers say veterans have a good work ethic, are disciplined, follow the chain of command, and make good decisions in different situations, such as mission types of operations. Accord- ing to a study by, 65 percent of employers said, given the choice between two equally qualified applicants, they are more likely to hire the veteran.58

Numerous websites are dedicated to recruiting veterans. They include Veterans4Hire,, and Milicruit holds virtual job fairs, which can help vets apply for jobs while they are still enlisted, if they are disabled, or otherwise are unable to travel to a regular job fair. Contacting and forming a relationship with a military base is another way. Most military bases have career centers for people leav- ing the military. These are often the first place military personnel turn to when they are transitioning into civilian lives. The U.S. Department of Labor’s VETS program is another good source. VETS has local veterans’ employment representatives across the country dedicated to increasing the employment of former military members.59

5.5e Older Employees A growing number of people over 65 are continuing to work—a trend that is likely to increase as more babyboomers retire.60 The move has come both as a result of changing workforce demographics, rising health care costs, and babyboomers spending down their retirement savings.

During annual meet- ings of shareholders

in 2017, Starbucks announced a new goal to hire 25,000 veterans

by 2025.

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192 Part 3 Developing Effectiveness in Human Resources

Why should a company hire older workers? For one, because they have proven employment experience, are reliable, and are more likely to remain with a firm than job hop. They are also an excellent recruitment source to staff part-time and full-time positions that are otherwise hard to fill. Independent contracting or consulting, on-call work (such as substitute nursing or teaching), and temporary work in administrative or IT roles are examples. Some retirees return or stay in the workforce at the request of their employers, who cannot afford to lose the knowledge accumulated by longtime employ- ees or their reliable work habits that have a positive effect on the entire work group.

But even though age discrimination is illegal, it is still a problem. Managers wonder whether older employees are adaptable enough to learn new processes and technolo- gies. Younger workers are more likely to get interviews than older people, studies have shown. To counter problems such as these, the AARP, the advocacy group for retired people, offers virtual job fairs and online videos to help its members assess, brush up on, and learn new tech skills. The organization also partners with firms that recruit older workers and offer them flexible work schedules and health benefits. The Home Depot, Staples, and Toys “R” Us are some of the firms featured on the site. The AARP will even pay an older worker’s wages and workers-compensation costs as part of a “try before you hire” program it has with companies. After a trial period of working for a company, the firm can decide whether or not it wants to hire the worker.

The decisions a company makes about talent need to be considered within the context of the busi- ness’s strategies: What types of positions are needed; where the talent is needed and where can it be found; the strength of the firm’s employment “brand”; how the talent can be attracted; and who will recruit the talent and make the final hiring decision. Which internal and external sources and methods are used in recruiting will depend on the strategy and goals of the organization, conditions of the labor market, and specifications of the jobs to be filled.

Outside candidates are recruited when inter- nal talent is lacking or a firm wants to hire employees with expertise from other organizations for competi- tive reasons and to prevent the inbreeding of ideas within their organization. To help meet a firm’s EEO requirement and diversify its talent pools, firms also look externally for candidates. Advertisements, the Internet, social networks, mobile recruiting, employ- ment agencies, tapping educational institutions and professional associations, and re-recruiting are among the many ways firms recruit external candidates.

Employers usually find it advantageous to use internal promotions and transfers to fill as many

LO 1

LO 2


openings as possible above the entry level. Doing so is faster, less expensive, and more likely to result in a successful hire. It also builds loyalty among workers. Internal job postings, performance appraisals, skills inventories, and replacement charts are ways in which firms identify internal talent.

HR managers have many tools available to them to gauge their efforts and improve their recruit- ing. Using realistic job reviews, surveying managers and applicants about the process, and examining metrics such as the cost per hire, time to fill a posi- tion, yield ratios, and acceptance rates are some of the ways in which firms evaluate their recruiting efforts. An applicant tracking system (ATS) can help a firm automatically track and calculate many of these statistics. The flipside of recruiting is retain- ing employees. Pay and benefits are important, but nonmonetary aspects, such as the support of one’s supervisor and the ability to further one’s career in an organization, can ultimately lead to an employee’s retention.

Identifying and developing talent is a responsi- bility of all managers. A career development program is a dynamic process that should integrate the career

LO 3

LO 4

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193Chapter 5 Expanding the Talent Pool: Recruitment and Careers

Name some companies with whom you have done business. Then discuss how you view their employer brands. Would you want to work for them or not? How might these firms improve their employer brands?

Think of a new type of business you would like to start up or manage. Which sources would you use to recruit employees who could help you make it a success?

LO 1

LO 2

Explain how realistic job previews (RJPs) oper- ate. As a manager or business owner, would you use them?

How can a career management program help an organization forced to downsize its operations?

What barriers to career advancement do women and minorities face?

LO 3

LO 4

LO 5

Discussion Questions

goals of employees with the goals of the organization. Job opportunities can be identified by studying jobs and determining the knowledge and skills each one requires. Once that is accomplished, key jobs can be identified, and job progressions can be planned. These progressions can then serve as a basis for developing the career paths of employees. Employees need to be made aware of the organization’s philosophy and its goals; otherwise they will not know how their goals match those of the organization. Firms can “grow” their internal talent by offering employees different career paths and programs, counseling them about their careers, establishing mentoring and tuition assis- tance programs, and helping them overcome career plateaus.

The first step toward facilitating the career development of women is to eliminate barriers to their advancement. Creating professional networks for women, providing them with managerial training and mentors, and accommodating families have been found to be effective ways to facilitate women’s career development.

A diversified workforce is composed of many different groups, an important segment of which is minority groups. Many organizations have special programs such as internships that provide minority groups with hands-on experience as well as special training opportunities. Other groups that require the attention of management are the disabled, veterans, older workers, and dual-career couples, who often need flexible working options.

LO 5

acceptance rate

applicant tracking system (ATS)


career paths

career plateau


employee leasing

employee profile

independent contractors

internal labor market

job progressions


mobile recruiting


nine-box grid

outplacement services

passive jobseekers


quality of fill

realistic job preview (RJP)

recruiting process outsourcing (RPO)


reverse mentoring


time to fill


virtual job fair

yield ratio

Key Terms

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HRM Experience

Career Management 2. Ask each person to identify his or her career goals and

how they have changed or are expected to change over time.

3. Ask each person to describe the sequence of events that led to where he or she is.

4. Ask each person what (if anything) he or she would do differently. Ask what advice he or she has for you about how to approach your career.

Do successful people plan their careers in advance and then work toward their goals in a logical and sequential way? Or does a career occur as a result of a person’s preparedness, insight, and taking advantages of opportunities as they arise?

Assignment 1. Form teams of four to six members. Identify three dif-

ferent people to interview about their careers. One person should be in the early stages of his or her career, one should be in midcareer, and one should be in the final stages of his or her career.


CASE STUDY A Lifecycle Approach to Talent1

To build a workforce that can respond to the health- care industry’s rapid transformation, Scripps Health, in San Diego, accommodates the needs of employees at the beginning, middle, and later stages in their careers. The result is higher morale and impeccable performance. “One-size-fits-all HR practices don’t work when you want a diverse, knowledge-based workforce,” says Victor Buzachero, corporate senior vice president for innovation, human resources, and performance management. “Originally many HR practices were designed primarily to be consistent and to avoid legal issues. Today our focus is on HR practices that engage people and encourage a higher contribution.”

For example, Scripps has implemented daily “huddles,” where workers can offer input and affect decisions—something especially prized by mil- lennial employees. “In the past workers wanted a supervisor who acted like a “boss.” Buzachero say, “Today they want a supervisor who acts like a coach, and we’re educating our supervisors to be strong coaches.”

In one program, seasoned nurses are trained to mentor recent nursing graduates to improve their critical-thinking skills; as a result, the graduates indi- cate they feel more prepared for their role. Scripps currently offers over 1,870 skills-building, leadership training, and continuing education units.

Scripps also encourages movement across the organization to remain a career destination for talent mid-career. For example, workers in medical surgi- cal units can receive 26 weeks of training to shift into areas where skilled workers are in short supply, such as operating rooms.

Also, traditional retirement packages that max out at age 60 can encourage these experienced work- ers to leave, even if they want to continue working. Scripps lets retirement plans continue to grow past age 65, while allowing staged retirement programs such as job sharing. “One of our most successful clinical nursing units is managed by two women who job share,” Buzachero says. “If we didn’t offer that kind of flexibility, they may have gone somewhere else.”

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195Chapter 5 Expanding the Talent Pool: Recruitment and Careers

This lifeycle approach creates a diverse workforce able to address the healthcare industry’s mandate to improve outcomes while cutting costs. “As patients ask for more and more from us, we need a workforce with all-encompassing view and innovative approach, Buzachero says. “But we can only build a highly skilled, varied workforce if we satisfy the many career needs of a varied workforce.”


1. In what ways does the Scripps lifecycle approach lead to a more diverse workforce?

2. Why are managers increasingly being encouraged to act as coaches? Do you see any problems with a manager acting as both a coach and a supervisor?

Source: Scripps Health.

Homegrown Talent: Mary Barra Rises to GM’s Top Post

When Mary Barra was a kid, she used to hang out in the garage with her dad tinkering on cars. Little did her father, a lifelong die-maker for GM’s Pontiac division, know that his daughter would one day become the CEO of the company and the first woman ever to lead a major U.S. car manufacturer. But that’s what happened in 2013. Barra was unanimously chosen by the board members of General Motors to lead the company—a decision employees cheered when they heard about it over the loudspeakers at corporate headquarters. Maybe they cheered because unlike GM’s previous two CEOs, Barra was one of them. Having worked in multiple departments at GM since she was 18, she knows the car business through and through. “There’s nobody with more years of honest ‘car guy’ credentials than she has,” says Ross Gordon in the Ross School of Business at the University of Michigan.

Barra, who grew up in a Detroit suburb, initially began working for GM in the 1980s as part of a work- study program. In this program, which is also referred to as a co-op program, students alternate working full time (for pay) and going to college. She earned an undergraduate degree in electrical engineering and GM later sent her to Stanford, where she got an MBA. During her career she has rotated through vari- ous positions at GM. Besides working in engineering and design, she managed one GM’s manufacturing plants and most recently was the senior vice president for global product development and quality control. Under her watch, the company has rolled out success- ful models that have helped bring the company back out of bankruptcy during the latest economic recession.

Barra has a reputation for getting results. Not only does she know cars, she knows people and how to manage them. When an updated version of the Chevy Malibu floundered because of design and other problems, she mobilized a team of employees and found a way to fix the Malibu in record time. Her great people management skills might explain why when GM was going through bankruptcy, she was put in charge of human resources for GM, an area she had never worked in before. GM hoped putting her in the job would prevent key talent from heading for the exits during the bankruptcy process. It did and GM bounced back. In 2016, GM sold more than 10 million vehicles worldwide, and its net income exceeded $9 billion. GM’s Chevy Volt was named North American Car of the Year in 2017, and the company announced a partnership to develop on- demand, self-driving vehicles in conjunction with the ride-sharing company Lyft. In short, the company is on a roll.

Sue Meisinger, formerly the president and CEO of the Society of Human Resources Management, says that Barra’s being named CEO underscores the importance of HR personnel working in and under- standing different areas of their firms. “If you’re interested in a career path that extends beyond HR, you need to have experience in multiple facets of the business,” Meisinger says. She notes that for many HR professionals, their crowning achievement is to be the head of HR. Barra’s rise to CEO, however, will have many of these professionals shifting their career goals.


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196 Part 3 Developing Effectiveness in Human Resources

Sources: Tom Beaman, “CEO Mary Barra Revs Things Up at General Motors,” Costco Connection 32, no 4 (April 2017): 45. Dee Ann Durbin and Tom Krisher, “Barra Inherits a Stronger GM,” Associated Press (December 29, 2013),; Dee Ann Durbin and Tom Krisher, “GM Picks Woman CEO,” Associated Press (December 29, 2013),; Chris Woodyard, “Who Is Mary Barra, the Next CEO of GM?” USA Today (December 10, 2013),; Mary Pyrillis, “Mary Barra, General Motors’ Next CEO Breaks Ground for Women and HR,” Workforce (December 11, 2013), http://www

Questions 1. Mary Barra’s father worked at General Motors.

Was her hiring an example of nepotism? If you were a business owner, would you want to hire relatives of your employees? What would the pros and cons of doing so be?

2. What role did Mary Barra play in advancing her career? What role did GM play in “growing” her career?

Notes and References

1. R. Bruab and David G. Allen, “Third Party Employment Branding: Human Capital Inflows and Outflows following ‘Best Places to Work’ Certifications,” Academy of Management Journal 59, no. 1 (2016): 90–112.

2. Blake Landua, “The Uncontained Culture of the Container Store,” Human Resources IQ (March 6, 2008), http://www

3. Sarah E. Needleman, “Play This Game and Win a Job,” Wall Street Journal (March 14, 2016): R2.

4. Damali Curry Edwards, “People and Technology: A Win- ning Recruiting Combination,” Career Planning and Adult Development Journal 32 no. 3 (2016): 45; Edward P. Lazear, Paul Oyer, Internal and External Labor Markets: A Personnel Economics Approach, NBER (Working paper, 2003), http://

5. Debbie Mack, “P&G Fights to Protect Its Bounty,” Corpo- rate Legal Times 13, no. 135 (February 2003): 64; Alexandria Sage, “Tesla Sues Ex-Autopilot Head over Recruiting,” Reuters (January 27, 2017),

6. Jeff Tanner and Mary Anne Raymond, Principles of Marketing (Washington, DC: FlatWorld Knowledge, 2016): 79.

7. Kazim Ladimeji “Five Ways to Significantly Increase Recruit- ing Effectiveness,” Recruiter (September 28, 2012), https://

8. Lauren Krugel, “SkipTheDishes Apologies, Offers to Resched- ule Interview,” Canadian Press (March 14, 2017), http://www

9. Henry S. Faber, Dan Silverman, and Till Von Wachter, “Deter- minants of Callbacks to Job Applications: An Audit Study,” The American Economic Review 106 no. 5 (2016): 314–18; Douglas P. Shuit, “Monster Board Games,” Workforce Man- agement 82, no. 2 (November 2003): 37–42; Joe Dysart, “New Directions in Internet Recruiting,” Contractor Magazine 53, no. 7 (July 2006): 33–36.

10. Roy Maurer, “Niche Job Boards Muscle into Recruiting Marketplace,” SHRM (February 24, 2017), https://www

11. Allan Schweyer, “Robots in Recruiting: The Implications of AI on Talent Acquisition,” Webinar, 2017,

12. Mike Vangel, “Social Recruitment Delivers Results for UPS,” Tal- ent Management (August 13, 2013),

13. John E. Dunn, “Facebook’s New Job Service Sparks Privacy Fears,” Naked Security (February 20, 2017), https://nakedse

14. Monica Anderson and Andrew Perri, “13% of Americans Don’t Use the Internet. Who Are They?” Pew Research (September 7, 2016);

15. Emily Glazer, “Virtual Fairs Offer Real Jobs,” Wall Street Journal (October 31, 2011): B9.

16. Kazim Ladimeji, “Five Ways to Significantly Increase Recruit- ing Effectiveness,” Recruiter (September 28, 2012), https://

17. Stephen V. Burks et al., “The Value of Hiring through Employee Referrals,” The Quarterly Journal of Economics (2015): qjv010; Jennifer Salopek, “Employee Referrals Remain a Recruiter’s Best Friend,” Workforce Management (December 2010),

18. Sara Stockman and Greet Van Hoye, “Rewarding Employee Referrals: Effects on Organizational Attractiveness,” 9th Dutch HRM Network Conference, 2016; Jennifer Taylor Arnold, “Employee Referrals at a Keystroke,” HRMagazine 51, no. 10 (October 2006): 82–88; VictoriaFurnes, “The New Frontier,” Personnel Today (January 22, 2008): 13–16.

19. Greg Patrick Haudek, “A Longitudinal Test of the Attraction- Selection-Attrition Model,” ETD Collection for Wayne State University (January 1, 2001), Paper AAI3010091, http://digi

20. Joshua Brustein, “Plantir Case Draws Attention to Discrimi- natory Potential of Referral Programs,” Blooomerg (Septem- ber 28, 2017),

21. Joanne B. Ciulla, “In Praise of Nepotism?” Business Ethics Quarterly 15, no. 1 (January 2005): 153–61; Richard Reeve and Gavin Sheridan, “Nepotism: Is It Back?” New Statesman 135 (September 29, 2003): 22–25.

22. Abbie J Shipp et al. “Gone Today but Here Tomorrow: Extend- ing the Unfolding Model of Turnover to Consider Boomerang Employees,” Personnel Psychology 67, no. 2 (2014): 421–462; Melissa Korn, “Boomerang Employees,” Wall Street Journal

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197Chapter 5 Expanding the Talent Pool: Recruitment and Careers

Online (October 24, 2011),; Madeline Laurano, “Best Practices in Re-Recruiting Top Talent,” Bersin & Associates (blog), (August 6, 2009),

23. Rachel Feintzeigm “CEOs Head Back to School,” Wall Street Journal (February 2, 2017): B4.

24. Paul Benjamin Lowry and David Wilson, “Creating Agile Organizations through IT,” The Journal of Strategic Infor- mation Systems 25 no. 3 (2016): 211–26; Ed Frauenheim, “Companies Focus Their Attention on Flexibility,” Workforce Management (February 2011): 3–4.

25. Chris Pentilla, “Got It Covered: If You Can’t Afford to Offer Employee Benefits on Your Own, Why Not Join Forces with a PEO?” Entrepreneur 32, no. 2 (February 2004): 66–68; Bill Leonard, “Small Firms Prepare for Aging Workforce,” HR Magazine 53, no. 5 (May 2008): 32.

26. Robert Rodriguez, “Filling the HR Pipeline,” HR Magazine 49, no. 9 (September 2004): 78–84; James W. Walker, “Perspec- tives,” Human Resource Planning 25, no. 1 (2002): 12–14.

27. “Heading for the Fast Track: New Studies Examine Who Gets Promoted and Why,” Knowledge@Wharton (August 10, 2005), http//www.

28. Matthew Bidwell, “Paying More to Get Less: Specific Skills, Matching, and the Effects of External Hiring versus Inter- nal Promotion,” Administrative Science Quarterly (2011): 369–407.

29. Pamela Tate, “Calling on Career Development,” Talent Management (January 7, 2014),

30. Pandey Smita and Mishra Sarika, “Analysis of the Pros and Cons of Online Recruitment Methods in India,” International Journal of Engineering and Management Sciences 6, no.  2 (2015): 65–67; The Pros and Cons of Online Recruiting,” HR Focus 81 (April 2004): S2.

31. Matthew Bidwell and J.R. Keller, “Within or Without? How Firms Combine Internal and External Labor Markets to Fill Jobs,” Academy of Management Journal 57, no. 4 (2014): 1035–1055; Stanely Ragalevsky, “CEO Succession: Five Best Practices for Internal Candidates,” Community Banker 17, no. 2 (February 2008): 24–25.

32. “How to Implement an Effective Process for a New HR Man- agement System,” HR Focus 82, no. 1 (January 2005): 3–4; Connie Winkler, “Job Tryouts Go Virtual,” HR Magazine 51, no. 9 (September 2006): 131–134.

33. Connie Winkler, “Job Tryouts Go Virtual.” 34. Colin Lee, “The Potential of Computer-aided Applicant Pre-

screening,” RSM Discovery-Management Knowledge 26, no. 2 (2016): 21–22; “Applicant Tracking System,” (March 18, 2011),

35. BruceFecheyr-Lippens, Bill Schaninger, and Karen Tanner, “Power to the New People Analytics,” McKinsey Quarterly 51, no. 1 (2015): 61–63; John Sullivan, “How Google Is Using People Analytics to Completely Reinvent HR,” TLNT (Febru- ary 26, 2013),

36. Sunil Bagai, “Google Brings Machine Learning to the Staff- ing Industry,” B2C (November 18, 2016),

37. “Dale Carnegie Training Global Leadership Study: USA 2016,”

38. Blake Landau, “The Uncontained Culture of the Container Store,” Human Resources IQ (March 6, 2008), http://www .human

39. Jos Akkermans et al. “It's All about CareerSKILLS,” Human Resource Management 54, no. 4 (2015): 533–551; Peg O’Herron and Peggy Simonsen, “Career Development Gets a Charge at Sears Credit,” Personnel Journal 74, no. 5 (May 1995): 103–06; see also Jules Abend, “Behind the Scenes at: Sears,” Bobbin 39, no. 11 (June 1998): 22–26; Shari Caudron, “The De-Jobbing of America,” Industry Week 243, no. 16 (September 5, 1994): 30–36; Edward E. Lawler III, “From Job-Based to Competency-Based Organizations,” Journal of Organizational Behavior 15, no. 1 (January 1994): 3–15; Douglas T. Hall, “Accelerate Executive Development—At Your Peril!” Career Development International 4, no. 4 (1999): 237–239.

40. Erika Fry, “An Ex-Cop Comes to the Rescue,” Fortune (March 18, 2013): 38.

41. “Coworkers Get a Chance to Change Places,” Wall Street Journal (February 21, 2012),

42. Hank Boyer, “Emerging Trends in Career Management,” LinkedIn (February 2, 2016),

43. Tate, “Calling on Career Development.” 44. Elaine Farndale et al., “Balancing Individual and Organiza-

tional Goals in Global Talent Management,” Journal of World Business 49, no. 2 (2014): 204–214; “How a Talent Manage- ment Plan Can Anchor Your Company’s Future,” HR Focus 81, no. 10 (October 2004): 7–10; “Heading for the Fast Track? New Studies Examine Who Gets Promoted and Why,” Knowl- edge@ Wharton (August 10, 2005), http://knowledge.whar

45. Dona Dezube, “How a Workplace Mentoring Program Can Benefit Your Company,” Tampa Bay Times (January 18, 2017),

46. Leslie Kwoh, “Reverse Mentoring Cracks Workplace,” Wall Street Journal (November 28, 2011): B7.

47. Tory Paez, “My Friend, My Mentor: The Benefits of Peer Mentoring in the Workplace,” Catalyst (2016); Suzanne C. de Janasz, Shery E. Sullivan, and Vicki Whiting, “Mentor Networks and Career Success: Lessons for Turbulent Times,” Academy of Management Executive 17, no. 4 (November 2003): 78–92; Kate Walsh and Judith Gordon, “Creating an Individual Work Identity,” Human Resource Management Review 18, no. 1 (March 2008): 46–61.

48. Jos Akkermans et al., “It's All about CareerSKILLS,” Human Resource Management 54 no. 4 (2015): 533–51; Larry Cam- bron, “Career Development Pays,” Far Eastern Economic Review 164, no. 42 (October 25, 2001): 83.

49. Kevin Jimmy, “A Dimensional Study on Employee Mentoring and Coaching Management,” Scholedge International Journal of Management & Development 2, no. 5 (2015): 64–67; Laura M. Francis, “The Shifting Shape of Mentoring,” Training & Development (September 2009),

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198 Part 3 Developing Effectiveness in Human Resources

50. Sheryl Smolkin, “Sabbaticals Said to Reduce Burnout, Improve Worker Loyalty,” Benefit News (May 17, 2016),

51. Heidi Hartmann, Jeffrey Hayes, and Jennifer Clark, “How Equal Pay for Working Women Would Reduce Poverty and Grow the American Economy” (Washington, DC: Institute for Women’s Policy Research, Briefing paper IWPR# C411, January 10, 2014); Hope Yen, “Women Gain Ground against Salary Disparity,” Fort Worth Star-Telegram (December 11, 2103): 6A.

52. Eunmi Chang, Hyun Chin, and Jieun Ye, “Organizational Work-Family Culture and Working Mothers’ Affective Com- mitment,” Human Resource Management 53, no. 5 (2014): 683–700; Alison Stein Wellner, “Welcoming Back Mom,” HR Magazine 49, no. 6 (June 2004): 76–83; “Mothers’ Labor Force Participation,” Monthly Labor Review 137, no. 5 (May 2004): 2; Brian Braiker and Anna Kuchment, “Just Do Not Call Me Mr. Mom,” Newsweek 150, no. 15 (October 8, 2007): 52–55; Melissa Fletcher, “Working Moms Fully in Favor of Going Part-Time,” Fort Worth Star-Telegram (August 30, 2007): E1, 9.

53. Courtney R. Masterson and Jenny M. Hoobler, “Care and Career: A Family Identity-Based Typology of Dual-Earner Couples,” Journal of Organizational Behavior 36, no. 1 (2015): 75–93; Janice Rosenberg, “Dual Career Couples Face Expen- sive Choices,” (July 2, 2007); Erin White, “Help Increases for Partners of Relocated Workers,” Wall Street Journal 251, no. 70 (March 25, 2008): D4.

54. “Recruiting Minorities,” Black Enterprise 35, no. 6 (January 2005): 53; Debbie Smith, “Building a New Diversity Road Map,” Multichannel News 25, no. 38 (September 20, 2004): 82.

55. Yeung, “Finders Keepers,” 42–44; Janny Scott, “Nearly Half of Black Men Found Jobless,” The New York Times (February 28, 2004), B1; Sylvia Ann Hewlett, Carolyn Buck Luce, and Cornel West, “Leadership in Your Midst,” Harvard Business Review 83, no. 11 (November 2005): 74–82.

56. Kathleen C. Brannen and Terrence M. Begley, “The Ameri- cans with Disabilities Act: What It Means to Small Business Owners,” Journal of Small Business Strategy 6, no. 1 (2015): 79–92; Joe Mullich, “Hiring without Limits,” Workforce Management 83, no. 6 (June 1, 2004): 53–60; Julie Hotch- kiss, “Growing Part-Time Employment among Workers with Disabilities,” Economic Review 89, no. 3 (July 2004): 25–42; “Entry Point Interns Top 400 in Seventh Year,” Sci- ence 301, no. 5637 (August 29, 2003): 1195; Kelly Butler, “Ten Million Ways to Fill the Talent Gap,” Employee Benefit News 21, no. 3 (March 2007): 22–24.

57. “Persons with a Disability: Labor Force Characteristics Summary,” U.S. Bureau of Labor Statistics (June 21, 2016),; Sam Hananel, “New Rules Boost Hiring of Vets, Disabled,” Associated Press (August 28, 2013),

58. Nabanita Datta Gupta, Mona Larsen, and Lars Stage Thom- sen, “Do Wage Subsidies for Disabled Workers Reduce Their Nonemployment?” IZA Journal of Labor Policy 4 no.  1 (2015): 10; “As ADA Turns 20, Harris Interactive Survey Finds Lifestyle and Economic Gaps Still Remain between Americans with and without Disabilities,” Kessler Foundation and National Organization on Disability (press release), July 26, 2010.

59. Gregg Zoroya, “Wanted: Military Vets for Good Man- agement Jobs,” USA Today (March 6, 2013), http://www .

60. Kimberly Curry Hall et al., "Connecting Veterans and Employers” (2015); Jessica Miller-Merrell, “How to Recruit Veterans,” GlassDoor (June 20, 2013),

61. Christopher Reynolds, “Boomers, Act II,” American Demo- graphics 27, no. 8 (October 2004): 10–12; TheresaMinton- Eversole, “Senate Forum Explores Ways to Keep Aging Workforce Working,” HR Magazine 48, no. 10 (October 2003): 30; Carly Foster, “Rehiring Retirees among 2008’s Top Recruit- ing Trends,” Employee Benefit News (January 8, 2008): 5.

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Personal Career Development Because you are likely to spend more time working during your life than doing anything else, it makes sense to plan your career. Although organizations can be a positive force in the career development process, the primary responsibility for your career is yours.

A.1 Developing Personal Skills and Competencies

Planning for a career involves more than simply acquiring specific job knowledge and skills. You must also develop other skills to be successful as an employee. To succeed as a manager, you must achieve still higher-level skills in the areas of communication, time management, self-motivation, interpersonal relationships, and leadership. Highlights in HRM 9 shows the competencies candidates “must have” today to successfully embark on a career in any field.

A.2 Choosing a Career People often have to do a lot of searching and changing of jobs before they find a career that suits them. Counselors at colleges and universities, as well as those in private prac- tice, help individuals evaluate their aptitudes, abilities, interests, and values as they relate to selecting careers. Placement offices and continuing education centers also offer career planning assistance.

Critical to your career planning is determining the long-term opportunities and sal- aries in the occupational fields you are considering. Most job-related websites, including Monster, CareerBuilder, Indeed, and LinkedIn contain free information about careers and wages. Government sources include O*Net OnLine, America’s Career InfoNet, and Career Outlook.

A.3 Self-Evaluation Successful career development depends in part on an individual’s ability to conduct an accurate self-evaluation. When you are doing a self-evaluation, you need to consider factors that are personally significant to you. What activities do you like to do? Do you


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“Must Have” Career Competencies

The following are “must have” career competencies accord- ing to the National Association of Colleges and Employers.

�� Critical Thinking/Problem Solving: Exercise sound reasoning to analyze issues, make decisions, and overcome problems. The individual is able to obtain, interpret, and use knowledge, facts, and data in this process, and may demonstrate originality and inventiveness.

�� Oral/Written Communications: Articulate thoughts and ideas clearly and effectively in written and oral forms to persons inside and outside of the organization. The individual has public speaking skills; is able to express ideas to others; and can write/edit memos, letters, and complex technical reports clearly and effectively.

�� Teamwork/Collaboration: Build collaborative rela- tionships with colleagues and customers representing diverse cultures, races, ages, genders, religions, life- styles, and viewpoints. The individual is able to work within a team structure, and can negotiate and man- age conflict.

�� Digital Technology: Leverage existing digital tech- nologies ethically and efficiently to solve problems, complete tasks, and accomplish goals. The individual demonstrates effective adaptability to new and emerging technologies.

�� Leadership: Leverage the strengths of others to achieve common goals, and use interpersonal skills

to coach and develop others. The individual is able to assess and manage his/her emotions and those of others; use empathetic skills to guide and motivate; and organize, prioritize, and delegate work.

�� Professionalism/Work Ethic: Demonstrate personal accountability and effective work habits (e.g., punc- tuality, working productively with others, and time workload management), and understand the impact of nonverbal communication on professional work image. The individual demonstrates integrity and ethi- cal behavior, acts responsibly with the interests of the larger community in mind, and is able to learn from his/her mistakes.

�� Career Management: Identify and articulate one’s skills, strengths, knowledge, and experiences rel- evant to the position desired and career goals, and identify areas necessary for professional growth. The individual is able to navigate and explore job options, understands and can take the steps necessary to pursue opportunities, and under- stands how to self-advocate for opportunities in the workplace.

�� Global/Intercultural Fluency: Value, respect, and learn from diverse cultures, races, ages, genders, sexual orientations, and religions. The individual demonstrates openness, inclusiveness, sensitivity, and the ability to interact respectfully with all people and understand individuals’ differences.

Highlights in HRM9

like working alone or with other people? Do you like technical work or creative work? Do you think you would like working in an office, or would you prefer another setting? What have you always dreamed of doing?

A.3a Interest Inventories Psychologists who specialize in career counseling typically administer a battery of tests. The Strong Interest Inventory, developed by E. K. Strong Jr., was among the first of the interest tests.1 Strong found people’s interests vary from occupation to occupation. Strong’s assessment tool can help you learn the degree to which your interests corre- spond with those of successful people in a wide range of occupations. Another inven- tory that measures both interests and skills is the Campbell Interest and Skill Survey


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201Chapter 5 Expanding the Talent Pool: Recruitment and Careers

(CISS). Occupations are identified with advice about whether each of the occupations should be “pursued,” “explored,” or “avoided” by the person who took the test. Both tests can be taken online for a fee. has a number of free self-assessments as do other sites such as, CareerPath, and LiveCareer. The O*Net Inter- est Profiler is a free online interest assessment tool offered by the U.S. Department of Labor.

Note, however, that people have taken interest and skills inventories that dissuaded them from their chosen careers, pursued them anyway, and have become extremely suc- cessful. If you find yourself in such a situation, do not be discouraged about your career choice. Consider exploring the career further via internships, informational interviews, and job shadowing (discussed next). Also, keep in mind that most people change careers multiple times during their lives. If your first choice of a career is not what you hoped it would be, you are always free to pursue another.

A.3b Informational Interviews, Job Shadowing, and Internships

An informational interview is a conversation you have with someone in an occu- pation that you are interested in. You invite the person to lunch or for coffee and ask the individual what the job is really like—the good and the bad, qualifications needed, the outlook for the career, and so forth. Most people are flattered to be asked  to provide career information and like to talk about what they do. How- ever, make it clear that you are not soliciting the person for a job—just seeking information.

Job shadowing is the process of observing someone in his or her own work envi- ronment to better understand what he or she does. Generally this is done for a few hours to a halfday. The website provides videos of professionals in approximately 100 different careers who explain their jobs. The site also contains information about the earnings and outlook of professions, educational requirements, and a search function that lists colleges that offer degrees for specific professions. People who sign up for the site can also ask a professional questions they might have. As we explained earlier in this chapter, internships can be a great way to experience a particular field of work, as is volunteering. Check with your college advisor and career placement center to find opportunities such as these.

Networking is a way to find out not only about different professions but different employers you might be interested in working for. Some of the best places to network include:

• Social media websites • Your college alumni association or career office networking lists • Your own extended family • Your friends’ parents and other family members • Your professors, advisors, coaches, tutors, and clergy • Your former bosses and your friends’ and family members’ bosses • Members of clubs, religious groups, and other organizations to which you belong • All of the organizations near where you live or go to school2

informational interview A conversation you have with someone in a career you are interested in to gather information about it.

job shadowing The process of observing someone in his or her work environment to see if the job is of interest to you.

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202 Part 3 Developing Effectiveness in Human Resources

A.4 Choosing an Employer Once you’ve made a career choice, even if only tentatively, the next major step is decid- ing which employer you think you might want to work for and where. Numerous com- pany directories containing information about privately and publicly held companies are available. is one online source, as is Corporate websites are another source. Often under the “Investors” or “Media” tabs you can find press releases issued by the companies in which you are interested. The releases often high- light the initiatives companies are pursuing and the directions in which they are taking their business. You can also sign up for Google Alerts to get news on companies you are researching. Knowing something about an employer and industry can give you a competitive edge in terms of getting an interview, landing a job, and negotiating a good salary.

Once you have landed an interview, you have the opportunity to learn more about an employer, including the type of people who work there, its corporate culture, benefits, and so forth. If you are offered a job with the firm, a website such as can help you determine whether the firm’s offer is acceptable to you.’s cost of living calculator, titled “How far will my salary go in another city?” can help you figure out whether it is monetarily feasible to relocate for a job. Highlights in HRM 10 shows the questions you should ask yourself before you accept a job offer with a particular company.

A.5 Consider the Boundaryless Career A generation ago, career success was synonymous with ascending a corporate hier- archy over the course of a lifetime spent in a single firm. Today, however, individuals pursuing boundaryless careers prefer to see themselves as self-directed “free agents” who develop a portfolio of employment opportunities by proactively moving from employer to employer, simultaneously developing and utilizing their marketable skills. Employees pursuing boundaryless careers develop their human capital along dimen- sions of industry and occupational knowledge. That is, they may be experts in com- puter programming or have great insights into trends in the banking industry. In contrast, individuals pursuing more traditional careers develop their knowledge in ways specific to a given firm.

Alternately, you might want to become an entrepreneur. Being an entrepreneur— one who starts, organizes, manages, and assumes responsibility for a business or other enterprise—offers a personal challenge that many individuals prefer over being an employee.3

A.6 Keeping Your Career in Perspective For most people, work is a primary factor in the overall quality of their lives. Neverthe- less, it is advisable to keep one’s career in perspective so that other important areas of life are not neglected.

entrepreneur One who starts, organizes, manages, and assumes responsibility for a business or other enterprise.

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A.6a Developing Off-the-Job Interests How satisfied you are with your life is a product of many forces. When people complain about not having a good work-life balance, often the problem is not too much work but too little “life.”4 Some of the more important ingredients of “life” are physical health, emotional well-being, harmonious interpersonal relationships, financial security, free- dom from too much stress, and achievement of one’s goals. While a career can provide some of the satisfaction that one needs, most people find it necessary to turn to interests and activities outside their career. Off-the-job activities not only provide a respite from daily work responsibilities but also offer satisfaction in areas unrelated to work. With that said, it is up to you to decide what is important to you and how to spend your work and off-the-job time. Your life is yours to live, and it is shorter than you think.

A.6b Balancing Marital and/or Family Life As we have said, the one event that often poses the greatest threat to a family is reloca- tion. Families often experience conflicts between the desire to advance the careers of different parents and settling down in one place. If an employee is experiencing ambi- guity and/or conflict with his or her work role, a low level of supervisory support, or disappointment due to unfulfilled work expectations, this can affect his or her family life as well. Other conflicts include work-life balance problems, such the need to spend time with a person’s family members and to care for children, aging elders, or a spouse. The different employment patterns in a family and dissimilarity in a couple’s career orientations can take a toll on employees.

A number of employers are doing more today to help their employees cope with these problems via alternative work options. Employees are also actively looking for companies that have family-friendly policies. Working Mother magazine annually publishes a survey of the 100 top companies in the United States for working parents. Understand that “to be a success in the business world takes hard work, long hours, persistent effort, and constant attention. To be a success in marriage takes hard work, long hours, persistent effort, and constant attention. The problem is giving each its due and not shortchanging the other.”5

Questions to Ask Yourself Before You Accept a Job

�� Have I been offered a fair salary? Is it comparable to what other people in the same position are making and work with my budget?

�� What is the benefit package and when am I eligible for it?

�� Do I like my potential boss? Does he or she seem like someone with whom I can have a good working relationship?

�� Do I like my potential coworkers?

�� Will I be comfortable in this office environment?

�� Is the corporate culture in line with my own values, attitudes, and goals?

�� Am I genuinely excited about the job?

�� Can I handle the commute to this job?

Sources: Liz Ryan, “Five Questions to Ask before You Accept a Job Offer,” Forbes (January 1, 2015),; Dawn Rosenberg McKay,, © 2007, Inc., a part of the New York Times Company. All rights reserved.,

Highlights in HRM10


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204 Part 3 Developing Effectiveness in Human Resources

A.6c Planning for Retirement Although you might be many years from retirement, it is never too early to plan for it. In your 20s, you will want to begin a savings plan and start paying off your student loans. As you get older, your goals will probably change. Perhaps you will want to buy a home, and you will need money for a down payment. Regardless of what stage of your life you are in, you should never neglect saving for your retirement throughout your working years. A small sum of money saved early, compounded with interest over years, can amount to millions of dollars. But if you wait until later, you will have to save a lot of money for it to amount to as much.

Your employer can help you with some aspects of retirement planning by providing you with information about tax-advantaged employer and individual savings plans. But although employer-sponsored preretirement programs can be helpful (as we will see in Chapter 11), planning for your own retirement is up to you. Do you want to travel or live in another state or country? What kind of retirement does your spouse envision? How much money will all of this require?

Your employer will not be able to answer these questions. However, by reading about the subject of retirement and taking it seriously while you are young, you will be able to answer these questions yourself. Planning early will help you set the stage for a healthy and satisfying retirement as free as possible from worries—especially worries that could have been avoided or minimized had you taken a few easy steps earlier in life.

entrepreneur informational interview job shadowing

Key Terms

Notes and References

1. E.K. Strong Jr., of Stanford University, was active in the mea- surement of interests from the early 1920s until his death in 1963. Since then his work has been carried on by the staff of the Measurement Research Center, University of Minnesota. The Strong Interest Inventory is distributed by Consulting Psychologists Press, Inc., to qualified people under an exclu- sive license from the publisher, Stanford University Press.

2. Carol Carter, Keys to Business Communication (Upper Saddle River, NJ: Pearson, 2012), Chapter 15.

3. Julie Rose, “The New Risk Takers,” Fortune Small Business 12, no. 2 (March 2002): 28–34; Jack Howard, “Balancing Conflicts of Interest When Employing Spouses,” Employee Responsibilities & Rights 20, no. 1 (March 2008): 29–43.

4. Jamie Eckle, “Randall Craig,” Computerworld 42, no. 26 (June 23, 2008): 36.

5. Maria Malik et al., “The Role of Work Life Balance in Job Sat- isfaction and Job Benefit,” Journal of Applied Business Research 30, no. 6 (2014): 1627; Christopher Caggiano, “Married … with Companies,” Inc. 17, no. 6 (May 1995): 68–76; Sue Shel- lenbarger, “Sustaining a Marriage When Job Demands Seem to Be Endless,” The Wall Street Journal (December 8, 1999): B1; Johan A. Turner, “Work Options for Older Americans: Employee Benefits for the Era of Living Longer,” Benefits Quarterly 24, no. 3, (2008): 20–25.

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Employee Selection

Learning Outcomes After studying this chapter, you should be able to

Explain what the objectives of the employee selection process are, its steps, and why the information gath- ered during the process must be reliable and valid.

Describe the tools used to screen applicants, the types of employment interviews and methods to administer them, and the post-interview screening tools firms use.

LO 1

LO 2

Compare the value of different types of employ- ment tests and how their validity and reliability are assessed.

Explain how firms evaluate the information they collect on candidates and the decision strategies they use to select employees.

LO 3

LO 4 D

im itr

i O tis

/G et

ty Im

ag es

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206 Part 3 Developing Effectiveness in Human Resources

R egardless of whether a company is large or small, it wants to hire the best and the brightest employees. In addition, equal employment opportunity legislation, court decisions, and the Uniform Guidelines (discussed in Chapter 3) make it critical for

the selection process to be done well: One group of researchers found that employers lose approximately 90 percent of all hiring discrimination suits, and the average payout per case is $1.5 million. The bottom line is good selection decisions make a difference. So do bad ones.1

6.1 Overview of the Selection Process Suppose you have started a small business, and a number of people have expressed interest in working for you. Now you have to pick the right employees and avoid the wrong ones. But how should this be done? And what happens if it is not done correctly?

Selection is the process of choosing individuals who are qualified to fill exist- ing or projected job openings. Figure 6.1 shows that the overall goal of selection is to maximize “hits” and avoid “misses.” Hits are accurate predictions, and misses are inaccurate ones. The cost of one type of miss would be the expense of hiring an employee who turns out to be unsuccessful. The cost of the other type of miss is an opportunity cost—someone who could have done a great job but did not get the chance to do so.

selection The process of choos- ing individuals who are qualified to fill existing or projected job openings

J o

b P

e rf

o rm

a n

c e


Inaccurate prediction (Person fails on the job)


Accurate prediction (Person would not have succeeded

on the job)


H ig h


L o w


Inaccurate prediction (Person would

have succeeded on the job)


Accurate prediction (Person succeeds

on the job)

Predicted Success

The Goal of Selection: Maximize “Hits”Figure 6.1

Managers often under- stand employees’ jobs well. But how impor- tant do you think it is for them to understand the job selection pro- cess to make good employment decisions?

LO 1

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207Chapter 6 Employee Selection

6.1a Begin with a Job Analysis Job specifications help identify the competencies employees need for success—the knowledge, skills, abilities, and other factors (KSAOs) that lead to superior performance. Managers then use selection methods such as interviews, references, and preemploy- ment tests to measure applicants’ KSAOs against the competencies required for the job. Complete and clear job specifications help interviewers differentiate between qualified and unqualified applicants and reduce the effect of an interviewer’s biases and preju- dices. Applicants whose KSAOs are well matched to the jobs they are hired for are also found to perform better and be more satisfied.2

Ordinarily, line managers are well acquainted with the skills, physical demands, and other characteristics of the jobs in their organizations. Interviewers and members of the HR department who participate in the selection process should become familiar with the jobs and competencies needed to perform them as well. In addition to the require- ments of the job, many organizations, including Morgan Stanley, Merck, Southwest Airlines, and Starbucks, also try to hire individuals who match their values and cultures. Recall from Chapter 2 that this process is referred to as values-based hiring. Zappos and are firms that give their employees the power to veto candidates they don’t think will fit in with their cultures. In contrast, Facebook discourages hiring for cultural fit because it can result in a lack of diversity.3

6.1b Steps in the Selection Process The steps in the selection process and their sequence will vary, not only with the organization, but also with the type of job being filled. Each step should be evaluated in terms of its contribution to the process. The steps that typically make up the selec- tion process are shown in Figure 6.2. Not all applicants will go through all of these steps. Some will be rejected after the preliminary interview, others after taking tests, and so on.

As Figure 6.2 shows, organizations gather information about applicants in a num- ber of ways: via résumés, applications, interviews, tests, medical examinations, and background and other checks. For an internal candidate not all of these steps may be needed. The person might need to submit a résumé and go through an interview but not necessarily a background investigation. However, some experts say it is a good idea to treat internal and external candidates the same way because it helps ensure no special treatment was given to any one candidate, and the best person for the job is chosen.

6.1c Obtaining Reliable and Valid Information Regardless of whether a position is filled internally or externally, the information gath- ered about candidates must be reliable and valid. Reliability occurs when an interview, test, or other selection procedure results in consistent information about a candidate when repeated. A test that produces vastly different scores for individuals when admin- istered to these same people a few days apart is unreliable. Likewise, unless an inter- viewer judges the capabilities of an applicant to be the same today as yesterday, the interviewer’s judgments are unreliable (i.e., unstable). Interrater reliability—agreement among two or more raters—is one measure of a method’s consistency. Reliability also refers to the extent to which two or more methods (e.g., interviews and tests) yield similar results or are consistent with one another.

reliability The degree to which an interview, test, or other selection procedures result in consistent information about a candidate

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208 Part 3 Developing Effectiveness in Human Resources

Validity refers to the degree to which a test or selection procedure actually predicts how well a person performs on the job. EEOC regulations require selection procedures to be valid. Like a new medicine, a selection procedure must be validated before it is used.4

6.2 Initial Screening As an employer, would you want to interview all applicants who applied for one of your jobs? Probably not. Doing so would be very time consuming, and because time is money, it would be very expensive. Instead you would first want to screen out people who aren’t qualified for the job. Next, let’s look at the tools you can use to do this.

6.2a Initial Screening Methods Employers use many different pieces of information to try to determine if an applicant will be successful on the job. The initial information tools for screening candidates include résumés, cover letters, the Internet, phone screening, and application forms.

Cover Letters and Résumés Résumés and cover letters continue to be used to assess applicants, especially for salaried positions. Generally, these documents are reviewed first with an eye toward who can be eliminated because they do not have the skills, abilities, education, or experience

validity The degree to which a test or selection proce- dure actually measures or predicts a person’s ability to do a job

Note: Steps may vary. An applicant may be rejected after any step in the process.

Medical exam/drug test

Hiring decision

Preemployment tests

Reference and background checks


Completion of application

Submission of resume

Many employers do Internet searches to turn up information on job candidates. Can you see any problem related to doing so?

LO 2

Steps in the Selection ProcessFigure 6.2

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209Chapter 6 Employee Selection

outlined in the job description for the application. Did the applicant submit a thoughtful cover letter? Or is he or she simply “spamming” companies with résumés? A lack of a cover letter could be one way of eliminating applicants.

Was the cover letter well written? Well-written cover letters are important if a requirement of the job is having good written communication skills, which is the case for many jobs. For example, if a person who applied for an online customer service job that includes writing chat messages to customers submitted a cover letter with numerous typos, this could be grounds for passing over the person. Good writing skills might be less important for a person who works as a Walmart greeter. Good verbal or interper- sonal skills might suffice for this position.

Evaluating résumés can be a subjective process. Evaluators often have a difficult time applying a set of consistent standards across multiple candidates or they consis- tently apply standards that are irrelevant to success on the job. The fact that there is no set format for writing résumés—that they vary from person to person—make them difficult for people to screen as well. Bias can also enter the process. One research study found that qualified applicants with black-sounding names had to send out 15 résumés to get an interview, whereas candidates with white-sounding names only had to send out 10.5

Developing clear evaluation criteria and a structured way to review résumés can help make the process less subjective. Using an assessment grid like the one shown in Figure 6.3 to take some of the guesswork out of the process. Job description criteria are placed in the left-hand column of the grid, and candidates are then ranked based on a scale as to whether the skills outlined in their résumés and cover letters match the job. The totals for the candidates are then compared.

Rate each candidate on a scale of 1–5, with 5 being the highest rating.

Quantitative requirements Applicant A Applicant B Applicant C Applicant D

Business degree and/or MBA 5

Two years’ managerial experience 5

Ability to develop strategies 2

Ability to manage budgets 2

Qualitative requirements

Demonstrated interpersonal skills 4

Demonstrated coaching and develop- ment skills


Ability to manage diverse teams and work with other departments


Flexibility 3

Writing and verbal skills 4

Presentation skills 4

Level of integrity 4

Totals 41

Application/Résumé Assessment GridFigure 6.3

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210 Part 3 Developing Effectiveness in Human Resources

The downside of manually screening and assessing cover letters is that firm can get hundreds of them for a single position. As you learned in Chapter 5, some companies use software such as applicant tracking systems to screen résumés. For example, a hiring manager or human resources representative will specify the educational and experience levels a job requires and keywords that indicate experience. The software then scans the résumés collected for that position, pulls a list of qualified candidates, and ranks them according to how closely they match the job criteria. Some of the systems also prescreen people who submit résumés by first asking them to take a short questionnaire to determine how qualified they are. Résumé screening software isn’t perfect, though.6 Case Study 2 at the end of the chapter takes a closer look at the pros and cons of résumé screening.

Internet Checks According to a survey by the website CareerBuilder, about 60 percent of employers research candidates using the Internet and social media sites, a practice that’s grown exponentially.7 However, doing so can be problematic for a number of reasons:

1. It can be difficult to verify the authenticity of information posted online (i.e., did the candidate really post the information, or did someone else?) and easy to confuse an applicant with someone else who has the same name, which could result in a lawsuit. Some federal courts have ruled that employers must ensure the information they collect online is verified by multiple sources.

2. Much of the information people post online isn’t job related. For example, recruit- ers need to ensure they don’t screen out applicants because they discovered they smoke or drink alcohol or engage in other activities that are not job related and are, in fact, legal.8

3. Third, scouring the Internet and social media sites can inadvertently lead to dis- crimination against members of protected classes.9

Another CareerBuilder survey found the biggest factor influencing an employer’s deci- sion not to hire an applicant was provocative photos on social media, an issue that is more likely to affect women than men. Religious discrimination can be a problem, too. Researchers at Carnegie Mellon University found that applicants whose online profiles indicated they were Muslim were less likely to get called for interviews than Christian applicants.10

Companies are still in the process of developing policies related to social media and Internet searches—that is, what information should be searched for and when, how it should be documented, and by whom. To avoid discrimination, most HR experts advise firms to not conduct any searches until after an applicant has been interviewed, and to use the same search process for all candidates. Candidates should also be told during their interviews that their public (not private) online profiles may be checked. Not all applicants realize the checking occurs and could feel their privacy is violated without such notice. At a minimum, advance notice gives candidates a chance to review and edit their profiles or make them private, if they want.

Phone and Video Screening Short phone interviews, or screening interviews, are often conducted, many times by HR personnel, to narrow down the field and save managers time by eliminating can- didates who are not likely to be hired. Video is being used to prescreen applicants as well. To give employers a “preview” of themselves, some candidates post video résumés

video résumés Short video clips that highlight applicants’ qualifications beyond what they can communi- cate on their résumés

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211Chapter 6 Employee Selection

on YouTube and include links to them in their résumés and LinkedIn profiles.11 Video résumés are short video clips that highlight applicants’ qualifications beyond what they can communicate via their résumés and cover letters. The videos allow employers to see how well they present themselves and decide whether they should be interviewed.

However, not all employers accept video resumes, and there is a concern they can result in employers screening people based on their looks, sexes, or ethnicities rather than their qualifications. To eliminate bias and recruit more diverse work- forces, some companies actually strip out names and photos from résumés before reviewing them. The recruiting software Hired does this automatically. Mehul Patel, the CEO of Hired, says he can envision a day when virtual reality programs disguise the appearances and voices of candidates, forcing recruiters and interviewers to focus on their experience and skills.12

Application Forms Application forms provide a fairly quick and systematic means of obtaining a variety of information about the applicant, such as whether the applicant meets the minimum requirements for experience, education, and so on. Even when applicants come armed with elaborate résumés, they should complete application forms because it is a way to gather consistent information about candidates. People, even those in high positions, frequently exaggerate their qualifications on their résumés and omit unflattering infor- mation. George O’Leary had to resign as head football coach at Notre Dame after falsely claiming he had played football at New Hampshire and had a master’s degree from New York University. Radio Shack CEO David Edmondson was forced to resign after claim- ing on his résumé that he had earned college degrees in theology and psychology. Not only had he not graduated, but the college he attended did not even offer a psychology degree.13

Far fewer people lie on application forms relative to their résumés, a survey by the job board CareerBuilder found. Most forms require an applicant to sign a state- ment verifying the information on the form is true and granting the employer the right to terminate the candidate’s employment if any of the information is found to be false.14

However, the EEOC and the courts have found that many questions on applica- tion forms discriminate against women and minorities and often are not job related. Highlights in HRM 1 offers firms some guidelines about the types of questions that should and should not be asked on an application form if a firm wants to stay out of court.

Because of differences in state laws, organizations operating in more than one state will find it difficult to develop one form that can be used nationally. For example, roughly half of U.S. states and more than 150 cities have banned boxes applicants must check about their criminal history because it can adversely affect minorities. Although it’s not a federal mandate, the EEOC supports “banning the box” because it helps ex-offenders reenter the workforce instead of being sidelined for life.15 When the boxes are present, virtually anyone with even a minor conviction that may have occurred years ago will get screened out.

That doesn’t mean a company can’t check a candidate’s criminal record later in the hiring process for job-related reasons, though. If someone applying for a bookkeeper’s job was recently convicted of embezzlement, a firm needs to be able to check that. Some state laws require firms to delay asking about an applicant’s criminal history until after an interview or provisional offer has been made to the candidate.

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6.3 Employment Interviews Even though they are plagued by subjectivity and have shown to be poor predictors of performance, employment interviews are almost always utilized in the selection process. As Figure 6.4 shows, situational factors and candidate characteristics, such as a person’s race and sex, can affect the perceptions of an interviewer and ultimately the interview’s outcome. Nonetheless, firms continue to use interviews because (1) they are practical when there are only a small number of applicants; (2) they serve other purposes, such as public relations; and (3) interviewers trust their judgments when it comes to mak- ing decisions about which candidates to choose. Even a limited understanding of the variables in Figure 6.4 and periodic training have been shown to dramatically improve the effectiveness of interviewers, however.16

What to Include—and Not to Include—on a Job Application Form

�� Application date. This helps managers know when the form was completed and gives them an idea of the time limit (e.g., one year) that the form should be on file.

�� Educational background. Include blanks for high school, college, and post-college attendance—but not the dates attended, since that can be connected with age.

�� Experience. Virtually any questions that focus on work experience related to the job are permissible.

�� Arrests and criminal convictions. Don’t ask questions about arrests. Questions about convictions and guilty pleadings can be problematic if they are not related to the job. Some states prohibit conviction ques- tions, and the EEOC has indicated that they can have a disparate impact on African American and Hispanic workers.

�� Marital status and dependents. Don’t ask questions about marital status or whether a person has depen- dents or children.

�� National origin. Don’t ask questions about an appli- cant’s national origin. However, it is acceptable to ask whether the person is legally prevented from working in the United States.

�� References. Most applications include blanks for the names, addresses, and phone numbers of references provided by applicants.

�� Disabilities. Don’t ask applicants questions designed to elicit information about the existence, nature, or severity of a disability. Inquiries about the ability of the person to perform job functions, however, are acceptable. Under the most recent guidelines issued by the EEOC, employers can ask whether an applicant needs reasonable accommodation—if the disability is obvious or if the applicant has voluntarily disclosed the disability.

Disclaimers �� EEOC and at-will statements. State on the application

form that the firm does not discriminate and is an EEOC employer. If your state allows it, the form should state that all employees are hired at will. This gives both employer and employee the right to end the employment relationship at any time without reason.

�� Reference checks. Include language that gives the hiring firm the right to contact the applicants’ previous employers listed on the form and their résumés.

�� Employment testing. List any tests the applicant may have to take and ask the applicant to sign the applica- tion consenting to their use.

�� Information falsification. Notify applicants that any fal- sification of the information they provide could result in their disqualification or termination should they be hired.

Highlights in HRM1


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213Chapter 6 Employee Selection

6.3a Types of Interviews Interviewing methods differ in several ways. In highly structured interviews, the inter- viewer determines the course that the interview will follow as each question is asked. In a structured interview the applicant plays a larger role in determining the course the discussion will take. Next, let’s look at the different types of interviews from the least structured to the most structured. Note that different types of interview styles and questions they utilize can be mixed and matched to yield a more complete picture of candidates.

Nondirective Interviews In a nondirective interview, the interviewer asks broad, open-ended questions—such as “Tell me more about your experiences on your last job” —and allows the applicant to talk freely with a minimum of interruption. The freedom afforded to the applicant helps uncover information a candidate might not disclose during more structured questioning. However, because the applicant determines the course of the interview, the information gathered on one applicant can be vastly different from the informa- tion gathered on another. Thus, the reliability and validity of these interviews are not likely to be as great.

nondirective interview An interview in which the applicant is allowed the maximum amount of freedom in determining the course of the discus- sion, while the inter- viewer carefully refrains from influencing the applicant’s remarks


• KSAOs • Education • Experience • Interests • Perceptions • Nonverbal cues • Age, sex, race, etc.


• Purpose of the interview

• Laws and regulations • Economic issues • Physical settings • Interview structure


• Experience/ training • Age, sex, race, etc. • Perceptions • Nonverbal cues • Goals



Outcome (Hiring Decision)

Variables in the Employment InterviewFigure 6.4

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214 Part 3 Developing Effectiveness in Human Resources

Structured Interviews A structured interview has a set of standardized questions (based on a job analysis) and an established set of answers against which applicant responses are rated. Thus, it provides a more consistent basis for evaluating job candidates and predicting their on-the-job performance. Weyerhaeuser Company, a forest products firm, has developed a structured interviewing process. Candidates’ responses are rated on a five-point scale relative to those answers, and the interviewers take notes for future reference and in case of a legal challenge. Structured interviews are also less likely than nondirective interviews to be attacked in court.17

Situational Interviews A situational interview is a variation of a structured interview. A candidate is given a hypothetical incident and asked how he or she would respond to it. The candidate’s response is then evaluated relative to a preestablished standard. Many organizations use situational interviews to select new college graduates because they may lack actual situations in the workplace they can describe. Highlights in HRM 2 shows a sample question from a situational interview used to select systems analysts at a chemical plant.

Behavioral Description Interviews A behavioral description interview (BDI) focuses on actual work incidents in the inter- viewee’s past and what the applicant did in response. To assess a potential manager’s ability to handle a problem employee, an interviewer might ask, “Tell me about the last time you disciplined an employee.”

A BDI assumes that past performance is the best predictor of future performance. The format also may be somewhat less susceptible to applicant faking. In addition, research indicates that the behavioral description interview is more effective than the situational interview for hiring higher-level positions such as general managers and executives.18

Sequential and Panel Interviews A sequential interview is one in which a candidate is interviewed by multiple people, one right after another. Sequential interviews are very common. They allow different interviewers who have a vested interest in the candidate’s success to meet and evaluate the person one-on-one. The interviewers later get together and compare their assess- ments of the candidates.

In a panel interview, the candidate meets with a group of interviewers who each take turns asking questions. After the interview, the interviewers pool their observa- tions and their scores of the candidate. Because these interviews involve input from multiple people, they tend to be more reliable and accepted as fair by candidates. If the panels are composed of a diverse group of interviewers, there is some evidence that hiring discrimination is minimized. 19 A panel interview also results in a shorter decision-making period than if each applicant has to be interviewed by each inter- viewer separately.

6.3b Methods for Administering Interviews Most interviews take place in person. However, they can be administered in other ways to broaden the talent pool and make interviewing easier, faster, and less costly.

structured interview An interview in which a set of standardized ques- tions having an estab- lished set of answers is used

situational interview An interview in which an applicant is given a hypothetical incident and asked how he or she would respond to it

behavioral description interview (BDI) An interview in which an applicant is asked questions about what he or she actually did in a given situation

sequential interview A format in which a candidate is interviewed by multiple people, one right after another

panel interview An interview in which a board of interviewers questions and observes a single candidate

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Video and Phone Interviews In an independent study of 500 HR managers at U.S. companies, 6 in 10 said their firms often conduct video interviews via webcams and services such as Skype.20 Video inter- views are convenient, low cost, and make it easier to interview people in different geo- graphic areas, thereby expanding the talent pool. However, a study by DeGroote School of Business at McMaster University in Ontario, Canada, found that candidates inter- viewed via video came across as less likable. Some candidates may be more comfortable on camera or using the technology than other candidates. The researchers suggested

video interviews Interviews conducted via videoconferencing or over the Web

Sample Situational Interview Question

Question: It is the night before your scheduled vacation. You are all packed and ready to go. Just before you get into bed, you receive a call from the plant. A problem has arisen that only you can handle. You are asked to come in to take care of things. What would you do in this situation?

Record Answer:

Scoring Guide: Good: “I would go in to work and make certain that everything is OK. Then I would go on vacation.” Good: “There are no problems that only I can handle. I would make certain that someone qualified was there to handle things.” Fair: “I would try to find someone else to deal with the problem.” Poor: “I would go on vacation.”

Highlights in HRM2

Video interviews make it easy and cost-effec- tive to interview can-

didates from different geographic areas.LD

pr od

/S hu

tt er

st oc



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that at a minimum all candidates be treated the same in terms of the methods by which they are interviewed.21

Phone interviews can be effective and actually help expand a company’s pool of talent as well. Via phone, Pacific Islands Club, a resort in Guam, is able to recruit people from around the world who want to work for the resort. After a successful phone interview, Rebecca Cummings, a young graduate living in the United States, went to work for the resort as an activities director. A face-to-face interview would have been cost prohibitive.22

Computer-Administered (Automated) Interviews Nike, Safeway Cigna Insurance, and Pinkerton Security are among the many com- panies that have used computer-assisted, or automated, interviews to gather infor- mation as well as compare candidates. In a computer-administered (automated) interview, the questions are administered to applicants via a computer. The inter- views can be conducted at a firm’s facilities, using kiosks, via phone, or online. A  drawback of computer-administered interviews is that recruiters and manag- ers can’t immediately ask candidates follow-up questions based on their answers. Consequently, organizations use automated interviews mainly as a complement to, rather than as a replacement for, live interviews. Automated interviews can also be perceived as impersonal.23

When the grocer Giant Eagle needed to hire 1,000 employees, it utilized computer- administered interviews at a Pittsburgh-area convention center. People who passed them were then led to group interviews, where HR personnel worked with as many as 20 applicants at a time. 24 Some firms use automated video interviewing services like HireVue and Applicants are invited to interview by email, given passwords to log onto the sites, and questions to answer, which are then recorded by their webcams and sent to the hiring firm. HireVue uses machine learning to analyze the video, audio, and language metrics in the interviews and then rank candidates based on previous top and bottom performers.

computer-administered (automated) interview Interviews in which the questions are adminis- tered to applicants via computers. The inter- views can be conducted at a firm’s facilities, using kiosks, online, or via phone

Hiring Managers Reveal Mistakes Candidates Make during Job Interviews

The following are some memorable blunders that have caused managers to not hire candidates.

�� “The candidate spoke no English, so he brought his mother to translate for him during the interview. It was for a customer-service position.”

�� “She kept telling me about her marital problems.”

�� “The candidate knew nothing about the job being offered or our organization.”

�� “One guy ate a sandwich.”

�� “The candidate asked me to hurry up because she left her child in the car.”

�� “He told me the only reason he was here was because his mother wanted him to get a job. He was 37.”

�� “One candidate did not wear shoes to the interview.”

�� “Body odor so bad I had to excuse myself midin- terview and put lip gloss in my nose in order to get through the rest.”

�� “One guy asked if we drug-tested and if we gave advance notice (we are a drug treatment facility).”

Sources:, Reader’s Digest.

Highlights in HRM3


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217Chapter 6 Employee Selection

6.3c Diversity Management: Could Your Questions Get You into Legal Trouble?

What questions should be or should not be asked in an interview? The EEOC discour- ages direct or indirect questions related to race, color, age, religion, sex, sexual orien- tation, national origin, caregiver status, and other factors we talked about in Chapter 3. Some questions that interviewers once felt free to ask are now problematic. Asking women (or men) if they are married or have children are examples. Several states have fair employment practice laws that are more restrictive than federal legislation. In gen- eral, if a question is job related, is asked of everyone, and does not discriminate against a certain class of applicants, it is likely to be acceptable.

Employers should provide their interviewers with instructions on how to avoid potentially discriminatory questions in their interviews. The examples of appropriate and inappropriate questions shown in Highlights in HRM 4 can serve as guidelines for application forms as well as preemployment interviews. Complete guidelines can be developed from current information available from district and regional EEOC offices and from state fair-employment practice offices.

6.4 Post-Interview Screening After a candidate has been interviewed and appears to be a good potential new hire, information about the person’s previous employment as well as other information provided by the applicant is investigated.

6.4a Reference Checks Organizations check the references of employees in a number of ways. Phone checks are fast and make it easy for references to elaborate on a candidate. Prescient InfoTech, a software development company in Fairfax, Virginia, first calls references to establish contact and then emails them a two-page questionnaire, asking them to numerically rank the applicant’s various job-related attributes. There is room at the end of the ques- tionnaire for comments and recommendations.

The most reliable information usually comes from supervisors, who are in the best position to report on an applicant’s work habits and performance. Verification related to an applicant’s job title, duties, and pay level from a former employer’s HR office is also very helpful. Highlights in HRM 5 includes a list of helpful questions to ask about candidates when checking their references.25

Prior to checking a candidate’s references, the candidate must complete forms permitting information to be solicited from former employers and other reference sources. Even with these safeguards, organizations are often reluctant to put into writ- ing an evaluation of a former employee for fear of being sued by the person. Many employers will only verify former employees’ employment dates and positions. Even firms that have refused to give an employee a recommendation have found themselves sued. Other firms have been sued for knowing a former employee posed a danger to others but failing to disclose it. Recognizing this predicament, a number of states have enacted statutes offering protection from liability for employers who give references in good faith.26

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Appropriate and Inappropriate Interview Questions


National origin What is your name? Have you ever worked under a different name?

What is the origin of your name? What is your ancestry?

Do you speak any foreign languages that may be perti- nent to this job?

Age Are you over 18? If hired, can you prove your age?

How old are you? What is your date of birth?

Gender (Say nothing unless it involves a bona fide occupational qualification.)

Are you a man or a woman?

Race (Say nothing.) What is your race? Disabilities Do you have any disabilities that may inhibit your job

performance? Are you willing to take a physical exam if the job requires it?

Do you have any physical defects? When was your last physical?

Height and weight (Not appropriate unless it is a bona fide occupational qualification.)

How tall are you? How much do you weigh?

Residence What is your address? How long have you lived there?

What are the names and relationships of those with whom you live?

Religion (You may inform a person of the required work schedule.) What church do you go to? Military record Did you have any military education/experience perti-

nent to this job? What type of discharge did you receive?

Education and experience

Where did you go to school? What is your prior work experience?

Is that a church-affiliated school? When did you graduate?

Why did you leave? What is your salary history?

Criminal record Have you ever been convicted of a crime? (May not be appropriate unless not being convicted is a bona fide occupational qualification.)

Have you ever been arrested?

Citizenship Do you have a legal right to work in the United States? Are you a U.S. citizen? Marital/family status

What is the name, address, and telephone number of a person we may contact in case of an emergency?

Are you married, divorced, single? Do you prefer Miss, Mrs., or Ms.? Do you have any children? How old are they?

Highlights in HRM4

6.4b Background Checks Background investigations, which require the consent of applicants, have become standard procedure for many companies. Moreover, state courts have ruled that com- panies can be held liable for negligent hiring if they fail to do adequate background checks. Federal law requires comprehensive background checks for all child care pro- viders, for example. It also prohibits convicted felons from engaging in financial and

negligent hiring The failure of an orga- nization to discover, via due diligence, that an employee it hired had the propensity to do harm to others


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security-oriented transactions. According to the Society of Human Resources Manage- ment, companies are increasingly background-checking contingent workers given the growth of the “gig” economy. Uber and Lyft drivers are examples. Some employers, but certainly not all, rescreen their employees when they change jobs within their companies.

Among the checks are social security verification, past employment, education, and certification and license verification. A number of other checks can be conducted if they pertain to the job for which one is being hired. They include a driving-record check (for jobs involving driving), a credit check (for money-handling jobs), a military records check, and criminal records check.

To run background checks, firms must obtain clear and conspicuous written con- sent from applicants beforehand (usually on a separate form). Applicants must also be told if the information uncovered is going to be used to deny their employment; they must be given a copy of the report(s), the right to dispute it (them), and time to do so. This is important because it’s not uncommon for background checks to be inaccurate or even include information about the wrong applicant.27 To comply with various laws, many companies hire firms that specialize in background checks to conduct them for them or use the Department of Homeland Security’s free e-Verify system.

Criminal Records Checks According to the Society of Human Resources Management, most major firms check candidates’ backgrounds for criminal records. However, as we have indicated, the EEOC has found that they can have a disparate impact on black and Hispanic workers, who, relative to other groups of people, have higher conviction and incarceration rates.

If criminal histories are taken into account, employers must also consider the nature of the job. For example, it may make sense to disqualify an applicant convicted of theft for a clerk’s position, but not drunk driving. Even if the person were convicted of theft,

Sample Reference-Checking Questions

�� What is your relationship to the applicant? Are you the person’s supervisor, peer, or subordinate?

�� What were the start and end dates of the applicant’s employment?

�� What were the applicant’s title and responsibilities?

�� In what areas did the applicant excel?

�� What unique, or exceptional, talents does the appli- cant have?

�� In what areas did the applicant need improvement?

�� What was the applicant’s biggest accomplishment at your organization?

�� How well does the applicant communicate with and get along with others?

�� How does the applicant deal with conflicts and stress?

�� To what extent is the applicant driven to succeed?

�� Was the applicant punctual?

�� For what reason did the applicant leave your organization?

�� Would you rehire the applicant?

�� Are there any serious problems with the applicant we should know about?

�� Is there any additional information about the appli- cant you would like to share with me?

Sources: “Four Reasons Why You Should Always Check References,” Human Resources Today (December 29, 2015), http://www.humanre-; Alison Doyle, “Reference Check Questions,” About. com (March 24, 2011),; Carolyn Hirschman, “The Whole Truth,” HRMagazine 45, no. 6 (June 2000): 86–72.

Highlights in HRM5


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220 Part 3 Developing Effectiveness in Human Resources

the EEOC requires the employer to consider mitigating factors such as the individual’s age at the time of conviction, how long ago it occurred, whether the person has been successfully rehabilitated, or has worked successfully in the same type of work following the conviction.28

Credit Checks Credit checks used to be conducted primarily to screen applicants who handled money, such as banking employees. However, the number of companies conducting credit check tests has risen—even though the evidence is mixed as to whether there is a clear cor- relation between good employees and good credit scores.29 Too often credit checks are used when they are not really needed, and candidates tend to view them as invasive and question their job relatedness. Eight of ten companies surveyed by the Society of Human Resources have gone ahead and hired job candidates with negative credit scores.30

Credit checks can also adversely affect qualified applicants who have been unem- ployed for long periods of time or faced bankruptcies or home foreclosures—problems that became more common among workers during the last recession. The EEOC has also warned employers that credit checks can have an adverse impact on some protected groups. For reasons such as these, a number of states, including Washington, California, Connecticut, Maryland, Illinois, and Hawaii, prohibit credit checks; many other states and U.S. lawmakers are considering similar action.

6.5 Preemployment Tests What if you have narrowed down the list of candidates you’re considering hiring but still can’t decide among them? Is there a test you could use that would tell you which ones would perform better than the others? That’s what people have wondered for years, hence the development of preemployment tests.

A preemployment test is an objective and standardized device used to gauge a person’s KSAOs relative to other individuals.31 Not all companies conduct preemploy- ment tests, but many do. One of the drawbacks of preemployment tests is that they create the potential for legal challenges by applicants claiming the tests they took were discriminatory. FedEx used to administer a basic skills test for the purposes of promoting employees, but it dropped the test following a lawsuit that alleged it was discriminatory.

The cost, time, and ease of administering and scoring the tests must also be consid- ered. For some jobs, the costs of testing may outweigh the benefits. There is also some evidence that the more tests that are required, the higher the likelihood of a lawsuit, and the more important it is for companies to demonstrate their reliability and validity in their procedures.32

It is a test developer’s responsibility to ensure it meets accepted standards of validity and reliability.33 The data about a test’s reliability are ordinarily presented in the manual for the test. However, a firm should not just take a developer’s word that its tests are reliable and valid. One source of information about commercially available tests—the Mental Measurements Yearbook (MMY)—contains descriptive information plus critical reviews by experts of various types of tests. The firm should also check to be sure the test was professionally validated in compliance with the Uniform Guidelines on Employee Selection Procedures, that it has been vetted for disparate impact, and that it has not been contested in court or by the EEOC.

preemployment test An objective and stan- dardized test used to gauge a person’s knowl- edge, skills, abilities, and other characteristics (KSAOs) relative to other individuals

Personality tests, like other tests used in employee selection, have been under attack for several decades. Why do you think some applicants find personality tests objec- tionable? On what basis could their use for selection purposes be justified?

LO 3

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221Chapter 6 Employee Selection

Keep in mind that even if a test is reliable and valid for positions in other organiza- tions, it might not be reliable and valid for the positions in your organization because they may be somewhat different. Managers therefore need to do a thorough job analy- sis to determine the skills candidates actually need to be tested for and eliminate any unnecessary or duplicate tests.

6.5a Types of Tests We will talk more about what the EEOC demands as far as the validity of preemploy- ment tests goes later in this section. First let’s look at the different types of preemploy- ment tests.

Job Knowledge Tests Job knowledge tests are achievement tests designed to measure people’s level of under- standing, or knowledge, about a particular job. The Uniform CPA Examination used to license certified public accountants is one such test. Most civil service examinations, for example, are used to determine whether an applicant possesses the information and understanding to do the job without further training.34 Job knowledge tests are also used by the U.S. Armed Forces.

How do small businesses go about selecting employ- ees to work at their firms? Not very systematically, some human resources professionals and researchers say. “All too often, employees are relatives or friends that lack the basic skills to augment the organization’s ability to be profitable/successful,” says an executive who coaches other businesspeople to help them achieve superior results.

Sometimes a small firm will make poor selections because it is anxious to get someone hired when the firm is short staffed. But if the wrong person is hired, that only compounds the problem. Another pitfall is being too confident about the right “type” of person for the job, which can cause hiring managers to make snap judgments about candidates based on casual conversa- tions, before examining the candidates’ qualifications for the job. Properly vetting candidates not only can lead to better employees, but can also help a company defend itself should it be accused of discriminatory practices. And at least one research study has found that the use of formal recruitment and selection tech- niques gives employees a positive perception of their

Small Business Application

firms and their bosses and results in greater loyalty to their organizations.

Adding structure to the selection process doesn’t have to be difficult. You can map out the qualifica- tions for the job on a form similar to the one shown in Figure 6.3. Then develop a series of open-ended and situ- ational questions designed to elicit information about the candidate’s job knowledge, conscientiousness, interest in the work, and how well his or her personality squares with the job.

Once you have the questions drafted, ask the same questions of all candidates. Last, embezzlement and theft can be particularly devastating to small businesses, so do run background checks on employees and check their ref- erences, even if you know the candidates. You might be surprised by what you find.

Sources: Robert N. Lussier and Joel Corman, “There Are Few Differ- ences between Successful and Failed Small Businesses,” Journal of Small Business Strategy 6, no. 1 (2015): 21–34; “Selecting the Best,” Elitefts (November 9, 2010),; Barbara Reda and Linda Dyer, “Finding Employees and Keeping Them: Predicting Loyalty in the Small Business,” Journal of Small Business & Entrepreneur- ship 23, no. 3 (2010): 445.

Adding Structure to the Employee Selection Process in Small Businesses

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222 Part 3 Developing Effectiveness in Human Resources

Work Sample Tests Work sample tests, or job sample tests, require the applicant to perform tasks that are actually a part of the work required on the job. Examples include a map-reading test for traffic control officers, a lathe test for machine operators, and a test to determine if an administrative assistant understands Microsoft Office. Computer simulations are sometimes used, particularly when testing a candidate might prove dangerous. Anyone who wants to become a pilot in the armed services and fly multimillion-dollar jets, for example, must undergo this type of testing. (Case Study 1 looks at different simulations firms are using.) Like job knowledge tests, when work sample tests are constructed from a carefully developed outline that experts agree includes the major job functions, the tests are considered effective, reliable, valid, and fair.35

Assessment Center Tests An assessment center test is used to evaluate candidates, often as a group, as they par- ticipate in a series of situations that resemble what they might be called on to handle on the job. Some assessment centers, which are where the tests are professionally con- ducted, take a “day in the life” approach. Candidates “report to work” at the assessment center and receive the usual steady diet of emails and other interruptions, meet with various role-players who play different characters, and handle manufactured events while they are observed and recorded.36 Because they are costly, assessment centers are often used to select managers and executives.

Cognitive Ability Tests Cognitive ability tests measure mental capabilities such as general intelligence, verbal fluency, numerical ability, and reasoning ability. The Scholastic Aptitude Test (SAT) and Graduate Management Aptitude Test (GMAT) are examples. The Wonderlic Personnel Test is a cog- nitive ability test also used by many organizations, including the National Football League. Figure 6.5 shows some items that could be used to measure different cognitive abilities.

Although cognitive ability tests can be developed to measure very specialized areas such as reading comprehension and spatial relations, many experts believe that the validity

assessment center test A process by which man- agerial candidates are evaluated at an assess- ment center as they participate in a series of situations that resemble what they might need to handle on the job

With jobs that require specific skills, it is quite common for employ- ers to ask candidates to demonstrate their abilities through work sample tests.

fiz ke

s/ Sh

ut te

rs to


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223Chapter 6 Employee Selection

Examples of Questions on a Cognitive Ability TestFigure 6.5

of cognitive ability tests simply reflects their connection to general intelligence. Past stud- ies of general intelligence, such as IQ, have shown to be good predictors of performance across a wide variety of jobs. However, newer studies suggest that this may be more of a perception in Western cultures, and that choosing people with the highest IQs might not always lead to hiring the best candidates.37 Cognitive ability tests also have to be job related and carefully validated. Ford Motor Co. settled a $1.6 million case with the EEOC for hav- ing implemented a cognitive ability test that had a disparate impact on black applicants.

Biographical Data (Biodata) Tests Biographical data tests (biodata tests) collect biographical information about candidates who has shown to correlate with on-the-job success. Candidates are questioned about events and behaviors that reflect attitudes, experiences, interests, skills, and abilities. Typi- cally the questions relate to events that have occurred in a person’s life and ask what the person typically did in those situations. The idea is that past behavior is the best predictor of future behavior. For example, a question on a biodata test might ask, “How do you handle stressful situations?” or “How often have you put aside tasks to complete another, more difficult assignment?” Test takers choose one of several predetermined alternatives to best match their past behavior and experiences. Because it costs about $100,000 to train an air- traffic controller, in 2014, the Federal Aviation Administration (FAA) instituted a biodata test to identify people who can handle the high-stress, high-stakes work without quitting.38

A response to a single biodata question is of little value. Rather, it is the pattern of responses across several different situations that give biographical data the power to pre- dict future behavior on the job. Although biodata tests have been found to be good predic- tors of on-the-job success, they are sophisticated and must be professionally developed and validated. Another drawback is that the questions might not appear to be clearly related to the job being tested for, so applicants might question the test’s validity. So many people with aviation experience failed the FAA test that it came under fire. The personal nature of biodata questions can also lead applicants to believe the tests invade their privacy.39

Verbal 1. What is the meaning of the word “surreptitious”?

a. covert c. lively

b. winding d. sweet

Quantitative 2. Divide 50 by 0.5 and add 5. What is the result?

a. 25 c. 95

b. 30 d. 105

Reasoning 3. __________ is to boat as snow is to _________.

a. Sail, ski c. Water, ski

b. Water, winter d. Engine, water

Mechanical 4. If gear A and gear C are both turning counterclockwise, what is happening to gear B?

a. It is turning counterclockwise. c. It remains stationary.

b. It is turning clockwise. d. The whole system will jam.

Answers: 1. a, 2. d, 3. c, 4. b

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224 Part 3 Developing Effectiveness in Human Resources

Personality and Interest Inventories During the 1990s, testing by the U.S. Army found that cognitive ability tests were the best predictors of how well soldiers were able to acquire job knowledge and, ultimately, of their technical proficiencies. But personality tests were the better predictors of their motivation, such as their leadership efforts and propensity to adhere to rules. Years of research show that five dimensions can summarize personality traits. The “Big Five” factors are as follows:

1. Extroversion—the degree to which someone is talkative, sociable, active, aggres- sive, and excitable.

2. Agreeableness—the degree to which someone is trusting, amiable, generous, toler- ant, honest, cooperative, and flexible.

3. Conscientiousness—the degree to which someone is dependable and organized and perseveres in tasks.

4. Neuroticism—the degree to which someone is secure, calm, independent, and autonomous.

5. Openness to experience—the degree to which someone is intellectual, philosophical, insightful, creative, artistic, and curious.40

Well-known personality tests include the California Psychological Inventory (CPI); the 180-question Caliper test, whose users range from FedEx to the Chicago Cubs; and the Predictive Index, which complies with EEOC guidelines.

Although there is some evidence to show that personality tests can help predict how well a person will perform on the job, historically the connection between the  two has been quite low. There is also some concern that the tests can easily be “faked” by applicants trying to give hiring firms the answers they think they want  to  hear. Personality tests can also be problematic if they inadver- tently discriminate against  individuals who would otherwise perform effectively, which is why several  states severely restrict their usage.41 In addition, personal- ity tests that reveal  anything about a person’s mental impairment or a psycho- logical condition,  even inadvertently, violate the Americans with Disabilities Act. Rather than being used to make hiring decisions, personality and interest inventories may be most useful for helping people with their occupational selection and career planning.

Polygraph Tests The polygraph, or lie detector, is a device that measures the changes in breathing, blood pressure, and pulse of a person who is being questioned. Questions typically cover such items as whether a person uses drugs, has stolen from an employer, or has committed a serious undetected crime. The growing swell of objections to the use of polygraphs in employment situations culminated in the passage of the fed- eral Employee Polygraph Protection Act of 1988. The act generally prohibits using lie detectors for prehire screening and random testing of a firm’s current employees and applies to all private employers except pharmaceutical companies and security service firms.42 Federal, state, and local governments can use polygraphs to screen applicants, but normally they are used only for law-enforcement personnel and high-security CIA- and FBI-type jobs.

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225Chapter 6 Employee Selection

Honesty and Integrity Tests In response to the restrictions imposed by the Employee Polygraph Protection Act, employers have begun using honesty and integrity tests. The questions that might appear on an integrity test include the following:

• How likely would you be to report a coworker you discovered was stealing office supplies?

• Should an employee who lied on the application be fired if the falsification is uncovered?

Kansas-based Payless ShoeSource used an honesty test that reduced employee theft by 20 percent, the company claims.43

Although some studies have shown that honesty tests are valid for predicting job performance as well as a wide range of disruptive behaviors such as theft, disciplinary problems, and absenteeism, other studies have questioned their validity.44 It is possible that the tests “work” not because they predict behavior but because they deter less-than- honest applicants from joining a company. Evolv, an assessment company, is one of a number of firms attempting to improve the accuracy of honesty and integrity tests by using big data and other analysis technology in the process.45

Physical Ability Tests For some jobs, employers need to assess a person’s physical abilities. Particularly for demanding and potentially dangerous jobs such as those held by firefighters and police officers, physical abilities such as strength and endurance tend to be good predictors not only of performance but also of accidents and injuries.46

Source: Marine-Corps-struggles-challenge-making-women-do-pullups

Like other organiza- tions, the Marine Corp

has had to ensure its physical abilities tests

are job related.

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226 Part 3 Developing Effectiveness in Human Resources

Physical ability tests must be used cautiously as well. In the past, requirements for physical characteristics such as strength, agility, height, and weight were often deter- mined by an employer’s unvalidated notion of what should be required. This often put women and disabled job applicants at a disadvantage. After a Dial Corp. plant in Fort Madison, Iowa, began using a strength test, the company was sued. Prior to the test’s use, nearly 50 percent of the people hired at the plant were women. Once the test was implemented, the percentage dropped dramatically. An appeals court ruled the test had a disparate impact on women because, although injuries at the plant fell, they only did so after the company instituted new safety rules, which happened years before the strength test was implemented.47 Because of situations such as these, physical requirements have been questioned and modified so as to represent typical job demands.

Medical Examinations A medical examination is one of the later steps in the selection process because the law prohibits it being administered to an applicant before he or she has been made a con- ditional employment offer and agreed to undergo it. A medical examination can only be given to ensure that the health of an applicant is fit for duty.48 The Americans with Disabilities Act limits the types of medical inquiries and examinations employers may use and states that all exams must be directly related to the requirements of the job. Furthermore, the ADA prohibits companies from screening out a prospective employee because he or she has an elevated risk of on-the-job injury or a medical condition that could be aggravated because of job demands.

Drug Tests In the United Sates, not only do employers have the right to use drug tests to screen candidates who use illegal substances, but roughly half of them do. Different states have different laws regarding drug testing. In some states, drug tests can only be given to candidates after they have been extended job offers conditional upon their passing the tests. A candidate can refuse to take the test, but that is tantamount to turning down the job.49 As with other background checks, candidates must be given the results of the tests and the right to dispute them.

However, some studies have failed to show that drug testing makes the workplace safer or leads to improvements in the performance of workers. Relatively few applicants test positive for drugs (about 4 percent). In fact, legal drugs such as alcohol and pre- scription painkillers such as opioids appear to create more problems than illegal drugs in the workplace.50 Marijuana is legal for recreational use in a number of states, which complicates the use of what drugs can be tested for, and it can be medically prescribed. It is also not uncommon for “false positives” to occur—that is, for a test to mistakenly show someone has used illegal drugs when he or she hasn’t. Over-the-counter drugs can lead to false positives.

For reasons such as these and because candidates view them as invasive, some com- panies no longer conduct drug tests on job candidates. Or should a candidate fail a drug test, they allow the candidate to retake it to ensure its accuracy. Other companies say drug testing has saved them thousands of dollars in workers’ compensation and other costs. The weight of the evidence suggests that testing is most appropriate for high-risk and safety-critical positions and those required by state and federal laws.

The U.S. Department of Labor suggests that if a company wants to implement drug testing, it seek legal advice and follow the testing standards federal agencies

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227Chapter 6 Employee Selection

follow—namely, the procedures established by the Substance Abuse and Mental Health Services Administration (SAMHSA). Of course, not testing job candidates for drugs doesn’t mean firms can’t continue to have drug-free workplace policies requiring employees to come to work sober.

6.5b Determining the Validity of Tests The Uniform Guidelines (see Chapter 3) recognizes and accepts different approaches to validating tests (and selection procedures in general): criterion-related validity, content validity, and construct validity.

Criterion-Related Validity The extent to which a test significantly correlates with important work behaviors is known as criterion-related validity. How well a person performs on a test, for example, is compared with his or her actual production records, supervisor’s ratings, training outcomes, and other measures of on-the-job success. Sales figures are commonly used for sales jobs. In production jobs, the quantity and quality of output are likely to be the best indicators of job success.

There are two types of criterion-related validity: concurrent and predictive. Concurrent validity is the extent to which the test scores of a firm’s current employees correlate with their job performance. To test concurrent validity, a firm obtains data from its current employees at about the same time that test scores (or other predictor information) are obtained. For example, a supervisor would rate a group of clerical employees on the quantity and quality of their performance. These employees would then be given a clerical aptitude test, and their scores would be compared with the supervisor’s ratings to determine the degree of relationship between them. Establishing the concurrent validity of a test prior to administering it to candidates can be quick and convenient because the firm has employees readily available to take the test. The drawback of this approach is that current employees have a great deal more experience, so their scores may not be comparable to candidates’ scores.

Predictive validity involves testing candidates and obtaining criterion data after the individuals have been hired and on the job for a period of time. For example, candidates would be given clerical aptitude tests, which would then be filed away for later study. After the individuals have been on the job for several months, supervisors (who should not know the employees’ test scores) are asked to rate them on the quality and quantity of their performance. The test scores are then compared with the supervisors’ ratings. If the scores and supervisor’s ratings are in line with one another, the test has predictive validity and can be used to test subsequent job candidates. Obviously this approach to testing will take longer to develop than the concurrent approach.

Regardless of the method used, cross-validation is essential. Cross-validation is a process in which a test or battery of tests is administered to a different sample of people (drawn from the same population) for the purpose of verifying the results obtained from the original validation study. One way to measure a test’s validity is to administer it to an organization’s current employees and create a benchmark score to which candidates’ scores can be compared. This is what FedEx has agreed to do before administering any new tests.

Correlation methods are generally used to determine the relationship between pre- dictor information such as test scores and criterion data. The correlation scatterplots in Figure 6.6 illustrate the difference between a selection test with zero validity (A) and one with high validity (B). Each dot represents a person.

criterion-related validity The extent to which a selection tool predicts, or significantly correlates with, important work behaviors

concurrent validity The extent to which the test scores of current employees correlate with their job performance

predictive validity The extent to which candidates’test scores match criterion data obtained from them after they have been hired and on the job for a period of time

cross-validation Verifying the results obtained from a valida- tion study by administer- ing a test or test battery to a different sample (drawn from the same population)

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228 Part 3 Developing Effectiveness in Human Resources

Note that in scatterplot A, there is no relationship between test scores and success on the job; in other words, the validity is zero. In scatterplot B, those who score low on the test tend to have low success on the job, whereas those who score high on the test tend to have high success on the job, indicating high validity. In actual practice, we would apply a statistical formula to the data to obtain a coefficient of correlation referred to as a validity coefficient. Correlation coefficients range from 0.00, denoting a complete absence of relationship, to 11.00 and to –1.00, indicating a perfect positive and perfect negative relationship, respectively.

Combining two or more procedures such as an interview or a test can improve the validity of a firm’s selection process. The higher the overall validity is, the greater the chances are of hiring individuals who will be the better performers.

Content Validity When it is not feasible to use the criterion-related approach, often because of limited samples of employees or applicants are available for testing, the content method is used. Content validity is assumed to exist when a test adequately samples the knowledge and skills a person needs to do a particular job. The closer the content of the selection instrument is to actual work samples or behaviors, the greater its content validity is. For example, a test for accountants has high content validity when it requires appli- cants to solve accounting problems representative of those found on the job. Asking an accountant to lift a 60-pound box, however, is a selection procedure that has content validity only if the job description indicates that accountants must be able to meet this requirement.

Content validity is the most direct and least complicated type of validity to assess. It is generally used to evaluate the job knowledge and skill tests. Unlike the criterion-related method, content validity is not expressed as a correlation. Instead, an index is computed (from the evaluations of an expert panel) that indicates the

content validity The extent to which a selection instrument, such as a test, adequately samples the knowledge and skills needed to do a particular job


Low High HighScore

S u

c c

e s s o

n t

h e

J o


S u

c c

e s s o

n t

h e

J o



Low Low

High High

Coefficient of correlation .00 Coefficient of correlation .75

Correlation ScatterplotsFigure 6.6

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229Chapter 6 Employee Selection

relationship between the content of the test items and a person’s performance on the job.51 Although content validity does have its limitations, it has made a positive con- tribution to job analysis procedures and the role expert judgments play in sampling and scoring procedures.

Construct Validity The extent to which a test measures a theoretical construct, or trait, is known as construct validity. Typical constructs are intelligence, mechanical comprehension, and anxiety. They are in effect broad, general categories of human functions that are based on the measurement of many discrete behaviors. For example, the Bennett Mechanical Comprehension Test consists of a wide variety of tasks that measure the construct of mechanical comprehension.

Measuring construct validity requires showing that the psychological trait is related to a satisfactory job performance and that the test accurately measures the psychologi- cal trait. There is a lack of literature covering this concept as it relates to employment practices, probably because it is difficult and expensive to validate a construct and to show how it is job related.52

As you can tell from this discussion, developing valid selection procedures, espe- cially selection tests, can be complicated and require expertise. Employers should ensure that tests and selection procedures are not adopted casually. If a selection procedure screens out a protected group, the employer should determine whether there is an equally effective alternative selection procedure that has less adverse impact and, if so, adopt the alternative procedure. Because valid custom tests are more defensible in court if applicants challenge them, many large organizations that subject applicants to multiple tests hire outside vendors with industrial-organizational psychologists on staff to help them develop selection procedures.

6.6 Reaching a Selection Decision You now have a wealth of information about the candidates who want to work for you. How do you weigh it all so as to make a final decision? Next, we’ll take a look at the various approaches you might use.

6.6a Summarizing Information about Applicants Once you have gathered relevant information about multiple applicants, you have to systematically organize and evaluate it. Summary forms and checklists such as the one shown in Figure 6.7 can be used to ensure that all of the pertinent information about applicants has been included. Fundamentally, an employer is interested in what an applicant can do and will do. Evaluating candidates on the basis of information you have assembled should focus on these two factors, as Figure 6.8 shows. The “can-do” factors include a candidate’s knowledge and skills, as well as the aptitude (potential) for acquiring new knowledge and skills. The “will-do” factors include the candidate’s motivation, interests, and other personality characteristics. Both factors are essential to successful performance on the job. The employee who has the ability (can do) but is not motivated to use it (will not do) is little better than the employee who lacks the necessary ability.

construct validity The extent to which a selection tool measures a theoretical construct or trait

How have your skills, knowledge, apti- tudes, and motivation affected the types of jobs you have applied for in the past or how well you did a particular job?

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230 Part 3 Developing Effectiveness in Human Resources

Position: Candidate Name: Interviewer Name: Interview Date:

Complete the comments section as you interview the candidate. After the interview, circle your ratings for each section, and then add them together for a final score. The ratings scale is as follows:


1. Negligible or doesn’t meet requirements 2. More needed 3. Adequate 4. Exceeds requirements

Education Comments: Rating: ________________________________

Experience Comments: Rating: ________________________________

Job Knowledge Comments: Rating: ________________________________

Job Skills Comments:

Interest in Position Comments: Rating:

Problem Solving Ability Comments: Rating: ________________________________

Communication Skills Comments: Rating: ________________________________

Leadership Skills Comments: Rating: ________________________________

________________ TOTAL POINTS

Rater’s Recommendation:

Candidate Evaluation FormFigure 6.7

“Can-Do” and “Will-Do” Factors in Selection DecisionsFigure 6.8


“WILL DO” • Personality • Values • Motivation

“CAN DO” • Knowledge • Skills • Abilities

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231Chapter 6 Employee Selection

It is much easier to measure what individuals can do than what they will do. The can-do factors are readily evident from test scores and verified information. What the individual will do can only be inferred. Employers can use the responses to interview and application form questions and references to obtain information for making infer- ences about what an individual will do.

6.6b Decision-Making Strategy The strategy used to make personnel decisions for one type of job, such as a manager, will differ from those used to make decisions for other types of job, such as a clerk or technician. Although many factors have to be considered, the following are some of the questions firms must consider when deciding on whom to hire:

1. Should the individuals be hired according to their highest potential or according to the needs of the organization?

2. At what grade or wage level should the individual be hired? 3. Should the selection be based on finding an ideal employee to match the job cur-

rently open, or should a candidate’s potential for advancement in the organization be considered?

4. Should individuals who are not qualified but trainable be considered? 5. Should overqualified individuals be considered? 6. What effect will the decision have on the firm’s affirmative action plans and diver-

sity goals?

In addition to these factors, a firm must decide which selection approach to use: the clinical (personal judgment) approach or the statistical approach, which are discussed next.

Clinical Approach Using the clinical approach, those making the selection decision review all the data on the applicants. Then, on the basis of their understanding of the job and the individu- als who have been successful in that job, they make a decision. Different evaluators will make different decisions about an applicant when they use the clinical approach because each of them will make different judgments about the applicant’s strengths and weaknesses. Unfortunately, personal biases and stereotypes are frequently covered up by what appear to be rational reasons for either accepting or rejecting a candidate. The clinical approach can also lead to a homogenous workforce because, as you learned in Chapter 5, according to the attraction–selection–attrition (ASA) model, people are often tempted to hire applicants like themselves.

Statistical Approach The statistical approach to decision making is more objective. It involves identifying the most valid predictors and weighting them using statistical methods such as multiple regression.53 Quantified data such as scores or ratings from interviews, tests, and other procedures are then combined according to their weighted value. Individuals with the highest combined scores are selected. Compared to the clinical approach, the statistical approach has shown to be superior in a wide variety of situations.

With a strictly statistical approach, a candidate’s high score on one predictor (such as a cognitive ability test) will make up for a low score on another predictor (such as

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232 Part 3 Developing Effectiveness in Human Resources

the interview). For this reason, this model is a compensatory model. However, it is frequently important for applicants to achieve some minimum level of proficiency on all selection dimensions. When this is the case, a multiple cutoff model can be used in which only those candidates who score above the minimum cutoff on all dimensions are considered. A selection from that subset of candidates is then made.54

A variation of the multiple cutoff model is the multiple hurdle model. After candidates go through an initial evaluation stage, those who score well advance to the next stage. The process continues through several stages (hurdles) before a final decision is made. This approach is especially useful when either the testing or training procedures are lengthy and expensive.

Each of the statistical approaches requires that a decision be made about where the cutoff lies—that point in the distribution of scores above which a person should be considered and below which the person should be rejected. The score that the applicant must achieve is the cutoff score. Depending on the labor supply and diver- sity and antidiscrimination considerations, it may be necessary to lower or raise the cutoff score.

The effects of raising and lowering the cutoff score are illustrated in Figure 6.9. Each dot in the center of the figure represents the relationship between the test score

compensatory model A selection decision model in which a high score in one area can make up for a low score in another area

multiple cutoff model A selection decision model that requires an applicant to achieve some minimum level of proficiency on all selec- tion dimensions

multiple hurdle model A selection decision model in which only the applicants with the high- est scores at an initial test stage go on to subse- quent stages

C B A Test Scores

C ri

te ri

o n

o f

S u

c c

e s s

7 5 3 1

8 6 4 2



S a ti

sf a c to

ry U

n sa

ti sf

a c to


Test Scores Scatterplot with Hypothetical CutoffsFigure 6.9

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233Chapter 6 Employee Selection

(or a weighted combination of test scores) and the criterion of success for one indi- vidual. The elliptical pattern of the dots indicates the test has a fairly high validity. Note that the high-scoring individuals are concentrated in the satisfactory job success category, whereas the low-scoring individuals are concentrated in the unsatisfactory category.

If the cutoff score is set at A, only the individuals represented by areas 1 and 2 will be accepted. Nearly all of them will be successful. If more employees are needed, the cutoff score can be lowered to point B. In this case, a larger number of potential failures will be accepted, as shown in quadrants 2 and 4. Even if the cutoff is lowered to C, the total number of satisfactory individuals selected (represented by the dots in areas 1, 3, and 5) exceeds the total number selected who are unsatisfactory (areas 2, 4, and 6). Thus, the test serves to maximize the selection of probable successes and to minimize the selection of probable failures. This is all we can hope for in terms of predicting on- the-job success: the probability of selecting a greater proportion of individuals who will be successful rather than unsuccessful.

A related factor helps ensure the best qualified people are selected: having an adequate number of candidates from which to make a selection. This factor is typically expressed in terms of a selection ratio, which is the ratio of the number of applicants to be selected to the total number of applicants. A ratio of 0.10, for example, means that 10 percent of the applicants will be selected. A ratio of 0.90 means that 90 percent will be selected. If the selection ratio is low, only the most promising applicants will be hired. When the ratio is high, very little selectivity will be possible because even applicants with mediocre abilities will have to be hired to fill the firm’s vacancies. When this is the situation, a firm’s managers can fall prey to what some experts call the “desperation bias”—choosing someone because you are in a pinch. It is a com- mon problem among managers because of the many time and operating constraints they face.

6.6c Final Decision In large organizations, managers or supervisors usually make the final decision about whom to hire, and communicate it to the human resources department. HR personnel then notify the candidate about the decision and make a job offer. The HR department should confirm the details of the job, working arrangements, hours, wages, and so on and specify a deadline by which the applicant must reach a decision. If, at this point, findings from the medical examination or drug test are not yet available, an offer is often made contingent on the applicant passing the examination. This information can be verbally communicated initially. It is commonplace to first contact candidates by phone to inform them of the offer. The offer should then be put in writing, generally in a letter to the candidate.

The process of notifying internal candidates is slightly different. Generally, the hir- ing manager contacts the candidates personally and informs them of the decision. How- ever, it is still important to put the offer in writing if an internal candidate is chosen so there is no ambiguity or dispute about its terms.

Rejecting both internal candidates and external candidates is a difficult task, but rejecting internal candidates can be particularly tricky. Most internal candidates seek- ing a promotion are valuable employees their firms would rather not lose. The manager delivering the bad news should explain to the employee that the person who got the job has skills more closely aligned with the firm’s needs but that the process has given the

selection ratio The number of appli- cants compared with the number of people to be hired

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234 Part 3 Developing Effectiveness in Human Resources

organization a better understanding of her or his background when future job openings arise. The manager should also explain that the decision was made in a systematic way based on objective criteria but that it was nonetheless a hard one to make.55

Last, organizations should not fail to notify candidates who are not chosen for the position. This happens too often with both internal candidates and external candidates. It is not uncommon for external candidates to be customers of the firms to which they apply. Not letting them know about the employment decision can jeopardize that rela- tionship. The same is true for internal candidates. One employee lamented that after applying internally for a job, no one contacted him or the other candidates to tell them they did not get the job. They only learned about it after a manager sent out an email about the new hire. “After 10-plus years of working for the company, I felt I deserved better treatment than that,” says the employee.

The employee selection process should start with a job analysis. The steps in the selection process and their sequence will vary, not only with the orga- nization, but also with the type and level of jobs to be filled. The employee selection process should provide reliable and valid information about applicants so that their qualifications can be carefully matched with the job’s specifications. The information that is obtained should be clearly job related, predict success on the job, and be free from discrimination. Reliability refers to the consistency of test scores over time and across measures. Validity refers to what a test or other selec- tion procedure is supposed to measure and how well it actually measures it.

Initial applicant screening tools include résumés and cover letters, application forms, ref- erences, Internet checks and phone screening, and sometimes short electronic questionnaires. Despite problems with its validity, the employment interview remains central to the selection process. Depending on the type of job, applicants could be interviewed by one person, members of a work team, or other individuals in the organization. Structured inter- views have been found to be better predictors of the performance of job applicants than nonstruc- tured interviews. Some interviews are situational and can focus on hypothetical situations or actual behavioral descriptions of a candidate’s previous work experiences. Most interviews are conducted in person, but they can also be conducted via video,

LO 1

LO 2


phone, or administered by a computer (automated). Post-interview screening tools include reference and background checks, including criminal, drug, and credit checks.

Preemployment tests are more objective than interviews and can give managers a fuller sense of the capabilities of different candidates. A wide range of tests exist. Cognitive ability tests are especially valuable for assessing verbal, quantitative, and reasoning abili- ties. Personality and interest-inventory tests are per- haps best used for placement or career development. Job knowledge and work sample tests are achieve- ment tests that are useful for determining whether a candidate can perform the duties of the job without further training. Physical ability tests can be used to prevent accidents and injuries, particularly for physi- cally demanding work. However, they must not be used if they have a disparate impact on candidates in protected classes. Medical examinations and drug tests should only be administered after a conditional offer of employment has been made. A test’s validity can be assessed in terms of whether the measurement is based on a job specification (content validity), whether test scores correlate with performance criteria (predictive validity), and whether the test accurately measures what it purports to measure (construct validity).

In the process of making decisions, all “can- do” and “will-do” factors should be assembled and weighted systematically so that the final decision

LO 3

LO 4

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235Chapter 6 Employee Selection

can be based on a composite of the most reliable and valid information. Although the clinical approach to decision making is used more than the statistical approach, the former lacks the accuracy of the lat- ter. Compensatory models allow a candidate’s high score on one predictor to make up for a low score on another. When the multiple cutoff model is used, only those candidates who score above a minimum

cutoff level remain in the running. A variation of the multiple cutoff is the multiple hurdle model, which involves several stages and cutoff levels. Organiza- tions should not fail to notify candidates who are not chosen for jobs. Those who are chosen should receive their offers in writing so the terms are clearly agreed upon and be given a time limit to either accept or reject the offer.

assessment center test

behavioral description interview (BDI)

compensatory model

computer-administered (auto- mated) interview

concurrent validity

construct validity

content validity

criterion-related validity


multiple cutoff model

multiple hurdle model

negligent hiring

nondirective interview

panel interview

predictive validity

preemployment test



selection ratio

sequential interview

situational interview

structured interview


video interviews

video résumés

Key Terms

Is there a “best” employment process stepwise? What steps must come first and last?

Compare briefly the major types of employ- ment interviews described in this chapter. Which type would you prefer to conduct? Why?

LO 1

LO 2

What characteristics do job knowledge and job sample tests have that often make them more acceptable to candidates than other types of tests?

What is meant by the term criterion as it is used in personnel selection? Give some exam- ples of criteria used for jobs with which you are familiar.

LO 3

LO 4

Discussion Questions

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HRM Experience

Designing Selection Criteria and Methods 2. Next, identify how you would evaluate candidates

with these qualities. What tools would you use (appli- cations, interviews, cognitive or ability tests, work samples, etc.) and why? Justify the cost and time required to conduct each.

3. After you have identified your selection criteria and methods, do a “reality check” in a real organiza- tion. Interview a manager who employs someone in that job. For example, if the job you selected is salesperson, go to a local business to learn how they select individuals for sales jobs. Compare what you thought would be a good selection approach with what you learned from the company you visited.

4. Identify the reasons for any discrepancies between your approach and theirs. Which approach do you think is better?

Making hiring decisions is important but difficult. Without good information, managers have almost no chance of making the right choice. They may as well randomly choose a candidate.

The information-gathering process begins with a sound understanding of the job: the tasks, duties, and responsibili- ties associated with it, and the knowledge, skills, and abili- ties needed to do it. A job analysis should be done to make certain that all managers have assembled all of the informa- tion they need to ensure a good person–job fit. However, this information may not be enough. Other information about the company’s values and philosophy are likely to be required to ensure that a good person–organization fit results.

Assignment 1. Working in teams of four to six individuals, choose a

job with which you are familiar and identify the KSAOs needed to do it well.

Job Candidate Assessment Tests Go Virtual

A growing number of preemployment tests simulate a job’s functions and are being conducted via computer or on the Web. You can liken them to video games but within a work setting. Toyota, Starbucks, the paint maker Sherwin Williams, and numerous financial firms such as SunTrust Banks, KeyBank, and National City Bank have successfully used virtual job simula- tions to assess applicants.

At Toyota, applicants participating in simulations read dials and gauges, spot safety problems, and use their ability to solve problems as well as their general ability to learn as assessed. The candidates can see and hear about the job they’re applying for from current Toyota employees. National City Bank has used virtual assessments to test call-center candidates and branch manager candidates. Call-center candidates are given customer-service problems to solve, and branch man- ager candidates go through a simulation that assesses their ability to foster relationships with clients and make personnel decisions.

The virtual assessments tools, which are produced by companies such as Shaker Consulting Group, Pro- files International, and others, do not come cheap. But although they can cost tens of thousands of dollars, larger companies that can afford them are saying they are worth it. The benefits? Better qualified candidates, faster recruiting, and lower turnover among employ- ees hired. KeyBank says that by using virtual testing tools, it realized savings of more than $1.75 million per year due to lower turnover.

Candidates also seem to like the assessments because they provide a more realistic job preview and make them feel like they are being chosen for jobs on more than just their personalities or how they performed during an interview. “It was a very insightful experience that made you think about what exactly you like and dislike in the workplace and if you really enjoy helping customers and have patience to do so,” says one candidate tested for a customer service job.

CaSE STuDy 1


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237Chapter 6 Employee Selection

trouble with simulations, games, or computers but might make good employees. You should still use the U.S. Department of Labor’s “whole person approach” to hiring, says one HR professional. The whole person approach factors in the results of a variety of accepted tests along with prior actual performance and inter- view results to get the most complete picture of an employee or candidate.

Questions 1. What do you think are the prime advantages and

disadvantages of “virtual tryouts”? 2. Do you think there would be any EEOC concerns

regarding this system? 3. Do you think virtual job tryouts might be bet-

ter suited for some jobs than others? If so, which ones?

Sources: Sarah Needleman, “Play This Game and Win a Job!” Wall Street Journal (March 14, 2016): R2; Karen Vilardo, “KeyBank’s Success with the ‘Virtual Job Tryout,’” Journal of Corporate Recruiting Leadership 5, no. 4 (May 2010): 24; Ira S. Wolfe and “Success Performance Solu- tions,” The Total View Newsletter (May 12, 2010); Connie Winkle, “HR Technology: Job Tryouts Go Virtual,” HR Magazine (September 1, 2006),; Gina Ruiz, “Job Candidate Assessment Tests Go Virtual,” Workforce Management Online (January 2008), http://www; “Clients and Case Studies,” Shaker Consulting Group (March 27, 2011),

It is not just younger candidates who play a lot of video games who like the tests. Older candidates do as well. “We haven’t seen any adverse impact,” says Ken Troyan, chief staffing officer for SunTrust Banks. “There’s some mythology—if you will—about older people not being computer-savvy, and that’s just not so.” One study found that the simulations also tend to result in less of a gap between minority and white candidates than when paper-and-pencil tests are used.

A handful of software companies have developed games that don’t mirror work tasks but actual video games you would play for fun. “Bomba Blitz” and “Meta Maze” are two mobile games developed by the preemployment-testing company Knack. According to Knack, the games utilize behavioral neuroscience and big data—in this case, the game scores and deci- sion-making traits of thousands of different types of workers—to match people with jobs.

HR experts warn that companies need to be sure they aren’t simply buying glitzy simulations that don’t translate well to the jobs for which they are hiring. Games like those produced by Knack are just now starting to be used, and firms generally aren’t solely relying on them to make hiring decisions. Also, the tools could potentially eliminate candidates who have

CaSE STuDy Pros and Cons of Cleaning Up the “Resu-mess”2

HR and hiring managers often find themselves swamped by résumés because they are so easy to send with a click of a button. Some large retailers can get a million or more résumés a year. Even small busi- nesses get flooded with them. When Raising Cain, a Louisiana-based fast-food chain, opened an office in Dallas, the firm needed to hire 35 people. It received 10,000 résumés and had to hire an outside firm to help sort through them.

Applicant tracking systems and résumé screen- ing software are helping harried HR personnel, man- agers, and business owners cope with the problem. After résumés are screened and reviewed, interviews can be scheduled automatically using a firm’s email system and electronic calendar, and job offers sent to candidates to sign electronically and return. Many job boards have résumé screening capabilities and

algorithms to recommend candidates similar to the way recommends products based on what a person has purchased in the past.

Not all HR professionals are fans of résumé screening software, however. Managers tend to use huge numbers of key words so that very few appli- cants can make it past the screen. Different kinds of software can have different kinds of glitches. The soft- ware might not read certain types of fonts or reject a résumé of a good candidate if it contains a single typo. Unqualified applicants have learned to “pepper” their résumés with a job’s keywords to get past résumé- screening software.

Peter Cappelli, a University of Pennsylvania pro- fessor, has written a book called Why Good People Can’t Get Jobs. Cappelli relates an incident in which an HR manager put his own résumé through his

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238 Part 3 Developing Effectiveness in Human Resources

1. Philip L. Roth et al., “Social Media in Employee-Selection- Related Decisions a Research Agenda for Uncharted Terri- tory,” Journal of Management (2013), 0149206313503018; Kate Z. Williams, Meline M. Schaffer, and Lauren E. Ellis, “Legal Risk in Selection: An Analysis of Processes and Tools,” Journal of Business & Psychology 28, no. 4 (December 2013), DOI: 10.1007/s10869-013-9299-4.

2. Misty L. Loughry, Matthew W. Ohland, and D. Dewayne Moore, “Development of a Theory-Based Assessment of Team Member Effectiveness,” Educational & Psychologi- cal Measurement 67, no. 3 (June 2007): 505–524; Patrick D. Converse, Fredrick L. Oswald, Michael A. Gillespie, Kevin A. Field, and Elizabeth B. Bizot, “Matching Individual to Occu- pations Using Abilities and the O*NET,” Personnel Psychology 57, no. 2 (Summer 2004): 451–488.

3. Rachel Feintzeig, “Cultural Fit Plays Role in Hiring,” Wall Street Journal (October 12, 2006),

4. Joe Williams, “Bringing the Human Touch to Recruit- ment,” Bloomberg Businessweek (January 24, 2011), http://

5. Mary-Kathryn Zachary, “Discrimination without Intent,” Supervision 64, no. 5 (May 2003): 23–29; Neal Schmitt, Wil- liam Rogers, David Chan, Lori Sheppard, and Danielle Jen- nings, “Adverse Impact and Predictive Efficiency of Various Predictor Combinations,” Journal of Applied Psychology 82, no. 5 (October 1997): 719–730.

6. Gary N. Burns et al., “Effects of Applicant Personality on Resume Evaluations," Journal of Business and Psychology 29, no. 4 (2014): 573–591; Michael Luo, “‘Whitening’ the Résumé,”

company’s screening process and got rejected. In another instance, an engineering firm received more than 25,000 résumés for a job but none of the candi- dates made it past electronic screening.

There is also a lack of the human touch and judg- ment in the process. Résumé-screening software can’t easily pick up on candidates’ “soft” skills, such as a person’s ability to interact well with other people. And managers don’t end up seeing interesting résumés— résumés from people who have different skills or life experiences that would translate well to the job. Con- sequently, a lot of people who would make excellent employees never get a glance.

Some recruiters have found ways to avoid the downsides of automatic résumé screening altogether. Kevin Mercuri, president of Propheta Communica- tions, a public relations firm in New York City, got tired of being swamped by résumés. Now when he needs to recruit personnel, he posts a message about

job openings on his LinkedIn page. “I get people vouching for each applicant, so I don’t have to spend hours sorting through résumés,” he says.

Questions 1. What impact do you think résumé screening tools

are having on HR departments? What about line managers? Would you use the software to screen résumés?

2. How might the drawbacks associated with résumé screening software be addressed?

Sources: Ryan Craig, “Blame Bad Applicant Tracing for the Soft Skills Shortage at Your Company,” TechCrunch (March 5, 2017), https://; Dave Wessel, “Software Raises the Bar for Hiring,” Wall Street Journal (May 31, 2012),; Darren Dahl, “Tapping the Talent Pool … without Drowning in Resumés,” Inc. 31 no. 3 (April 2009): 122; Anne Kadet, “Did You Get My Résumé?” Smart Money (February 27, 2009),; Drew Robb, “Screening for Speedier Selection,” HR Magazine 49, no. 9 (September 2004): 143–147.

Notes and References

New  York Times (December 5, 2009), http://www.nytimes. com.

7. Roy Mauer, “Know Before You Hire: 2017 Employment Screening Trends,” Society of Human Resources Management (January 25, 2017),

8. Op cit. 9. Alexander Reicher, “The Background of Our Bing: Internet

Background Checks in the Hiring Process,” Berkeley Technol- ogy Law Journal 28, no. 1 (Spring 2013): 115–153.

10. Jennifer Valentino DeVries, “Bosses May Use Social Media to Discriminate against Job Seekers,” Wall Street Journal (November 20, 2013),

11. Lisa Takeuchi Cullen, “It’s a Wrap: You’re Hired,” Time (February 22, 2007,

12. Hanna Kuchler, “Silicon Valley Tactics for Waging War on Biases in the Workplace” (March 7, 2017),

13. “A New Assistant at Georgia Tech Made False Claims,” The New York Times (January 29, 2002), D7; Stephanie Armour, “Security Checks Worry Workers; Padded Résumés Could Be Exposed,” USA Today (June 19, 2002): B1.

14. Scott Bennet, The Elements of Résumé Style: Essential Rules for Writing Résumés and Cover Letters that Work. (AMACOM, 2014); “Busted,” Training Development 60, no. 12 (December 2006): 19; Pamela Babock, “Spotting Lies,” HRMagazine 48, no. 10 (October 2003): 46–51; Tammy Prater and Sara Bliss Kiser, “Lies, Lies, and More Lies,” A.A.M. Advance Manage- ment Journal 67, no. 2 (Spring 2002): 9–14.

15. Max Mihelich, “Check on Background Checks,” Workforce. com (September 23, 2013),

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239Chapter 6 Employee Selection

16. Amy Maingault, John Sweeney, and Naomi Cossack, “Inter- viewing, Management Training, Strikes,” HRMagazine 52, no. 6 (June 2007): 43; James Bassett, “Stop, Thief!” Gifts & Deco- rative Accessories 104, no. 1 (January 2003): 130–134; Richard A. Posthuma, Frederick Morgeson, and Michael Campion, “Beyond Employment Interview Validity: A Comprehensive Narrative Review of Recent Research and Trends over Time,” Personnel Psychology 55, no. 1 (Spring 2002): 1–8.

17. Robert Gatewood, Hubert S. Feild, and Murray Barrick, Human Resource Selection (Nelson Education, 2015); Yen- Chun Chen, Wei-Chi Tsai, and Changya Hu, “The Influences of Interviewer-Related and Situational Factors on Interviewer Reactions to High Structured Job Interviews,” International Journal of Human Resource Management 19, no. 6 (June 2008): 1056–1071; Jesus F. Salgado and Silvia Moscoso, “Compre- hensive Meta-Analysis of the Construct Validity of the Employment Interview,” European Journal of Work and Orga- nizational Psychology 11, no. 3 (September 2002): 299–325.

18. Julia Levashina et al., “The Structured Employment Inter- view: Narrative and Quantitative Review of the Research Lit- erature,” Personnel Psychology 67, no. 1 (2014): 241–293; Allen Huffcutt, Jeff Weekley, Willi Wiesner, Timothy Degroot, and Casey Jones, “Comparison of Situational and Behavior Description Interview Questions for Higher-Level Positions,” Personnel Psychology 54, no. 3 (Autumn 2001): 619–644.

19. Allen I. Huffcutt, Satoris S. Culbertson, and William S. Weyhrauch, “Employment Interview Reliability”, International Journal of Selection and Assessment 21, no. 3 (2013): 264–76; Peter Herriot, “Assessment by Groups: Can Value Be Added?” European Journal of Work & Organizational Psychology 12, no. 2 (June 2003): 131–146; Salgado and Moscoso, “Comprehen- sive Meta-Analysis”, Amelia J. Prewett-Livingston, John G. Veres III, Hubert S. Field, and Philip M. Lewis, “Effects of Race on Interview Ratings in a Situational Panel Interview,” Journal of Applied Psychology 81, no. 2 (April 1996).

20. Delroy L. Paulhus et al., “Self-Presentation Style in Job Interviews, “Journal of Applied Social Psychology 43, no. 10 (2013): 2042–59; “Survey: Six in Ten Companies Conduct Video Job Interviews,” PR Newswire (August 30, 2012),

21. Julia Thomas, “Video Killed the Interview Star,” DeGroote School of Business (July 29, 2013), http://www.degroote.

22. Carol Carter, Keys to Business Communication (Upper Saddle River, NJ: Pearson, 2012): Chapter 15.

23. Darren Dahl, “Tapping the Talent Pool…without Drowning in Resumés,” Inc. 31, no. 3 (April 2009): 122.

24. Joe Smydo, “Giant Eagle Job Fairs Attract Hundreds,” Pitts- burgh Post-Gazette (September 21, 2014),

25. Jack Welch and Suzy Welch, “Hiring Is Hard Work,” Business Week Online, no. 4091 (July 7, 2008): n.p.; Michele V. Rafter, “Candidates for Jobs in High Places Sit for Tests That Size Up Their Mettle,” Workforce Management 83, no. 5 (May 2004): 70–73.

26. Kira Vermond, “References Done Right,” Profit 26, no. 2 (May 2007): 101; Kathleen Samey, “A Not-So-Perfect Fit,” Adweek 44, no. 47 (December 1, 2003): 34; Ann Fisher, “How Can We Be Sure We’re Not Hiring a Bunch of Shady Liars?” Fortune 147, no. 10 (May 26, 2003).

27. “New Employee Privacy Rights in Oregon and Washington,” Venulex Legal Summaries (2007 Q3): 1–4; Barry J. Nadell, “The Cut of His Jib Doesn’t Jibe,” Security Management 48, no. 9 (September 2004): 108–114.

28. Will Dobbie et al., Bad Credit, No Problem? (National Bureau of Economic Research, 2016): w22711; Mary-Kathryn, “Labor Law for Supervisors,” Supervision 67, no. 2 (February 2006): 22–23; “Some Job-Screening Tactics May Be Illegal,” Fort Worth Star-Telegram (August 12, 2010): 5A; Katherine Erdel, “Changes May Prompt Review of Background Check Policies,” Corporate Counsel Guide 24 (2014): 12B–13B.

29. Marsha Nielsen and Kristine Kuhn, “Late Payments and Leery Applicants: Credit Checks as a Selection Test,” Employee Responsibilities & Rights Journal 21, no. 2 (June 2009): 115.

30. Beth Braverman, “Employers Running Credit Checks on Job Applicants Must Tread Carefully,” (July 25, 2016),

31. Elizabeth D. MacGillivray, Juanita H. Beecher, and Diedre M. Golden, “Employment Testing: The New Hot Button Issue for Federal Agencies—and Other Legal Developments,” Global Business & Organizational Excellence 27, no. 3 (March-April 2008): 68–78.

32. “EEOC Clarifies the Definition of Who Is an ‘Applicant’ in the Context of Internet Recruiting and Hiring,” Fair Employ- ment Practices Guidelines, no. 587 (April 1, 2004): 3–13; Kath- ryn Tyler, “Put Applicants’ Skills to the Test,” HRMagazine 45, no. 1 (January 2000): 74–80.

33. Standards that testing programs should meet are described in Standards for Educational and Psychological Tests (Washing- ton, DC: American Psychological Association, 1999).

34. Hershey H. Friedman, Linda Weiser Friedman, and Chaya Leverton, “Increase Diversity to Boost Creativity and Enhance Problem Solving,” Psychosociological Issues in Human Resource Management 4, no. 2 (2016): 7–33; John Bret Becton, Hubert S. Feild, William F. Giles, and Allison Jones-Farmer, “Racial Differences in Promotion Candidate Performance and  Reactions to Selection Procedures: A Field Study in a Diverse Top-Management Context,” Journal of Organizational Behavior 29, no. 3 (April 2008): 265–285.

35. Rachel Suff, “Testing the Water: Using Work Sampling for Selection,” IRS Employment Review, no. 802 (June 18, 2004): 44–49; Leonard D. Goodstein and Alan D. Davidson, “Hiring the Right Stuff: Using Competency-Based Selection,” Compen- sation & Benefits Management 14, no. 3 (Summer 1998): 1–10.

36. Stuart Crandell, “Assessment Centers in Talent Management: Strategies, Use, and Value,” Talent Management (January 7, 2008),

37. Ken Richardson and Sarah H. Norgate, “Does IQ Really Predict Job Performance?” Applied Development Science

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240 Part 3 Developing Effectiveness in Human Resources

19, no. 3 (2011): 153–69; Matthew Night, “Does IQ Predict Performance at Work?” CNN (February 28, 2011), http://edi-; Noelle Murphy, “Testing the Waters: Employ- ers’ Use of Selection Assessments,” IRS Employment Review 852 (August 4, 2006): 42–48.

38. Candice Rudd, “FAA’s Bid to Expand Air Traffic Hiring Pool Hits Turbulence,” Newsday (April 24, 2016), http://www

39. “Biographical Data (Biodata) Tests,” Personnel Selection and Resource Center (Washington DC: U.S. Office of Personnel Management, 2011),

40. Jesús F. Salgado and Gabriel Táuriz, “The Five-Factor Model, Forced-Choice Personality Inventories and Performance,” European Journal of Work and Organizational Psychology 23, no. 1 (2014): 3–30; Timothy Judge and Joyce Bono, “Five- Factor Model of Personality and Transformational Leader- ship,” Journal of Applied Psychology 85, no. 5 (October 2000): 751–765; J. Michael Crant and Thomas S. Bateman, “Charis- matic Leadership Viewed from Above: The Impact of Proac- tive Personality,” Journal of Organizational Behavior 21, no. 1 (February 2000): 63–75.

41. Jason L. Huang et al., “Personality and Adaptive Performance at Work,” Journal of Applied Psychology 99, no. 1 (2014): 162; Frederick P. Morgeson, Michael A. Campion, Robert L. Dip- boye, John R. Hollenbeck, Kevin Murphy, and Neal Schmitt, “Reconsidering the Use of Personality Tests in Personnel Selection Contexts,” Personnel Psychology 60, no. 3 (Autumn 2007): 683–729; Gregory Hurtz and John Donovan, “Person- ality and Job Performance: The Big Five Revisited,” Journal of Applied Psychology 85, no. 6 (December 2000): 869–879.

42. Julie Furr Youngman, “The Use and Abuse of Pre-Employ- ment Personality Tests,” Business Horizons (2017); Lawrence Peikes and Meghan D. Burns, “Polygraph Test Request Unlawful,” HRMagazine 50, no. 7 (July 2005): 110; “Pretext for Discrimination: How to Avoid Looking Like a Liar,” Fair Employment Practices Guidelines, no. 592 (September 1, 2004): 1–3; Gillian Flynn, Diane D. Hatch, and James E. Hall, “Know the Background of Background Checks,” Workforce 81, no. 9 (September 2002): 96–98.

43. “If the Shoe Fits,” Security Management 40, no. 2 (February 1996): 11; Michelle Cottle, “Job Testing: Multiple Choices,” The New York Times (September 5, 1999): 3, 10.

44. Taya R. Cohen et al., “Moral Character in the Workplace,” Journal of Personality and Social Psychology 107, no. 5 (2014): 943; Thomas J. Ryan, “Nerves of Steal,” SGB 37, no. 6 (June 2004): 8–10; D. S. Ones, C. Viswesvaran, and F. L. Schmidt, “Comprehensive Meta-Analysis of Integrity Test Validities: Findings and Implications for Personnel Selection and The- ories of Job Performance,” Journal of Applied Psychology 78 (August 1993): 679–703.

45. Steve Lorh, “Big Data, Trying to Build Better Workers,” New York Times (April 20, 2013),

46. Paul Zielbauer, “Small Changes Could Improve Police Hiring, Panel Says,” The New York Times (January 7, 1999): 8; Lynn McFarland and Ann Marie Ryan, “Variance in Faking across Noncognitive Measures,” Journal of Applied Psychology 85, no. 5 (October 2000): 812–21.

47. Robert Gatewood, Hubert S. Feild, and Murray Barrick, Human Resource Selection (Nelson Education, 2015); Maria Greco Danaher, “Strength Test Falls,” HRMagazine 52, no. 2 (February 2007): 115–116; M.S. Sothmann, D.L. Gebhardt, T.A. Baker, G.M. Kastello, and V.A. Sheppard, “Performance Requirements of Physically Strenuous Occupations: Validat- ing Minimum Standards for Muscular Strength,” Ergonomics 47, no. 8 (June 22, 2004): 864.

48. Kenneth G. Dau-Schmidt, Matt Finkin, and Robert Cov- ington, Legal Protection for the Individual Employee (West Academic, 2016); Michael Adams, Ben Van Houten, Robert Klara, and Elizabeth Bernstein, “Access Denied?” Restaurant Business 98, no. 2 (January 15, 1999): 36–48; “Medical Screen- ing: Are Employers Going Too Far?” Employee Benefit Plan Review 53, no. 11 (May 1999): 42–43.

49. “News Briefs,” Security Director’s Report 13, no. 18 (August 2013): 6.

50. Ibid. 51. Philip Bobko, Philip L. Roth, and Maury A. Buster, “The

Usefulness of Unit Weights in Creating Composite Scores: A Literature Review, Application to Content Validity, and Meta-Analysis,” Organizational Research Methods 10, no. 4 (October 2007): 689–709.

52. Deniz S. Ones, Chockalingam Viswesvaran, and Frank L Schmidt, “No New Terrain: Reliability and Construct Valid- ity of Job Performance Ratings,” Industrial & Organizational Psychology 1, no. 2 (June 2008): 174–79; D. Brent Smith and Lill Ellingson, “Substance versus Style: A New Look at Social Desirability in Motivating Contexts,” Journal of Applied Psy- chology 87, no. 2 (April 2002): 211–219; Ken Craik, et al., “Explorations of Construct Validity in a Combined Mana- gerial and Personality Assessment Programme,” Journal of Occupational and Organizational Psychology 75, no. 2 (June 2002): 171–193.

53. Multiple regression is a statistical method for evaluating the magnitude of effects of more than one independent variable (e.g., selection predictors) on a dependent variable (e.g., job performance) using principles of correlation and regression.

54. Patricia M. Buhler, “Managing in the New Millennium,” Supervision 68, no. 11 (November 2007): 17–20; Ann Marie Ryan, Joshua Sacco, Lynn McFarland, and David Kriska, “Applicant Self-Selection: Correlates of Withdrawal from a Multiple Hurdle Process,” Journal of Applied Psychology 85, no. 2 (April 2000): 163–179.

55. “Considering and Evaluating Internal Candidates for Senior- Level Nonprofit Positions,” Bridgestar (March 27, 2011),

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Training and Development

Learning Outcomes After studying this chapter, you should be able to

Discuss the scope of training and development and its strategic aspects.

Describe how a training needs assessment should be done.

Describe the factors that must be taken into account when designing a training program.

LO 1

LO 2

LO 3

Identify the types of training-delivery methods organizations use.

Explain how the effectiveness of training programs are evaluated, and describe some of the additional training programs conducted by firms.

LO 4

LO 5 Be

to C

ha ga

s/ Sh

ut te

rs to


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242 Part 3 Developing Effectiveness in Human Resources

W orkplace training used to be rather boxlike. It focused on teaching employees to do particular activities—operate machines, process work, and so forth. However, as the workplace has shifted from “touch labor” to “knowledge workers” (see

Chapter 1), the focus of training has shifted as well. Companies are realizing that workers need not only operational knowhow but also superior job expertise; knowledge about competitive, industry, and technological trends; and the ability to continually learn and utilize new information. These characteristics better help an organization adapt and inno- vate to compete far more effectively in today’s fast-paced global business world. Because training plays a central role in nurturing, strengthening, and expanding the capabilities of a firm in this way, it has become part of the backbone of strategic management.

7.1 The Scope of Training Many new employees come equipped with most of the knowledge, skills, and abilities needed to start work. Others require extensive training before they are ready to make much of a contribution to the organization. The term training is often used casually to describe almost any effort initiated by an organization to foster learning among its members. However, many experts distinguish between training, which tends to be more narrowly focused and oriented toward short-term performance concerns, and develop- ment, which, as you learned in Chapter 5, tends to be oriented more toward broadening an individual’s skills for future responsibilities. The two terms tend to be combined into a single phrase—training and development—to recognize the combination of activities organizations use to increase the knowledge and skills of employees.

Research shows that an organization’s revenues and overall profitability are posi- tively correlated to the amount of training it gives its employees. According to Training magazine’s ongoing industry report, U.S. businesses provide each of their employees between 35 and 55 hours, on average, of training annually.1 By contrast, the 100 best U.S. companies to work for, as cited by Fortune magazine, provide their employees with approximately double that amount of training and sometimes even more. New employ- ees hired by the Ritz Carlton hotel chain get over 300 hours of training. The greatest proportion of training is spent on rank-and-file employees and supervisors.

It’s not unusual for large corporations to have their own “universities” where they train their employees and future managers. Hamburger University, operated by McDonald’s Corporation near Chicago, is probably the best known corporate university. General Elec- tric has a 53-acre training campus north of New York City, where about 10,000

What aspects of train- ing plans do you think are strategic, and how are these plans similar or dissimilar to the col- lege and career plans you have created for yourself?

LO 1

Hamburger University, located at headquar- ters in Oak Brook, Illinois, is McDonald’s management training center.

Q ila

i S he

n/ G

et ty

Im ag


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243Chapter 7 Training and Development

people attend classes each year. The Campbell’s Soup Company operates Campbell University, which has a 2-year program focused on personal leadership development for both aspiring and seasoned managers.

So how much does all of this corporate training cost? About $70 billion annually. That’s a significant amount of money, so firms want to ensure it’s well spent.

U.S. businesses spend nearly four times as much on informal instruction as they do formal instruction, however. The informal instruction ranges from simple, on-the-job instruction to sophisticated skills training conducted on multimillion-dollar simula- tors. Other types of training include regular training given to new hires, customer ser- vice and communication-skills training, and compliance training—training employees must receive as a result of various legal mandates, such as EEO requirements or OSHA requirements. Airline attendants must undergo mandatory safety training designated by the Federal Aviation Administration. Train crews must annually undergo training mandated by the Federal Railroad Administration.

7.1a A Strategic Approach to Training Managers should keep a close eye on their firm’s goals and strategies and orient their training accordingly. Is it the firm’s goal to develop new product lines? If so, how should this goal affect its training initiatives? Is the firm trying to lower its costs of production so it can utilize a low-cost strategy to capture new business? If so, are there training initiatives that can be undertaken to deliver on this strategy?

Unfortunately, some organizations fail to make the connection between train- ing and an organization’s goals. Instead, they do whatever the competition is doing or what is the latest trend. As a result, training programs are often misdirected, poorly designed, and inadequately evaluated—not to mention a waste of money. One, not all of a firm’s strategic initiatives can be accomplished with training. Two, not all training programs—no matter how widely they are adopted by other organizations—will be a strategic imperative for your firm.

Because business conditions change rapidly, as does technology, keeping abreast of the types of training a firm’s employees need to remain competitive can be a challenge. If employees consistently fail to achieve their productivity objectives, this might be a signal that training is needed. Likewise, if organizations receive an excessive number of customer complaints, this, too, might suggest a firm’s training is inadequate. Larger firms typically have chief learning officers, who are high-ranking executives responsible for ensuring a company’s training is timely, well designed, and focused on the firm’s strategic issues.

To ensure a firm’s training and development investment has the maximum impact possible, a strategic and systematic approach should be used that involves four phases:

1. A needs assessment based on the firm’s competitive objectives: What training does the firm really need?

2. Program design: Given those needs, how should the training program best designed or structured?

3. Implementation: How should the program be delivered—that is, by what method? 4. Evaluation: How can the firm tell if the training program is really working?

Figure 7.1 presents these elements. We will use it as a framework for organizing the material in this chapter.

chief learning officers A high-ranking executive responsible for fostering employee learning and development within the firm

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244 Part 3 Developing Effectiveness in Human Resources

7.2 Phase 1: Conducting the Needs Assessment

If you own or manage a business, how would you figure out what types of training your employees need and how much of it? The following are some of the most common types of training employees are given. “Hard skills” refer to the tangible and teachable skills needed to do a job. Learning to operate a machine is an example. “Soft skills” refer to subjective skills that are harder to measure, requiring more discretion or judgment, but equally valuable in the workplace. Working well with other people is an example of a soft skill.

Hard-Skills Training

• On-the-job training for new hires • Basic skills training • Budgeting and accounting training • Machinery operating training • IT/computer training • Customer service training • Compliance (regulations) training

Soft-Skills Training

• Ethics training • Diversity training • Leadership training • Communications training • Team training • Time management training • Interpersonal skills training

To determine what type of training your firm needs, you must conduct a training needs assessment. However, a study conducted a few years ago by the American Society for Training and Development found that organizations conduct needs assessments less than 50 percent of the time. This situation has improved somewhat, in part because

If you were launching a new business, what factors would you look at to do a training-needs assessment for the organization?

LO 2

• Objectives • Trainee Readiness • Principles of Learning

Phase Two: Design

• Reactions • Learning • Behavior • Results

Phase Four: Evaluation

• Organization • Task Analysis • Person Analysis

Phase One: Needs Assessment

• Methods • Learning Outcomes

Phase Three: Implementation

Strategic Model of Training and DevelopmentFigure 7.1

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245Chapter 7 Training and Development

tighter training budgets have forced firms to ensure that their training is well aligned with their objectives. Being able to quickly assess the training your employees need is especially important for small businesses that may not have the time or resources to do lengthy needs assessment analyses. Doing a needs assessment does not need to be a laborious task, as this chapter’s small-business feature shows.2 As Figure 7.2 shows, a needs assessment consists of three parts: an organization analysis, a task analysis, and a person analysis. Each of these steps will be discussed next.

7.2a Organization Analysis An organization analysis is an examination of a firm’s environment, goals, strategies, performance, and resources so as to determine what training it should do. For this pur- pose, HR personnel typically collect data such as information on the quality of a firm’s goods or services, its absenteeism, turnover, and number of accidents. The availability of potential replacements and the time required to train them are important factors in organization analysis. Other issues include technological change, innovation, globaliza- tion, quality and process improvement, mergers and acquisition, and restructuring—all of which necessitate training. Why? Because they frequently require employees and managers to take on new roles and responsibilities and adjust to new cultures and ways of doing business.

Economic and public policy issues influence corporate training needs as well. For example, terrorist and cyber attacks continue to change the training that airport and airline workers need, as well as police, IT and transportation employees, nuclear power plant employees, and even security staff at theme parks.3 Finally, trends in the workforce itself affect a firm’s training needs. As older workers near retirement, younger workers need the training and knowledge to take their place.

Conducting an organization analysis also involves examining a firm’s resources— technological, financial, and human—available to conduct the training. HR departments are under constant pressure to make the most of their training dollars. When budgets are tight, training and development are usually the first programs to be cut. Compa- nies such as Darden Restaurants, Ford, and Merck have used information technology to significantly cut their training budgets. Other companies outsource their training programs, or at least part of them, to external firms to cut costs or to take advantage of

organization analysis An examination of an organization’s environ- ment, goals, strategies, performance, and resources so as to deter- mine what training it should do

Needs Assessment for TrainingFigure 7.2




…of environment, strategies, and resources to determine where to emphasize training.

…of the activities to be performed in order to determine the KSAOs needed.

…of performance, knowledge, and skills in order to determine who needs training.

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246 Part 3 Developing Effectiveness in Human Resources

expertise the firm lacks. Other organizations purchase “off the shelf ” course materials developed by training companies rather than develop their own. Another trend is for companies to partner with firms in their supply chains to jointly train their employees more cost effectively.4

7.2b Task Analysis The second step in training-needs assessment is task analysis. A task analysis involves reviewing the job description and KSAOs of a particular position, including the specific actions and behaviors required to do it. In other words, a task analysis goes beyond just the “what” of a job and also includes the “how.”

If the job is new or jobs are changing, the first step in a task analysis is to list all the tasks or duties included in the job. The second step is to list the steps the employee needs to take to complete each task. The type of performance for each task (i.e., manipulation, speech, and discrimination), along with the skills and knowledge necessary to do it, can then be identified. For example, in the task of taking a chest X-ray, a radiologist correctly positions the patient (manipulation), gives special instructions (speech), and checks the proper distance of the X-ray tube from the patient (discrimination). The types of skills and knowledge that trainees need can be determined by observing and question- ing skilled jobholders or by reviewing job descriptions. This information helps trainers select program content and choose the most effective training methods.

Jobs are changing so quickly today that instead of focusing on a fixed sequence of tasks, firms are finding that their employees need more flexible sets of competencies to

task analysis The process of determin- ing a training program’s content by studying the tasks and duties a job involves

Do environmental scanning. Continually look at what is going on in your industry and organization to anticipate upcoming training needs. Enlist the help of employees and managers in the process. Question managers about their strategic goals and their impact on the organization, and gear your analysis accordingly.

Do internal scanning. Determine what skills are most important to acquire in terms of your organization’s cur- rent and future needs. Which ones will provide the biggest payback?

Gather organizational data. Performance data for your firm (such as errors, sales, and customer complaints) and staffing data (such as turnover and absenteeism) can be very helpful as a starting point.

Develop a plan. Once the training need has been iden- tified, identify various ways to deliver it and consider the costs and benefits of each. Determine what kind of

Small Business Application

growth or other measure is a reasonable result of the training.

Utilize state and local government programs. Many state and local governments have programs to help small businesses train their employees. For example, the Texas Workforce Commission will pay small businesses in Texas up to $1,800 annually in tuition and fees for each new full- time employee hired and trained at a local college. (For a current employee, the program covers tuition and fees up to $900 annually.)

Make the needs-assessment process ongoing. Repeat these activities as your business needs change.

Sources: Patti Greene, “Five Affordable and Effective Ways Small Busi- ness Owners Could Better Train Employees,” Forbes (October 21, 2016),; “TWC Launches Small Busin.ess Employee Training Program,” Your Houston News (November 20, 2010), http://www.; “Employee Training Tips,” D&, http://small-; Ron Zemke, “How to Do a Needs Assessment When You Think You Don’t Have Time,” Training 35, no. 3 (March 1998): 38–44.

A Small Business’s Guide to Quickly Assessing Its Training Needs

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247Chapter 7 Training and Development

adapt. A competency assessment focuses on the sets of skills and knowledge employees need to be successful, particularly for decision-oriented and knowledge-intensive jobs. A competency assessment goes beyond simply describing the traits employees must have to successfully perform the work. It also captures elements of how those traits should be used within an organization’s context and culture. That might include the motivation levels of employees, their interpersonal skills, and so on. “It’s easy for top performers to become experts in a certain niche, but ‘talent factories’ focus on creating generalists,” explains one HR consultant. “To get the most from talented employees, they should know how to handle a wide range of functions.”5

Instead of offering a laundry list of training plans as it used to, Amway has estab- lished job competencies for its employees around the world. The competencies denote the particular skills each employee needs for his or her job and a training “road map” to get them there.6 Highlights in HRM 1 shows an example of a partial competency assessment tool used for evaluating a manager.

7.2c Person Analysis A person analysis is the process of determining which employees require training and, equally important, which do not. This helps organizations avoid providing all employ- ees training when some do not need it. In addition, a person analysis helps managers determine what prospective trainees are able to do currently so that the programs can be designed to provide training that will benefit them.

Performance appraisal information can also be used to conduct a person analy- sis. However, although performance appraisals might reveal which employees are not meeting the firm’s expectations, for example, they typically do not reveal why. If the performance is due to ability problems, training is likely to be a good solution. If the performance is due to poor motivation or factors outside an employee’s control, train- ing might not be the answer. Conducting a deeper performance diagnosis is discussed in Chapter 8 on performance appraisals. Ultimately, managers have to sit down with employees to talk about areas for improvement so that they can jointly determine the training or other approaches that will have maximum benefit.7 A person analysis along with appraisal information can also be used to determine the training someone needs for a new position, a promotion, or to take on new responsibilities.

7.3 Phase 2: Designing the Training Program Once you have assessed your firm’s training needs, the next step is to design the training program. Experts believe that the design of training programs should focus on at least four related issues: (1) the training’s instructional objectives, (2) readiness of trainees and their motivation, (3) principles of learning, and (4) characteristics of instructors.

7.3a Developing Instructional Objectives After conducting organization, task, and person analyses, managers should have a more complete picture of their firms’ training needs. On the basis of this information, they can more formally state the desired outcomes of training via written instructional objectives, which describe the skills or knowledge to be acquired and/or the attitudes to be changed. The learning objectives at the beginning of this chapter are examples of instructional objectives.

competency assessment An analysis of the sets of skills and knowledge needed for decision- oriented and knowledge- intensive jobs

person analysis The process of determin- ing the specific individu- als who need training in an organization

instructional objectives The desired outcomes of a training program

What has your college experience taught you about how people learn that can be applied to the workplace?

LO 3

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The objectives should be performance centered. Performance-centered objectives typically include precise terms, such as “to calculate,” “to repair,” “to adjust,” “to con- struct,” “to assemble,” and “to classify.”8 For example, the stated objective for one training program might be, “Employees trained in team methods will be able to perform the different jobs of their team members within six months.”

7.3b Assessing the Readiness and Motivation of Trainees Two preconditions for learning affect the success of those who are to receive train- ing: readiness and motivation. Trainee readiness refers to whether or not the experi- ence and knowledge of trainees have made them ready to absorb the training. Do they have the background knowledge and the skills necessary to absorb what will be presented?

It is often desirable to group individuals according to their readiness, as deter- mined by test scores or other assessment information, and to provide alternative types of instruction for those who need it. The receptiveness and readiness of partici- pants in training programs can be increased by having them complete questionnaires

A Competency Assessment for a Managerial Position

For each item, select the number that best describes the manager’s characteristics. For items that do not apply, select NA (not applicable). For other items for which you lack suf- ficient observations or documentary evidence, select DK (don’t know).

4 – Exemplary