525 paper 2 YY

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6 Explain the importance of corporate culture and human resource management.

7 Describe the importance of employer branding.

8 Discuss human resource management issues for small businesses.

9 Identify ways that country culture influences global business.

10 Describe the human resource management profession.

1 Define human resource management.

2 Identify the human resource management functions.

3 Describe who performs human resource management activities.

4 Explain how HR serves as a strategic business partner.

5 Identify the elements of the dynamic HRM environment.

Chapter ObjeCtives After completing this chapter, students should be able to:

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Human Resource Management: An Overview1

3

Defining human resource Management human resource management (hrM) is the use of individuals to achieve organizational objectives. Basically, all managers get things done through the efforts of others. Consequently, managers at every level must concern themselves with HRM. Individuals dealing with human resource matters face a multitude of challenges, ranging from a constantly changing work- force to ever-present government regulations, a technological revolution, and the economy of the United States and the world. Furthermore, global competition has forced both large and small organizations to be more conscious of costs and productivity. Because of the criti- cal nature of human resource issues, these matters must receive major attention from upper management.

The remainder of this chapter will enable you to gain an appreciation of HRM as a critical business function. In the next sections, we will introduce you to the functions that make up HRM and identify who is responsible for managing human resources (HR). Then, we will discuss HR as a strategic business partner and the dynamic role of the environment that influences HRM practice. Finally, we turn our attention to the importance of corporate and national culture and discuss the HRM profession.

human resource Management Functions People who are engaged in managing HR develop and work through an integrated HRM system. As Figure 1-1 shows, six functional areas are associated with effective HRM: staffing, human resource development, performance management, compensation, safety and health, and employee and labor relations. These functions are discussed next.

Staffing staffing is the process through which an organization ensures that it always has the proper number of employees with the appropriate skills in the right jobs, at the right time, to achieve organizational objectives. Staffing involves job analysis, human resource planning, recruitment, and selection, all of which are discussed in this text.1

ObjeCtive 1.1

Define human resource management.

human resource management (HRM) Utilization of individuals to achieve organizational objectives.

ObjeCtive 1.2

Identify the human resource management functions.

staffing Process through which an organization ensures that it always has the proper number of employees with the appropriate skills in the right jobs, at the right time, to achieve organizational objectives.

4 Part 1 • Setting the Stage

Job analysis is the systematic process of determining the skills, duties, and knowledge required for performing jobs in an organization. It impacts virtually every aspect of HRM, including planning, recruitment, and selection. Human resource planning is the systematic process of matching the internal and external supply of people with job openings anticipated in the organization over a specified period. The data provided set the stage for recruitment or other HR actions. Recruitment is the process of attracting individuals on a timely basis, in sufficient numbers, and with appropriate qualifications to apply for jobs with an organization. Selection is the process of choosing the individual best suited for a particular position and the organization from a group of applicants. Successful accomplishment of the staffing function is vital if the organization is to effectively accomplish its mission. These topics are collectively often referred to as staffing.

Performance Management performance management is a goal-oriented process that is directed toward ensuring that organizational processes are in place to maximize the productivity of employees, teams, and ultimately, the organization. Performance appraisal is a formal system of review and evalua- tion of individual or team task performance. It affords employees the opportunity to capitalize on their strengths and overcome identified deficiencies, thereby helping them to become more satisfied and productive employees.

Human Resource Development human resource development is a major HRM function consisting not only of training and development but also of career planning and development activities, organization development, and performance management and appraisal. Training is designed to provide learners with the knowledge and skills needed for their present jobs. Development involves learning that goes beyond today’s job and has a more long-term focus.

Organization development (OD) is planned and systematic attempts to change the organi- zation (corporate culture), typically to a more behavioral environment. OD applies to an entire system, such as a company or a plant. A number of OD methods are discussed that serve to improve a firm’s performance.

Career planning is an ongoing process whereby an individual sets career goals and identifies the means to achieve them. According to the U.S. Bureau of Labor Statistics, today’s employees will work for approximately 9 to 11 companies during their careers based on the assumption that

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performance management (PM) Goal-oriented process directed toward ensuring that organizational processes are in place to maximize the productivity of employees, teams, and ultimately, the organization.

human resource development (HRD) Major HRM functions consisting not only of training and development but also of individual career planning and development activities, organization development, and performance management and appraisal.

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Figure 1-1 Human Resource Management Functions

ChaPter 1 • human reSourCe management: an overview 5

most people will work 30 to 40 years.2 A survey conducted by NYU’s School of Continuing and Professional Studies showed that on average, individuals will change careers (not merely “jobs”) three times in their life.3 Employee loyalty loses its meaning in this environment.

Career development is a formal approach used by the organization to ensure that people with the proper qualifications and experiences are available when needed. Individual careers and organizational needs are not separate and distinct. Organizations should assist employees in career planning so the needs of both can be satisfied.

Compensation The question of what constitutes a fair day’s pay has plagued management, unions, and workers for a long time. A well-thought-out compensation system provides employees with adequate and equitable rewards for their contributions to meeting organizational goals. As used in this book, the term compensation includes the total of all rewards provided to employees in return for their services. The rewards may be one or a combination of the following:

• Direct Financial Compensation (Core Compensation): Pay that a person receives in the form of wages, salaries, commissions, and bonuses.

• indirect Financial Compensation (employee benefits): All financial rewards that are not included in direct compensation, such as paid vacations, sick leave, holidays, and medical insurance.

• Nonfinancial Compensation: Satisfaction that a person receives from the job itself or from the psychological or physical environment in which the person works.

Employee and Labor Relations Businesses are required by law to recognize a union and bargain with it in good faith if the firm’s employees want the union to represent them. In the past, this relationship was an accepted way of life for many employers, but most firms today would rather have a union-free environment. When a labor union represents a firm’s employees, the human resource activity is often referred to as labor relations, which handles the job of collective bargaining. Internal employee relations comprise the HRM activities associated with the movement of employees within the organiza- tion such as promotions, demotion, termination, and resignation.

Safety and Health safety involves protecting employees from injuries caused by work-related accidents. health refers to the employees’ freedom from physical or emotional illness. These aspects of the job are important because employees who work in a safe environment and enjoy good health are more likely to be productive and yield long-term benefits to the organization. Today, because of federal and state legislation that reflect societal concerns, most organizations have become attentive to their employees’ safety and health needs.

Human Resource Research Although human resource research is not a distinct HRM function, it pervades all functional areas, and the researcher’s laboratory is the entire work environment. For instance, a study related to recruitment may suggest the type of worker most likely to succeed in the culture of a particular firm. Research on job safety may identify the causes of certain work-related accidents. The reasons for problems such as excessive absenteeism or excessive grievances may not be readily apparent. However, when such problems occur, human resource research can often find the causes and offer possible solutions. Human resource research is clearly an important key to developing the most productive and satisfied workforce possible.

Interrelationships of Human Resource Management Functions All HRM functional areas are highly interrelated. Management must recognize that decisions in one area will affect other areas. For instance, a firm that emphasizes recruiting top-quality candidates but neglects to provide satisfactory compensation is wasting time, effort, and money.

direct financial compensation (core compensation) Pay that a person receives in the form of wages, salary, commissions, and bonuses.

indirect financial compensation (employee benefits) All financial rewards that are not included in direct financial compensation.

nonfinancial compensation Satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which the person works.

safety Protection of employees from injuries caused by work-related accidents.

health Employees’ freedom from physical or emotional illness.

6 Part 1 • Setting the Stage

In addition, a firm’s compensation system will be inadequate unless employees are provided a safe and healthy work environment. If a firm’s compensation system pays below-market wages, the firm will always be hiring and training new employees only to see the best leave for a com- petitor’s higher wages. The interrelationships among the HRM functional areas will become more obvious as these topics are addressed throughout the book.

Who performs human resource Management activities? The person or units who perform the HRM tasks have changed dramatically in recent years, and today there is no typical HR department. Many of these changes are being made so that HR professionals can accomplish a more strategic role. Also, the recent recession forced some HR departments to accomplish more with less, and some companies have downsized the HR department to keep production-oriented people. This restructuring often resulted in a shift in who carries out each function, not the elimination of the previously identified HR functions. Some organizations continue to perform the majority of HR functions within the firm. However, as internal operations are reexamined, questions are raised, such as: Can some HR tasks be performed more efficiently by line managers or outside vendors? Can some HR tasks be central- ized or eliminated altogether? Can technology improve the productivity of HR professionals? One apparent fact is that all functions within today’s organizations are being scrutinized for cost cutting, including HR. All units must operate under a lean budget in this competitive global environment, and HR is no exception.

Evidence provided by The Hackett Group shows that the HR functions have been impacted more than other support functions with regard to reductions in staff and operating budgets.4 In fact, the most efficient companies typically spend nearly 30 percent less per employee on HR and operate with 25 percent fewer HR employees.5 Mobile HR has been a major factor in this trend as we discuss later in the chapter. Many HR departments continue to get smaller because others outside the HR department now perform certain functions. HR outsourcing, shared service cen- ters, professional employer organizations, and line managers now assist in the accomplishment of many traditional HR activities. Let us first look at the role of the traditional HR professional.

Human Resource Management Professional Historically, the HR manager was responsible for each of the six HR functions. A human resource management professional is an individual who normally acts in an advisory or staff capacity, working with other managers to help them address human resource matters. Often, HR departments are created, with the central figure being the HR manager or executive. The HRM professional is primarily responsible for coordinating the management of HR to help the organization achieve its goals. Figure 1-2 displays a summary of a typical human resource professional’s job along with the typical tasks performed by these professionals.

Line Managers All managers get things done through the efforts of others. Consequently, managers at every level naturally concern themselves with HRM, for example, making decisions about which job candidates are likely to meet the needs of company, conducting employee performance evaluations, and determining pay raise amounts. Individuals directly involved in accomplish- ing the primary purpose of the organization are line managers. As the traditional work of HR managers evolves, line managers have assumed some tasks typically done by HR profession- als.6 Automation has assisted greatly in this process. Managers are being assisted by manager self-service, the use of software, and the corporate network to automate paper-based human resource processes that require a manager’s approval, recordkeeping or input, and processes that support the manager’s job. Everything from recruitment, selection, and performance appraisal to employee development has been automated to assist line managers in performing traditional HR tasks.

There is a shared responsibility between line managers and HR professionals. Frequently, the line manager looks to HR for guidance in topics such as selection, training, promotion, and

ObjeCtive 1.3

Describe who performs human resource management activities.

human resource professional Individual who normally acts in an advisory or staff capacity, working with other professionals to help them deal with human resource matters.

line managers Individuals directly involved in accomplishing the primary purpose of the organization.

ChaPter 1 • human reSourCe management: an overview 7

taking disciplinary action. The relationship between HR professionals and line managers is illustrated by the following account:

Bill Brown, the production supervisor for Ajax Manufacturing, has just learned that one of his machine operators has resigned. He immediately calls Sandra Williams, the HR manager, and says, “Sandra, I just had a Class A machine operator quit down here. Can you find some qualified people for me to interview?” “Sure Bill,” Sandra replies. “I’ll send two or three down to you within the week, and you can select the one that best fits your needs.”

In this instance, both Bill and Sandra are concerned with accomplishing organizational goals, but from different perspectives. As an HR manager, Sandra identifies applicants who meet the criteria specified by Bill. Yet, Bill will make the final decision about hiring because he is responsible for the machine operators’ performance. His primary responsibility is production; hers is human resources. As an HR manager, Sandra must constantly deal with the many prob- lems related to HR that Bill and the other managers face. Her job is to help them meet the human HR needs of the entire organization.

Human Resources Outsourcing hr outsourcing (hrO) is the process of hiring external HR professionals to do the HR work that was previously done internally. It is estimated that HRO is a $42 billion industry with expected future annual growth to be approximately 5 percent.7 In the early days of HRO, cost savings was the primary driver in determining which activities to outsource. Today, outsourcing agreements are focusing more on quality of service and saving time, which is often more important than saving money.8 Ron Gier, vice president of human capital planning and employee relations for Sprint, said, “Outsourcing is about concentrating where you are going to put your energy, where you are going to build competency as a company and where you can use a partner to perform activities that are not core to your business.”9 This permits HR to focus on strategic organizational issues.10 As will be stressed throughout the text, strategic HR has become a major driver for HR professionals.11

Discrete services outsourcing involves one element of a business process or a single set of high-volume repetitive functions to be outsourced.12 Benefits have often been the HR task

HR outsourcing (HRO) Process of hiring external HR professionals to do the HR work that was previously done internally.

Plan, direct, or coordinate hr activities and staff of an organization. Sample of reported job titles: human resources manager (hr manager), Director of human resources, human resources Director (hr Director), employee Benefits manager, human resources vice President, employee relations manager

Tasks

• Serve as a link between management and employees by handling questions, inter- preting and administering contracts and helping resolve work-related problems.

• analyze and modify compensation and benefits policies to establish competitive programs and ensure compliance with legal requirements.

• advise managers on organizational policy matters such as equal employment opportunity and sexual harassment, and recommend needed changes.

• Perform difficult staffing duties, including dealing with understaffing, refereeing disputes, firing employees, and administering disciplinary procedures.

• Plan and conduct new employee orientation to foster positive attitude toward organizational objectives.

• identify staff vacancies and recruit, interview, and select applicants. • Plan, direct, supervise, and coordinate work activities of subordinates and staff

relating to employment, compensation, labor relations, and employee relations. • Plan, organize, direct, control, or coordinate the personnel, training, or labor

relations activities of an organization. • represent organization at personnel-related hearings and investigations. • administer compensation, benefits and performance management systems, and

safety and recreation programs.

Figure 1-2 Human Resource Professional Job Description Source: National Center for O*NET Development. 11-3121.00. O*NET OnLine. Retrieved January 14, 2014, from http://www.onetonline.org/ link/summary/11-3121.00

8 Part 1 • Setting the Stage

most likely to be outsourced. Dan Thomas, president of Trivalent Benefits Consulting Inc., said, “Benefits administration has become so complex that it really takes someone who works with it every single day to keep track of all of the different laws and changes that are going on.”13 For example, a survey conducted by the ADP Institute revealed that more than half of employers (52 percent of midsized and 54 percent of large) believe that benefits administration will be more complex as a result of the Affordable Care Act. An even higher percentage of employers (57 percent of midsized and 64 percent of large) believe that health care reform will cause the time spent on benefits administration to increase.14

Business process outsourcing (BPO) is the transfer of the majority of HR services to a third party. Typically larger companies are involved with BPO, both as a provider and a user. A major HR outsourcer is IBM that has more than $100 billion in revenue.15 Kraft Foods Inc. and IBM signed a multiyear BPO agreement in which IBM took over workforce administration, compen- sation, and performance reporting for all of Kraft’s 98,000 employees spread across 72 coun- tries.16 Florida created a Web-based HR information system and outsourced administration of most HR functions for approximately 240,000 state employees and retirees. Outsourced services included recruiting, payroll, and HR administration services and benefits administration.17

Human Resources Shared Service Centers A shared service center (ssC), also known as a center of expertise, takes routine, transaction- based activities dispersed throughout the organization and consolidates them in one place. For example, a company with 20 strategic business units might consolidate routine HR tasks and per- form them in one location. Shared service centers provide an alternative to HRO and can often provide the same cost savings and customer service. Fewer HR professionals are needed when shared service centers are used, resulting in significant cost savings. The most common HR func- tions that use SSCs are benefits and pension administration, payroll, relocation assistance and recruitment support, global training and development, succession planning, and talent retention.

Professional Employer Organizations A professional employer organization (peO) is a company that leases employees to other busi- nesses. When a decision is made to use a PEO, the company releases its employees, who are then hired by the PEO. The PEO then manages the administrative needs associated with employees. It is the PEO that pays the employees’ salaries; it also pays workers’ compensation premiums, payroll-related taxes, and employee benefits. The PEO is responsible to the IRS if, for example, the payroll taxes go unpaid. The company reimburses the PEO, which typically charges a fee

shared service center (SSC) A center that takes routine, transaction-based activities dispersed throughout the organization and consolidates them in one place.

professional employer organization (PEO) A company that leases employees to other businesses.

If your professor has assigned this, go to mymanagementlab.com to complete the HR Bloopers exercise and test your application of these concepts when faced with real-world decisions.

H r B l o o p e r s

Staffing Stone Consulting Business at Stone Consulting is growing faster

than Shelly Stone expected. She just signed a contract on another big project that she believes secures her future in the consulting business.

However, she has been so busy selling the firm’s services that she has put little thought into how she is going to staff the projects she has recently sold. She opened the firm more than a year ago and quickly hired five consultants and an office manager to help her get the business off the ground.

Unfortunately, one of the consultants has already left the firm after making a huge mistake that caused Shelly to lose a client. Some of the other consultants have raised some concerns with Shelly as

well. They’ve asked about pay increases and also her promise to even- tually provide them with health insurance. However, she hasn’t had time to even think about these issues because she has focused her attention on finding new clients. As she looks over her project list she realizes she needs to start thinking about staffing fast. Her current team is already committed to other projects and the new projects she has secured need to get started right away. The office manager inter- rupts her thoughts to tell her a potential client is on the line. Excited about yet another opportunity, Shelly jumps on the call, quickly for- getting her staffing concerns.

ChaPter 1 • human reSourCe management: an overview 9

of from 2 to 7 percent of the customer’s gross wages, with percentages based on the number of leased employees. Because the PEO is the employees’ legal employer it has the right to hire, fire, discipline, and reassign an employee. However, the client company maintains enough con- trol so it can run the day-to-day operations of its business. Although PEOs have been available since the early 1980s, they have recently become a multibillion dollar industry. In fact, there is an estimated two to three million U.S. workers employed under a PEO-type arrangement and that number is certain to grow.18 PEOs permit business owners to focus on their core business, whereas the PEO handles HR activities.19 Companies using a PEO typically have a high level of benefits and greater HR expertise than they could possibly have had on their own.

human resources as a strategic business partner In the environment presently confronting HR, many HR professions are increasingly taking on the role of being a strategic partner with upper management.20 In this role, HR professionals are able to focus on matters that are truly important to the company as a whole.21 For example, increas- ing sales and building customer loyalty to the brand are important goals of soft drink companies such as Coca Cola and PepsiCo. Increasing sales require hiring highly dedicated and motivated sales and distribution employees. As a strategic business partner, HR helps to identify and develop the employees necessary for excellent performance, builds recruitment systems, training programs for product distribution and interactions with customers, constructs performance management, and structures compensation programs that will greatly incentivize these employees to excel. The rap- idly evolving world of HR will increasingly require HR professionals to thoroughly understand all aspects of what the companies they work for do. Essentially, they must know more than just HR work.22 In moving from a transactional to a strategic model, HR professionals work toward solving strategic problems in the organization. No longer is an administrative and compliance role appropriate as their primary jobs. For instance, preparing the company’s affirmative action plan or administering the payroll system are compliance and administrative tasks. HR executives today need to think like the CEO to become a strategic partner in achieving organizational plans and results.23 In doing so, they understand the production side of the business and help to determine the strategic capabilities of the company’s workforce, both today and in the future. HR professionals need to be agile in their thinking as they adapt to the ebbs and flows of business. Therefore, HR executives are ensuring that human resources support the firm’s mission.

HR professionals have changed the way they work. Working as a strategic business partner requires a much deeper and broader understanding of business issues.24 What strategically should HR be doing exactly? Possible strategic tasks for HR include making workforce strategies fundamental to company strategies and goals; increasing HR’s role in strategic planning, merg- ers, and acquisitions; developing awareness or an understanding of the business; and helping line managers achieve their goals as in the previous example of soft drink companies.

HR professionals can give the CEO and CFO a powerful understanding of the role that employees play in the organization and the way it combines with business processes to expand or shrink shareholder value. HR professionals are integrating the goals of HR with the goals of the organization and focusing on expanding its strategic and high-level corporate participation with an emphasis on adding value. In doing so, HR is demonstrating that it can produce a return on investment for its programs. It analyzes HR activities to determine whether they are maintaining acceptable profit margins. For example, HR professionals strive to develop cost-effective train- ing strategies that boost sales revenue that far exceeds the cost of training. The CEO needs help in matters that HR professionals are qualified to handle. HR professionals are the enablers; they are the ones who should know about change and develop strategies to make it work.

A useful way to better understand how HR serves as a strategic business partner is to think about the use of capital for value creation. Capital refers to the factors that enable companies to generate income, higher company stock prices, economic value, strong positive brand identity, and reputation. There is a variety of capital that companies use to create value, including finan- cial capital (cash) and capital equipment (state-of-the-art robotics used in manufacturing).

Employees represent a specific type of capital called human capital. human capital, as defined by economists, refers to sets of collective skills, knowledge, and ability that employees can apply to create value for their employers. Companies purchase the use of human capital by

ObjeCtive 1.4

Explain how HR serves as a strategic business partner.

human capital As defined by economists, refers to sets of collective skills, knowledge, and ability that employees can apply to create economic value for their employers.

10 Part 1 • Setting the Stage

paying employees an hourly wage, salary, or bonuses and providing benefits such as paid vaca- tion and health insurance. Also, companies help develop human capital to their advantage by offering training programs aimed at further boosting employee productivity.

The meaning of value creation differs according to a company’s mission. It is useful to think about the differences between for-profit and not-for-profit organizations. For example, Microsoft and Frito Lay are for-profit companies that strive to generate annual profits for company share- holders. These companies promote profit generation by selling quality software and quality snack products, respectively. The American Red Cross is an illustration of a not-for-profit organization that relies on charitable monetary contributions and grant money to create societal value. The people who contribute money and other resources do not seek monetary gain. Instead, they value supporting humanitarian causes such as disaster relief. The American Red Cross provides disaster relief after the occurrence of devastating events, including the typhoon in the Philippines that destroyed cities and villages in 2013.

Every organization relies on capital to create value, but the combination of capital used to create value differs from company to company. For example, Frito Lay uses state-of-the-art man- ufacturing equipment, and the American Red Cross does not. However, every organization shares in common the employment of individuals and the necessity of managing employees to success- fully create value. Indeed, HRM is the business function of managing employees to facilitate an organization’s efforts to create value.

Dynamic human resource Management environment Many interrelated factors affect HRM practice within and outside the organization. As illustrated in Figure 1-3, environmental factors include legal considerations, labor market, society, political parties, unions, shareholders, competition, customers, technology, the economy, and unantici- pated events. Each factor, either separately or in combination with others, can create constraints or opportunities for HRM.

ObjeCtive 1.5

Identify the elements of the dynamic HRM environment.

Customers

Legal Considerations Labor Market

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Figure 1-3 Environment of Human Resource Management

ChaPter 1 • human reSourCe management: an overview 11

Legal Considerations A significant external force affecting HRM relates to federal, state, and local legislation and the many court decisions interpreting this legislation. For example, the Age Discrimination in Employment Act is an example of a federal law that protects older workers from illegal discrimination. In addition, presidential executive orders have had a major impact on HRM. These legal considerations affect virtually the entire spectrum of human resource policies. Laws, court decisions, and executive orders affecting other HRM activities will be described in the appropriate chapters.

Labor Market Potential employees located within the geographic area from which employees are normally recruited comprise the labor market. The capabilities of a firm’s employees determine, to a large extent, how well the organization can perform its mission. Because new employees are hired from outside the firm, the labor market is considered an important environmental factor. The labor market is always changing, and these shifts inevitably cause changes in the workforce of an organization. For example, members of the aging baby boom cohort, the largest current gen- eration of employees, are retiring in large numbers; however, younger generations are smaller and less well-prepared to assume leadership roles because they have had much less time in the workforce to develop them.

Society Society may also exert pressure on HRM. The public is no longer content to accept, without question, the actions of business. To remain acceptable to the general public, a firm must accomplish its purpose while complying with societal norms.

Ethics is the discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation. Corporate social responsibility (CSR) is closely related to ethics. CSR is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves.25 We take up these subjects in Chapter 2.

Political Parties Closely related to society, but not the same, are political parties. The Democratic and Republican parties are the two major political parties in the United States. These parties often have differing opinions on how HRM should be accomplished. For example, Democrats tend to favor govern- ment regulation that protects the rights of virtually all employees to receive at least a minimum wage (the Fair Labor Standards Act) and health insurance (Patient Protection Affordability and Accountability Act). Republicans, on the other hand, tend not to favor government regulation, believing that businesses should have as much flexibility as possible to operate successfully.

Unions Wage levels, benefits, and working conditions for millions of employees reflect decisions made jointly by unions and management. A union consists of employees who have joined together for the purpose of negotiating terms of employment such as wages and work hours. The United Auto Workers is an example of a large labor union. Unions are treated as an environmental factor because, essentially, they become a third party when dealing with the company.

Shareholders The owners of a corporation are called shareholders. Because shareholders, or stockholders, have invested money in the firm, they may at times challenge programs considered by man- agement to be beneficial to the organization. Stockholders are wielding increasing influence, and management may be forced to justify the merits of a particular program in terms of how it will affect future projects, costs, revenues, profits, and even benefits to society as a whole.26 Considerable pressure has recently been exerted by shareholders and lawmakers to control the salaries of corporate executives as we shall see in the discussion of the Dodd-Frank Act in Chapters 2 and 9.27

union Consists of employees who have joined together for the purpose of negotiating terms of employment such as wages and work hours.

shareholders Owners of a corporation.

12 Part 1 • Setting the Stage

Competition Firms may face intense global competition for both their product or service and labor markets. Unless an organization is in the unusual position of monopolizing the market it serves, other firms will be producing similar products or services. A firm must also maintain a supply of competent employees if it is to succeed, grow, and prosper. But other organizations are also striving for that same objective. A firm’s major task is to ensure that it obtains and retains a sufficient number of employees in various career fields to allow it to compete effectively. A  bidding war often results when competitors attempt to fill certain critical positions in their firms. Even in a depressed economy, firms find creative ways to recruit and retain such employees. For example, a company may offer a signing bonus (that is, a one-time monetary payment) to offset lower pay.

Customers The people who actually use a firm’s goods and services also are part of its external environ- ment. Because sales are crucial to the firm’s survival, management has the task of ensuring that its employment practices provide excellent customer support service. Customers constantly demand high-quality products and after-purchase service. Therefore, a firm’s workforce should be capable of providing top-quality goods and after-sale customer support. These conditions relate directly to the skills, qualifications, and motivations of the organization’s employees.

HR Technology The rate of technological change is staggering. The development of technology has created new roles for HR professionals but also places additional pressures on them to keep abreast of the technology. We will briefly review three applications: human resource information systems, cloud computing, and social media.

With the increased technology sophistication has come the ability to design a more useful human resource information system (hris), which is any organized approach for obtaining relevant and timely information on which to base HR decisions. The HRIS brings under one encompassing technology system many human resource activities. Think of an HRIS as an umbrella for merging the various subsystems discussed throughout this text. Today, mainstay HR responsibilities such as planning, recruitment, selection, oversight of legal and regulatory compliance, benefits administration, and the safeguarding of confidential employee informa- tion cannot be carried out effectively without an HRIS. Throughout the text, topics will be highlighted that are part of an HRIS. In addition, all of the HRIS applications may be accessed through cloud computing.

A rapidly developing trend is the increased mobility of tasks performed by HR profes- sionals.28 A major factor contributing to HR mobility is cloud computing, a means of provid- ing software and data via the Internet. Cloud computing and the use of mobile devices are changing the way HR work is performed, and the change is moving at an amazing pace.29 With the cloud there is no more expensive, capital-intensive hardware and infrastructure and no more expensive, time-consuming, staff-intensive upgrades.30 Cloud computing permits businesses to buy and use what they need, when they need it. It allows large organizations to move away from managing their own computer centers and focus on the core competen- cies of the firm. Cloud users have the ability to access the application securely from anywhere in the world.31 HR professionals can be virtually anywhere and access the cloud, all through any standard Web. HR departments are leveraging the increasing popularity of social media, including LinkedIn, Facebook, YouTube, and Twitter. In the 2011 Achievers Social HR sur- vey, respondents expressed the belief that social networking is an important tool for recruiting, retaining, and managing employees. The majority of respondents, 81.9 percent, believe that social networks will be used as an HR tool in their organizations within the next 12 months, and the low cost associated with using social media is a positive contributing factor.32 There are three main applications of social media. First, companies may engage in targeted recruiting and sourcing passive and active applicants. Second, companies may use social media to promote knowledge sharing, training and development, and reinforcing identification with the organiza- tion and promoting the brand.

human resource information system (HRIS) Any organized approach for obtaining relevant and timely information on which to base HR decisions.

ChaPter 1 • human reSourCe management: an overview 13

Economy The economy of the nation and world is a major environmental factor affecting HRM. As a generalization, when the economy is booming, it is more difficult to recruit qualified workers. On the other hand, when a downturn is experienced, more applicants are typically available. To complicate this situation even further, one segment of the country may be experiencing an economic downturn, another a slow recovery, and another a boom. A major challenge facing HR is working within this dynamic, ever-changing economic environment because it impacts every aspect of HRM.33

Unanticipated Events Unanticipated events are occurrences in the environment that cannot be foreseen. The Deepwater Horizon oil spill off the Gulf Coast in 2010 caused major modifications in the performance of many HR functions. Every disaster—whether human-made or natural—likely requires a tre- mendous amount of adjustment with regard to HRM. For example, after Hurricane Katrina, Tulane University reduced the number of employees. On a global perspective, think of the many different ways HR was affected by the tsunami in Japan. Japanese automobile plants in the United States were forced to temporarily shut down because of a lack of parts produced in Japan. Other recent disasters, such as heat waves, earthquakes, tornadoes, floods, and fires, have created their own type of difficulty.

Corporate Culture and human resource Management As an internal environment factor affecting HRM, corporate culture refers to the firm’s social and psychological climate. Corporate culture is defined as the system of shared values, beliefs, and habits within an organization that interacts with the formal structure to produce behavioral norms.

Culture gives people a sense of how to behave and what they ought to be doing. Each indi- vidual gradually forms such perceptions over a period of time as the person performs assigned activities under the general guidance of a superior and a set of organizational policies. The cul- ture existing within a firm influences the employees’ degree of satisfaction with the job as well as the level and quality of their performance. The assessment of how desirable the organization’s culture is may differ for each employee. One person may perceive the environment as bad, and another may see the same environment as positive. An employee may actually leave an organi- zation in the hope of finding a more compatible culture. Max Caldwell, a managing director at Towers Watson, said, “Maybe the best definition of company culture is what everyone does when no one is looking.”34 Topics related to corporate culture are presented throughout this text. Some corporate culture topics include the following:

• Employer branding is the firm’s corporate image or culture created to attract and retain the type of employees the firm is seeking. It is what the company stands for in the public eye.

• Corporate culture is a driving force when discussing business ethics and corporate social responsibility.

• Diversity management is about pursuing an inclusive corporate culture in which newcomers feel welcome and everyone sees the value of his or her job.

• Organizational fit refers to management’s perception of the degree to which the prospec- tive employee will fit in with the firm’s culture or value system. A good Web site should provide a feeling of the kind of corporate culture that exists within the company.

• New hire orientation reflects the firm’s corporate culture by showing in effect, “How we do things around here.”

• Talent management is a strategic endeavor to optimize the use of employees and enables an organization to drive short- and long-term results by building culture, engagement, capability, and capacity through integrated talent acquisition, development, and deployment processes that are aligned to business goals.

ObjeCtive 1.6

Explain the importance of corporate culture and human resource management.

corporate culture System of shared values, beliefs, and habits within an organization that interacts with the formal structure to produce behavioral norms.

14 Part 1 • Setting the Stage

• Organization development is a major means of achieving change in the corporate culture.

• Anything that the company provides an employee is included in compensation, from pay and benefits to the organization’s culture and environment.

• A corporate culture that does not consider the needs of employees as individuals makes the firm ripe for unionization.

• Retaining the best employees often rests with the corporate culture that exists within the organization.

• Accident rates decline when the corporate culture encourages workers consciously or subconsciously to think about safety.

• A country’s culture is the set of values, symbols, beliefs, languages, and norms that guide human behavior within the country. Cultural differences are often the biggest barrier to doing business in the world market. Many of the global topics discussed throughout your text are influenced by the issue of corporate culture or country culture.

employer branding Wayne Mondy shares a memory about his mother, which bears directly on this subject. His mother would always buy a certain brand of canned fruit even though it was more expensive. The brand name itself caused her to buy a product that although higher priced was probably the same or similar quality as less expensive brands. The company had created a positive image that made  her want to use the product. As with the canned fruit, companies want a brand that will entice individuals to join and remain with the firm. Employer branding is an extension of product or business branding. employer branding is the firm’s corporate image or culture created to attract and retain the type of employees the firm is seeking. It is what the company stands for in the public eye.35 As such, the focus on employer branding has become increasingly important for organizations.36

Jeffrey St. Amour, national practice leader for PricewaterhouseCoopers’ HR Services stra- tegic communication group said, “They’re both trying to create the same thing, which is product loyalty or a feeling that this is a high-quality company.”37 Employer branding has become a major recruitment and retention strategy and everyone in the company works to promote the image of the firm.38

Brands imply what employees will get from working there and why working for the company is a career and not just a job. Organizations such as Southwest Airlines believe that their employment brand is a key strategic advantage and sees it as a key contributor to its success.39 As more Gen Yers enter the workforce, firms may need to alter their brand to attract and retain these young people who view having fun in an engaging work environment as important as a good salary. A well-paying job that is boring will not keep them for long. They want an organiza- tion that is “cool.”40 Gen Yers tend to be choosier and seek companies that match their personal standards as well as identity.41

An employer brand embodies the values and standards that guide people’s behavior. Through employer branding, people get to know what the company stands for, the people it hires, the fit between jobs and people, and the results it recognizes and rewards. Every company has a brand, which could be the company of choice or one of last resort. A robust employment brand attracts people and makes them want to stay. In fact, most workers want to belong to an organization that embraces the ideas and principles they share.42 Employer branding has become a driving force to engage and retain the firm’s most valuable employees.43 As the econ- omy moves out of the recent recession and firms begin hiring again, employer branding is attracting more attention.

Achieving acknowledgment by an external source is a good way for a brand to be recog- nized. Being listed on Fortune magazine’s 100 Best Companies to Work For is so desirable that some organizations try to change their culture and philosophies to get on the list. Think about how being on the following lists might assist in a company’s recruitment and retention programs:

• Working Mother list of 100 best companies • Fortune magazine list of 100 fastest-growing companies in the United States • Money magazine list of 100 best places to live

country’s culture Set of values, symbols, beliefs, language, and norms that guide human resource behavior within the country.

ObjeCtive 1.7

Describe the importance of employer branding.

employer branding Firm’s corporate image or culture created to attract and retain the type of employees the firm is seeking.

ChaPter 1 • human reSourCe management: an overview 15

• Business Ethics magazine list of 100 Best Corporate Citizens • Computerworld list of Best Places to Work • Black Enterprise list of Best Companies for Diversity

As the previous discussion indicates, many companies embrace creating and maintaining a positive work culture, and they recognize it is “good” business because they are better able to recruit and retain valued employees. A company named Patagonia also recognizes the benefits of a positive work culture from the perspective of employees. The following Watch It video describes Patagonia’s efforts to maintain a positive work culture that emphasizes a culture of personal responsibility, flexibility, and development.

Watch It 1 If your instructor has assigned this, go to MyManagementLab to watch a video titled Patagonia: Human Resource Management and respond to questions.

human resource Management in small businesses The Small Business Administration (SBA) defines a small business as one that is independently owned and operated, is organized for profit, and is not dominant in its field. More than 99 percent of the businesses in the United States are classified as small businesses and they are responsible for at least half of the private sector employees.44The discussion throughout this text has histori- cally focused primarily on how HR is practiced with major corporations. However, today, many college graduates obtain jobs in small businesses. In fact, growth of small business is often a pri- mary driver for the economy. Therefore, the practice of HR as it is conducted in small businesses is discussed at various times in your text.

Typically the same HR functions previously identified must be accomplished by small busi- ness, but the manner in which they are accomplished may be altered.45 Small businesses often do not have a formal HR unit or an HRM specialist. Rather, line managers often handle the HR functions. The focus of their activities is generally on hiring and retaining capable employees. Some aspects of HR functions may actually be more significant in smaller firms than in larger ones. For example, a staffing mistake in hiring an incompetent employee who alienates custom- ers may cause the business to fail. In a larger firm, such an error might be much less harmful. As the business grows, the need for a more sophisticated HR function usually is needed.46 This move typically occurs at the 50-employee level when concerns about compliance with labor laws often begin.47 Also, new small businesses are faced with a host of federal and state government regulatory requirements, tax laws, and compensation demands.

ObjeCtive 1.8

Discuss human resource management issues for small businesses.

HR Web Wisdom

U.S. Small Business Administration http://www.sba.gov/

Small business is the most pow- erful engine of opportunity and economic growth in the United States. SBA offers a variety of programs and support services to help owners navigate the issues they face with initial applications and resources to help after they open for business. Virtually all HR topics can be addressed from a small business standpoint. Watch It 2

If your instructor has assigned this, go to MyManagementLab to watch a video titled Blackbird Guitars: Managing Human Resources in Entrepreneurial Firms and to respond to questions.

Country Culture and Global business A country’s culture is the set of values, symbols, beliefs, languages, and norms that guide human behavior within the country. It is learned behavior that develops as individuals grow from childhood to adulthood. As one goes from one side of this country to the other, a wide range of cultural differences will be experienced. The same can be said in traveling from north to south. Then think about the cultural differences that exist in going from this country to another. Americans’ use of colloquialisms often creates cultural barriers. For example the use of the illus- tration, ‘Which comes first, the chicken or the egg” is a U.S. example that suggests that everyone understands its circular argument. However, residents of other countries may not understand the meaning, which creates a breakdown in communication.48

ObjeCtive 1.9

Identify ways that country culture influences global business.

country’s culture Set of values, symbols, beliefs, language, and norms that guide human resource behavior within the country.

16 Part 1 • Setting the Stage

Even though the language may be the same, such as is the case with the United States and the United Kingdom, major cultural differences exist. Dean Foster, a New York–based consultant on intercultural business issues said, “The United Kingdom really is a foreign country—and HR departments that ignore that fact are at their peril. It’s that expectation of similarity that throws everyone off.”49 A businessperson who travels from Switzerland to Italy goes from a country where meetings tend to be highly structured and expected to start on time to one where meetings can be more informal and punctuality is less important.50 Many believe that China has the most different culture for Americans to deal with.51

Throughout this text, cultural differences between countries will be identified as a major factor influencing global business. This borderless world adds dramatically to the difficulty of managing employees. Cultural differences reveal themselves in everything from the workplace environments to differences in the concept of time, space, and social interaction.52 Companies operating in the global environment recognize that national cultures differ and that such differ- ences cannot be ignored.53

Chrysler Corporation employees have gone through major cultural changes in the last sev- eral years.54 The misfortune cost Daimler nearly $36 billion over a decade, which amounted to a loss of almost $10 million per day for 10 years.55 First, they were merged into a German firm, Daimler-Benz, then they were sold back to a U.S. company, and they are now merged into Fiat, an Italian firm. Each ownership change brought new cultural rules with which employees had to deal. Certainly the Germans and Italians have two distinct but different cultures.56 InBev, based in Leuven, Belgium, purchased Anheuser-Busch several years ago, making it the leading global brewer and one of the world’s top five consumer products companies. Merging two large corpo- rate cultures after an acquisition is often not easy. In fact, InBev’s purchase of Anheuser-Busch was particularly difficult, even two-and-a-half years after the $52 billion deal closed.57

The cultural norms of Japan promote loyalty and teamwork. The work culture there is one in which honesty and hard work are prized assets. In Japan, most managers tend to remain with the same company for life. In the United States, senior executives often change companies, but the Japanese believe strongly that leaving a job is to be avoided out of respect for the business team.58 In Japan, if a boss gives detailed instructions to a subordinate, it is like saying the person is incompetent.59

Cultural misunderstandings are common, but they can be hazards to executives managing global workforces. Samuel Berner, head of HR of the private banking Asia Pacific division in Singapore for Credit Suisse AG said, “Things that are perfectly natural in one culture offend in another.”60 Eric Rozenberg, CMM, CMP, president, Ince&Tive, of Brussels, Belgium, stated, “Even though people are aware that there are cultural differences between various nationalities, they’re still uncomfortable with it and are afraid of making mistakes.”61 Cultural barriers are not easily overcome.

human resource Management profession Various designations are used within the HR profession; among these are HR executives, general- ists, and specialists. An executive is a top-level manager who reports directly to the corporation’s CEO or to the head of a major division. A generalist, who may be an executive, performs tasks in a variety of HR-related areas. The generalist is involved in several, or all, of the six HRM func- tions. A specialist may be an HR executive, manager, or nonmanager who is typically concerned with only one of the six functional areas of HRM. Figure 1-4 helps clarify these distinctions.

The vice president of industrial relations, shown in Figure 1-4, specializes primarily in union- related matters. This person is both an executive and a specialist. An HR vice president is both an executive and a generalist, having responsibility for a wide variety of functions. The compensa- tion manager is a specialist, as is the benefits analyst. Whereas a position level in the organization identifies an executive, the breadth of such positions distinguishes generalists and specialists.

A profession is a vocation characterized by the existence of a common body of knowledge and a procedure for certifying members. Performance standards are established by members of the profession rather than by outsiders; that is, the profession is self-regulated. Most professions also have effective representative organizations that permit members to exchange ideas of mutual con- cern. These characteristics apply to the field of HR, and several well-known organizations serve

ObjeCtive 1.10

Describe the human resource management profession.

executive A top-level manager who reports directly to a corporation’s chief executive officer or to the head of a major division.

generalist A person who may be an executive and performs tasks in a variety of HR-related areas.

specialist An individual who may be a human resource executive, a human resource manager, or a non- manager, and who is typically concerned with only one of the six functional areas of human resource management.

profession Vocation characterized by the existence of a common body of knowledge and a procedure for certifying members.

ChaPter 1 • human reSourCe management: an overview 17

the profession. Among the more prominent is the Society for Human Resource Management, the Human Resource Certification Institute (http://www.hrci.org), the American Society for Training and Development (http://www.astd.org), and WorldatWork (http://www.worldatwork.org). The HR profession is based on a variety of competencies. Figure 1-5 lists five competencies and brief descriptions. We will see throughout this book that effective HR professionals demonstrate these competencies. For example, we will look at the advocate competency, particularly, in Chapter 2 as it applies to ethics, CSR, and sustainability. The HR Expert competency includes all of the knowl- edge we have already studied and to come in the remainder of this book, for example, staffing, training, and employee relations.

Opportunities for employment in the HRM profession are growing. According to the U.S. Bureau of Labor Statistics:

Employment of human resources managers is projected to grow 13 percent from 2012 to 2022, about as fast as the average for all occupations.

HR Web Wisdom

Human Resource Certification Institute (HRCI) http://www.hrci.org

The Professional Certification Program in HR Management is for individuals seeking to expand their formal HR training.

Vice President, Industrial Relations

Human Resource Executives, Generalists, and Specialists

Benefits Analyst

Executive:

Generalist:

Specialist:

Manager, Compensation

Vice President, Human Resources

Manager, Training and Development

Manager, Staffing

Figure 1-4 Human Resource Executives, Generalists, and Specialists

Leader

Takes risks

Ethical

Decisive

Develops staff

Creates trust

Competency Model for HR Professionals

Business

Mission oriented

Strategic planner

Systems innovator

Understands team behavior

HR Expert

Knows HR principles

Customer oriented

Applies business procedures

Manages resources

Uses HR tools

NAPA

Change Agent Manages change

Consults

Analyzes

Uses coalition skills

Influences others Advocate

Values diversity

Resolves conflict

Communicates well

Respects others

Figure 1-5 Model of Human Resources Competencies Source: U.S. Office of Personnel Management. Online: http://archive.opm.gov/studies/ transapp.pdf. Accessed February 1, 2014.

18 Part 1 • Setting the Stage

Employment growth largely depends on the performance and growth of individual companies. However, as new companies form and organizations expand their operations, they will need more human resources managers to oversee and administer their programs.

Managers will also be needed to ensure that firms adhere to changing, complex em- ployment laws regarding occupational safety and health, equal employment opportunity, healthcare, wages, and retirement plans. For example, adoption of the Affordable Care Act may spur the need to hire more managers to help implement this program.

Although job opportunities are expected to vary based on the staffing needs of indi- vidual companies, very strong competition can be expected for most positions.

Job opportunities should be best in the management of companies and enterprises industry as organizations continue to use outside firms to assist with some of their human resources functions.

Candidates with certification or a master’s degree—particularly those with a concen- tration in human resources management—should have the best job prospects. Those with a solid background in human resources programs, policies, and employment law should also have better job opportunities.62

The median annual compensation for HR managers was $99,720, which is nearly three times the median annual earnings for all jobs. Executive and Human Resource Specialist median salaries ranged between $55,640 for HR Specialists and Labor Relations Specialists to $101,650 for top executive positions in the profession. Figure 1-6 lists the median annual salaries for various jobs in the HRM profession. The salary levels vary on a number factors, including relevant work

Occupation Job Duties 2012 Median Pay

Compensation and Benefits managers

Compensation managers plan, direct, and coordinate how much an organization pays its employees and how employees are paid. Benefits managers plan, direct, and coordinate retirement plans, health insurance, and other benefits that an or- ganization offers its employees.

$95,250

Compensation, Benefits, and Job analysis Specialists

Compensation, benefits, and job analysis specialists help conduct an organization’s compensation and benefits programs. they also evaluate job positions to determine details such as classification and salary.

$59,090

human resources managers

human resources managers plan, direct, and coordinate the administrative func- tions of an organization. they oversee the recruiting, interviewing, and hiring of new staff; consult with top executives on strategic planning; and serve as a link between an organization’s management and its employees.

$99,720

human resources Specialists and Labor relations Specialists

human resources specialists recruit, screen, interview, and place workers. they often handle other human resources work, such as those related to employee relations, payroll and benefits, and training. Labor relations specialists interpret and admin- ister labor contracts regarding issues such as wages and salaries, employee welfare, healthcare, pensions, and union and management practices.

$55,640

Figure 1-6 HR Professional Annual Salaries Source: U.S. Bureau of Labor Statistics, “Human Resources Managers,” Occupational Outlook Handbook, 2014–15 Edition,” Online: http://www.bls.gov/ooh/ management/human-resources- managers.htm. Accessed January 14, 2014.

ChaPter 1 • human reSourCe management: an overview 19

Occupation Job Duties 2012 Median Pay

instructional Coordinators

instructional coordinators oversee school curriculums and teaching standards. they develop instructional material, coordinate its implementation with teachers and principals, and assess its effectiveness.

$60,050

top executives top executives devise strategies and poli- cies to ensure that an organization meets its goals. they plan, direct, and coordi- nate operational activities of companies and organizations.

$101,650

training and Development Specialists

training and development specialists help plan, conduct, and administer programs that train employees and improve their skills and knowledge.

$55,930

Figure 1-6 Continued

experience, educational credentials, and industry. For example, median annual salaries for HR managers were substantially higher in the management of companies and enterprises industry ($112,550) than in the health care and social assistance industry ($85,870).

scope of this book Effective HRM is crucial to the success of every organization. To be effective, managers must understand and competently practice HRM. This book was designed to give you the following:

• An insight into the role of strategic HRM in today’s organizations and the strategic role of HR functions

• An appreciation of the value of employees as human capital • An awareness of the importance of business ethics and corporate social responsibility • An understanding of job analysis, HR planning, recruitment, and selection • An awareness of the importance of HR development, including training and developing, for

employees at all levels • An understanding of performance appraisal and its role in performance management • An appreciation of how compensation and employee benefits programs are formulated and

administered • An opportunity to understand employee and labor relations • An understanding of safety and health factors as they affect the firm’s profitability • An appreciation of the global impact on HRM

This book is organized in six parts, as shown in Figure 1-7; combined, they provide a com- prehensive view of HRM. As you read it, hopefully you will be stimulated to increase your knowledge in this rapidly changing and challenging field.

Try It! If your instructor has assigned this, go to MyManagementLab to complete the Human Resource Management simulation and test your application of these concepts when faced with real world decisions.

20 Part 1 • Setting the Stage

Human ResouRce management, 14tH edition

PART ONE. SETTING THE STAGE Chapter 1: human resource management: an overview Chapter 2: Business ethics and Corporate Social responsibility Chapter 3: equal employment opportunity, affirmative action, and workforce Diversity

PART TWO. STAFFING Chapter 4: Strategic Planning, human resource Planning, and Job analysis Chapter 5: recruitment Chapter 6: Selection

PART THREE. PERFORMANCE MANAGEMENT AND TRAINING Chapter 7: Performance management and appraisal Chapter 8: training and Development

PART FOUR. COMPENSATION Chapter 9: Direct Financial Compensation (Core Compensation) Chapter 10: indirect Financial Compensation (employee Benefits)

PART FIVE. LABOR RELATIONS, EMPLOYEE RELATIONS, SAFETY AND HEALTH Chapter 11: Labor unions and Collective Bargaining Chapter 12: internal employee relations Chapter 13: employee Safety, health, and wellness

PART SIX. OPERATING IN A GLOBAL ENVIRONMENT Chapter 14: global human resource management

Figure 1-7 Organization of This Book

summary 1. Define human resource management. Human resource

management (HRM) is the utilization of employees to achieve organizational objectives. It is the business func- tion of managing employees. HRM professionals embrace the idea that employees are essential to the success of organizations, and as such, they view employees as assets or human capital.

2. Identify the HRM functions. There are six functional areas associated with effective HRM: staffing, HR develop- ment, performance management, compensation, safety and health, and employee and labor relations.

3. Explain who performs HRM activities. Human resource managers are individuals who normally act in an advisory or staff capacity, working with other managers to help them deal with human resource matters.

HR outsourcing is the process of hiring an external provider to do the work that was previously done internally.

HR shared service centers take routine, transaction- based activities that are dispersed throughout the organiza- tion and consolidate them in one place.

A professional employer organization is a company that leases employees to other businesses.

Line managers in certain firms are being used more frequently than before to deliver HR services.

4. Explain how human resources (HR) serves as a stra- tegic business partner. Working as a strategic business partner requires a much deeper and broader understanding of business issues. Possible strategic tasks for HR include making workforce strategies fundamental to company strategies and goals; increasing HR’s role in strategic planning, mergers, and acquisitions; developing aware- ness or an understanding of the business; and helping line managers achieve their goals. Also, as a strategic business partner, HR helps to identify and develop the human capi- tal necessary for excellent performance, builds recruit- ment systems, training programs for product distribution and interactions with customers, constructs performance management, and structures compensation programs that will greatly incentivize these employees to excel. In the end, if HR is to be a strategic partner, HR executives must

ChaPter 1 • human reSourCe management: an overview 21

work with top management in achieving concrete plans and results.

5. Identify the elements of the dynamic HRM environment. Factors include legal considerations, the labor market, society, political parties, unions, shareholders, competi- tion, customers, technology, economy, and unanticipated events.

6. Explain the importance of corporate culture and HRM. Corporate culture is the system of shared values, be- liefs, and habits within an organization that interacts with the formal structure to produce behavioral norms. Culture gives people a sense of how to behave and what they ought to be doing. It often affects job performance throughout the organization and consequently affects profitability.

7. Describe the importance of employer branding. Employer branding is the firm’s corporate image or cul- ture created to attract and retain the type of employees the firm is seeking. It is what the company stands for in the public eye.

8. Discuss HRM issues for small businesses. Often the same HR functions previously identified must be accomplished by small business, but the manner in which they are accomplished may be altered. Small businesses often do not have a formal HR unit or HRM

specialists. Rather, other line managers in the company handle HR functions.

9. Identify ways that country culture influences global business. Cultural differences reveal themselves in every- thing from the workplace environments to differences in the concepts of time, space, and social interaction. Cultural differences are often the biggest barrier to doing business in the world market.

10. Describe the HRM profession. A profession is a vocation characterized by the existence of a common body of knowl- edge and a procedure for certifying members.

Executives are top-level managers who report directly to the corporation’s CEO or the head of a major division.

Generalists (who are often executives) are persons who perform tasks in a wide variety of HR-related areas.

A specialist may be an HR executive, manager, or nonmanager who typically is concerned with only one of the functional areas of HRM.

Several well-known organizations serve the profession. Among the more prominent are the Society for Human Resource Management (SHRM), the Human Resource Certification Institute (HRCI), the American Society for Training and Development (ASTD), and WorldatWork.

Key terms human resource management (HRM) 3 staffing 4 performance management 4 human resource development (HRD) 4 direct financial compensation 5 indirect financial compensation

(benefits) 5 nonfinancial compensation 5 safety 5 health 5

human resource management professional 6

line managers 6 HR outsourcing (HRO) 7 shared service center (SSC) 8 professional employer organization

(PEO) 8 capital 9 human capital 9 union 11

shareholders 11 human resource information system

(HRIS) 12 corporate culture 13 country’s culture 14 employer branding 14 executive 16 generalist 16 specialist 16 profession 16

MyManagementLab® Go to mymanagementlab.com to complete the problems marked with this icon .

exercises 1-1. Employer branding was discussed in this chapter.

On a scale of 1 (Poor) to 5 (Excellent), how valuable are the following brands? Why do you rate them low or high?

a. Bank of America b. McDonald’s

c. BP Global d. Walmart 1-2. How might being on the following lists assist in a com-

pany’s recruitment and retention programs? a. Fortune magazine’s 100 Best Companies b. Working Mother list of 100 best companies

22 Part 1 • Setting the Stage

c. Fortune magazine list of 100 fastest-growing companies in the United States

d. Money magazine list of 100 best places to live e. Business Ethics magazine list of 100 Best Corporate

Citizens f. Computerworld list of Best Places to Work g. Black Enterprise list of Best Companies for

Diversity. 1-3. Review the employment classified ads in the Wall Street

Journal, HR Magazine, and a Sunday edition of a large city newspaper. Make a list of the types of HRM jobs, the companies offering employment, and the qualifica- tions needed to obtain the positions. What is your basic conclusion after this review in terms of the availability of HRM positions and the necessary qualifications for obtaining a position?

1-4. The HR functions are highly interrelated. How would a change in one of the following affect the other HR functions?

a. Paying the lowest wages in the industry b. Being recognized as an industry leader in providing

continuous training and development c. Having a reputation for providing a work environ-

ment that is unhealthy 1-5. Corporate culture is discussed throughout your text as

having a significant impact on HR tasks. How might the following cultures affect the six HR functions?

a. Employees generally believe that this is a fun place to work

b. Management generally has the attitude that “It’s my way. Don’t question me.”

c. Rewards are available for productive, hardworking employees

Questions for review 1-6. Define human resource management. What HRM func-

tions must be performed regardless of the organization’s size?

1-7. What are the environmental factors that affect HRM? Describe each.

1-8. How might mobile HR affect the various HR functions? 1-9. Define corporate culture. Explain why corporate culture

is a major internal environment factor. 1-10. This chapter describes HR’s changing role in business.

Describe each component that is involved in HRM.

1-11. According to the Small Business Administration, what does a small business need to do before hiring the first employee?

1-12. What are the various designations associated with HRM?

1-13. What has been the evolution of HRM? 1-14. Explain the differences between capital and human

capital. 1-15. Define profession. Do you believe that the field of HRM

is a profession? Explain your answer.

i n c i d e n t 1 HR after a Disaster After Hurricane Rita struck Lake Charles in southwest Louisiana, many businesses wondered if they would ever return to their former selves. Massive destruction was everywhere. Lake Charles, known for its large and beautiful oak and pine trees, now had the job of removing those downed trees from homes, businesses, and lots. You could see for miles through what used to be thick forests. Huge trucks designed for remov- ing massive tree trunks were everywhere. While driving down a street, downed trees could be seen stacked two stories high, waiting to be picked up. The town grew rapidly in size because of the increased num- ber of repair crews working on recovery operations. The noise created by their chain saws could be heard from daylight until dark. The sounds of hammers were everywhere as homeowners scrambled to get their roofs repaired. Often repair crews would just find an empty lot and set up tents for the night because all motels were full. Traffic was unbeliev- ably slow, and it appeared as if everyone was attempting to get on the road at the same time. Just driving from Point A to Point B could often be quite an adventure. As might be expected in conditions such as these, accidents were numerous. Often police did not have the resources to ticket every fender bender, so unless there were injuries, insurance cards were exchanged and the police went on to the next accident.

Months after Hurricane Rita struck, large and small businesses were still frantically trying to find workers so they could start up again. It appeared that every business in the town had a “Help Wanted” sign out front. Individuals who wanted a job could get one and could command

a premium salary. Walmart, known for remaining open 24 hours a day, could only stay open on an abbreviated schedule. Employers often had to bus employees from locations not affected by the hurricane each morn- ing and returned them at night because there were not enough workers available in the local area. Restaurants that normally remained open late into the evening closed at 6:00 p.m., if they opened at all. Compensation scales that were in use before the hurricane had to be thrown out and new plans implemented. Minimum-wage jobs were nonexistent. Employees who earned minimum wage before the storm could now command $10 per hour just for being a flagger (a person who directs traffic). Fast-food restaurants that normally paid minimum wage now paid $10 or $11. Burger King was even offering a $1,500 bonus for entry-level workers. Upscale restaurants that normally paid minimum wage plus tips now paid premium rate plus tips. Restaurants that remained open often had a much younger staff, and it was evident that the managers and assistant managers were working overtime to train these new workers. Restaurant patrons had to learn patience because there would be mistakes by these eager, but largely untrained workers.

Questions 1-16. Which environment factor(s) did Hurricane Rita affect? Discuss. 1-17. How were the HR functions affected by Hurricane Rita? 1-18. Do you believe the HR situations described regarding Hurricane

Rita would be typical in a disaster? Explain.

ChaPter 1 • human reSourCe management: an overview 23

i n c i d e n t 2 Downsizing As the largest employer in Ouachita County, Arkansas, International Forest Products (IFP) Company is an important part of the local econ- omy. Ouachita County is a mostly rural area in south central Arkansas. It employs almost 10 percent of the local workforce, and few alternative job opportunities are available in the area.

Scott Wheeler, the HR director at IFP, tells of a difficult decision he once had to make. According to Scott, everything was going along pretty well despite the economic recession, but he knew that sooner or later the company would be affected. “I got the word at a private meet- ing with the president, Janet Deason, that we would have to cut the workforce by 30 percent on a crash basis. I was to get back to her within a week with a suggested plan. I knew that my plan would not be the final one because the move was so major, but I knew that Ms. Deason was depending on me to provide at least a workable approach.

“First, I thought about how the union would react. Certainly, workers would have to be let go in order of seniority. The union would try to protect as many jobs as possible. I also knew that all of manage- ment’s actions during this period would be intensely scrutinized. We had to make sure that we had our act together.

“Then there was the impact on the surrounding community to consider. The economy of Ouachita County had not been in good shape recently. Aside from the influence on the individual workers who were laid off, I knew that our cutbacks would further depress the area’s economy. I knew that there would be a number of government officials and civic leaders who would want to know how we were trying to minimize the harm done to the public in the area.

“We really had no choice but to make the cuts, I believed. First of all, I had no choice because Ms. Deason said we were going to do it. Also, I had recently read a news account that one of our competitors,

Johns Manville Corporation in West Monroe, Louisiana, had laid off several hundred workers in a cost-cutting move. To keep our sales from being further depressed, we had to ensure that our costs were just as low as those of our competitors. The wood products market is very competitive and a cost advantage of even 2 or 3 percent would allow competitors to take many of our customers.

“Finally, a major reason for the cutbacks was to protect the interests of our shareholders. A few years ago a shareholder group disrupted our annual meeting to insist that IFP make certain antipollution changes. In general, though, the shareholders seem to be more concerned with the return on their investments than with social responsibility. At our meet- ing, the president reminded me that, just like every other manager in the company, I should place the shareholders’ interests above all else. I really was quite overwhelmed as I began to work up a human resource plan that would balance all of these conflicting interests.”

Questions 1-19. How might each HR function be affected by the reduction in

force? Remember that all employees at IFP are not members of the union.

1-20. List the elements in the company’s environment that will affect Scott’s suggested plan. How legitimate is the interest of each of these?

1-21. Is it true that Scott should be concerned first and foremost with protecting the interests of shareholders? Discuss.

1-22. Corporate culture is discussed in this chapter as a major internal environmental factor affecting an organization. How might the downsizing of IFP affect the corporate culture of the company?

MyManagementLab® Go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:

1-23. What is employer branding? How might employer branding affect a company’s ability to recruit?

1-24. How might a country’s culture be a barrier to global business?

endnotes Scan for Endnotes or go to http://www.pearsonhighered.com/mondy

24

1 Define ethics, corporate social responsibility, and corporate sustainability.

2 Explore the concept of business ethics.

3 Describe sources of ethical guidance.

4 Discuss attempts at legislating ethics.

5 Explain the importance of creating an ethical culture and code of ethics.

6 Define human resource ethics.

Learn It If your professor has chosen to assign this, go to mymanagementlab.com to see what you should particularly focus on and to take the Chapter 2 Warm-Up.

MyManagementLab® Improve Your Grade!

Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems.

7 Discuss the importance of linking pay to ethical behavior.

8 Describe ethics training.

9 Describe the concept of corporate social responsibility.

10 Explain corporate sustainability.

11 Describe a social audit.

12 Explain whether corporate social responsibility can succeed in the global environment.

2 Business Ethics and Corporate Social Responsibility Chapter ObjeCtives After completing this chapter, students should be able to:

25

Defining ethics, Corporate social responsibility, and Corporate sustainability Ethics is the discipline dealing with what is good and bad, right and wrong, or with moral duty and obligation. Ethics at times may appear to be complicated because businesses are created to produce a short-term profit, which could potentially conflict with ethical behavior.1 Today most executives have a different view in that integrity and ethical values have an important place in business and should form the foundation of a company’s culture.2 Unfortunately, some companies and individuals still behave unethically, perhaps, because ethics moves to the back burner while executives focus on what they believe to be more important concerns.

Related to ethics are the concepts of corporate social responsibility and corporate sustainability. Corporate social responsibility (CSR) is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves, and corporate sustainability focuses on the possible future impact of an organization on soci- ety,  including social welfare, the economy, and the environment. CSR and corporate sustainability differ from ethics in an important way. Ethics focus on individual decision making and behavior and the impact of ethical choices on employee welfare. As noted, CSR and corporate sustainability consider the broader impact of corporate activities on society.

Ethics, CSR, and corporate sustainability are everyone’s business. Human resource (HR) professionals particularly concern themselves with establishing policies to promote ethical behavior and unethical behavior. In addition, the human resource management (HRM) function’s leadership works with other executive leadership to identify training opportunities for educating employees about how they may make positive contributions to these objectives and developing performance- based pay programs that align employee performance with CSR and social responsibility goals. In this chapter, we will explore these three important topics.

business ethics The past corrupt conduct of corporations such as WorldCom and Enron and the senior managers who led them provides deplorable examples of just how unethical company leadership can be. We also forgot to guard against the type of ethical abuses that ultimately bankrupted companies such as Bear Stearns and Lehman Brothers. Unfortunately, unethical behavior manifests in other ways. For example, the U.S. Justice Department expects that Credit Suisse Group AG is likely to plead guilty to a crime in which they assisted wealthy Americans evade taxes.3

ObjeCtive 2.1

Define ethics, corporate social responsibility, and corporate sustainability.

ObjeCtive 2.2

Explore the concept of business ethics.

ethics Discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation.

corporate social responsibility (CSR) Implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves.

corporate sustainability Concerns with possible future impact of an organization on society, including social welfare, the economy, and the environment.

26 Part 1 • Setting the Stage

CEOs have to be clear that unethical behavior is not acceptable. In one survey, 67 percent of investors said they would move their account if they discovered the company was involved in unethical behavior.4 Jeff Immelt, General Electric’s (GE) CEO, begins and ends each annual meeting of 220 officers and 600 senior managers by restating the company’s fundamental integrity principles: “GE’s business success is built on our reputation with all stakeholders for lawful and ethical behavior.”5 At GE, when it comes to integrity violations, it is one strike and you are out. There are no second chances.6 The focus should be on just doing the right thing. The image of the business world would be in much better shape if this simple advice were followed. Hopefully, ethical standards are improving.

Most of the 500 largest corporations in the United States now have a code of ethics, which encompasses written conduct standards, internal education, and formal agreements on industry standards, ethics offices, social accounting, and social projects. Even so, business ethics scandals continue to be headline news. Lying on résumés, obstruction of justice, destruction of records, stock price manipulation, cutting corners to meet Wall Street’s expectations, fraud, waste, and abuse are unfortunately occurring all too often when those in business decide to make poor ethical choices. Then, there are the corporate executives that took home millions even though their company failed and employees were laid off. They evidently realized that they could make a quick profit through their unethical behavior.7

However, business is not alone. There is virtually no occupation that has not had its own painful ethical crises in recent years. There were the teachers who provided answers on stan- dardized tests to improve their schools’ performance scores. Doctors who make money by falsely billing Medicare do not even make the headlines anymore. But certainly a devastating blow to society has been dealt by business, and ethical breaches in business continue today.

Compliance with the law sets the minimum standard for ethical behavior; ethics, however, is much more. There must be leaders who are able and willing to instill ethics throughout the culture of the organization. Ethics is about deciding whether an action is good or bad and what to do about it if it is bad. Ethics is a philosophical discipline that describes and directs moral conduct. Those in management make ethical (or unethical) decisions every day. Do you hire the best-qualified person, who is a minority? Do you forget to tell a candidate about the dangerous aspect of a certain job? Some ethical decisions are major and some are minor. But decisions in small matters often set a pattern for the more important decisions a manager makes. Attitudes such as “It’s standard practice,” “It’s not a big deal,” “It’s not my responsibility,” and “I want to be loyal” are simply not acceptable.8 The Roman philosopher Cicero echoed this when he said, “It is a true saying that one falsehood leads easily to another.”9 In the sixteenth century, Sir Thomas More said, “If virtue were profitable, common sense would make us good and greed would make us saintly.”10 More knew that virtue is not profitable, so people must make hard choices from time to time.

sources of ethical Guidance The sources of ethical guidance should lead to our beliefs or a conviction about what is right or wrong. Most would agree that people have a responsibility to avail themselves to these sources of ethical guidance. In short, individuals should care about what is right and wrong and not just be concerned with what is expedient. One might use a number of sources to determine what is right or wrong, good or bad, and moral or immoral. These sources include the Bible and other holy books. They also include the small voice that many refer to as conscience. Many believe that conscience is a gift of God or the voice of God. Others see it as a developed response based on the internalization of societal mores. Another source of ethical guidance is the behavior and advice of the people psychologists call “significant others”—our parents, friends, and role models and members of our churches, clubs, and associations.

Laws also offer guidance to ethical behavior, prohibiting acts that can be especially harm- ful to others. They codify what society has deemed to be unacceptable.11 If a certain behavior is illegal, most would consider it to be unethical as well. There are exceptions, of course. For example, through the 1950s, laws in most southern states relegated blacks to the backs of buses and otherwise assigned them inferior status. Martin Luther King Jr. resisted such laws and, in fact, engaged in civil disobedience and other nonviolent forms of resistance to their enforce- ment. King won the Nobel Peace Prize for his efforts.

ObjeCtive 2.3

Describe sources of ethical guidance.

HR Web Wisdom

International Business Ethics Institute http://www.business-ethics.org

The Institute was founded in 1994 in response to the growing need for transnational organizations in the field of business ethics.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 27

The sources of ethical guidance should lead to our beliefs or a conviction about what is right or wrong. Most would agree that people have a responsibility to avail themselves of these sources of ethical guidance. In short, individuals should care about what is right and wrong and not just be concerned with what is expedient. Two conditions must exist if an individual or organization is to be considered ethical. First, ethics consists of the strength of the relation- ship between what an individual or an organization believes to be moral and correct and what available sources of guidance suggest is morally correct. For example, suppose a manager believes it is acceptable not to hire minorities, despite the fact that almost everyone condemns this practice. This person would not be considered ethical. Having strong beliefs about what is right and wrong and basing them on the proper sources may have little relationship to what one does.

Second, ethics consists of the strength of the relationship between what one believes and how one behaves. For example, if a manager knows that it is wrong to discriminate but does so anyway, the manager is also unethical. If a board of directors considers it wrong to pay exces- sively high salaries relative to the CEO’s job performance, yet pays salaries that are excessive in this context, this behavior is also unethical. Generally, a person is not considered ethical unless the person satisfies both conditions.

For most professionals, there are codes of ethics that prescribe certain behavior. Without this conscience that has developed, it might be easy to say, “Everyone does it,” “Just this once won’t hurt,” or “No one will ever know.” Some still believe that greed is acceptable as long as the Equal Employment Opportunity Commission (EEOC) does not find out.12 Fortunately, the HRM profession subscribes to a code of ethics, which we discuss later in this chapter.

Legislating ethics In 1907, Teddy Roosevelt said, “Men can never escape being governed. If from lawless- ness or fickleness, from folly or self-indulgence, they refuse to govern themselves, then in the end they will be governed [by others].”13 Many contend that ethics cannot be legislated. Although laws cannot mandate ethics, they may be able to identify the baseline separating what is good and what is bad. Much of the current legislation was passed because of business ethics  breakdowns. There have been at least four attempts to legislate business ethics since the late 1980s.

ObjeCtive 2.4

Discuss attempts at legislating ethics.

E t h i c a l D i l E m m a

A Selection Quandary You are being promoted to a new assign-

ment within your company, and your boss has asked you to nom- inate one of your subordinates as your replacement. The possible candidates are Randy Carlton, who is obviously more qualified, and James Mitchell, who, though not as experienced, is much better liked by the workers. If Randy is given the promotion, you are not certain the workers will accept him as their leader. James, on the other hand, is a hard worker and is well liked and respected by the others, including Randy. As you labor over the decision, you think about how unfair it would be to Randy if the feelings of the other workers kept him from getting a deserved promotion. At the same time, you feel that your primary responsibility should be to maintain the productivity of the work unit. If your former division fell apart after your departure, it would hurt your reputation, not to mention the company.

1. What would you do? 2. What factor(s) in this ethical dilemma might influence a person

to make a less-than-ethical decision?

This is the only place in this text where we will recommend the ethical choice and also identify other factors that might make a person take a less-than-ethical stand. What would you have done if placed in a situation such as this?

Ethical Choice: Recommend Randy, who is the best-qualified employee.

Factors Influencing Another Decision: The department might fall apart if Randy is given the promotion. Other workers might not work for Randy and the workers would more readily accept James. Your reputation may be hurt if the department productivity declines. Besides, Randy can work with James.

28 Part 1 • Setting the Stage

Procurement Integrity Act The Procurement Integrity Act of 1988 prohibits the release by government employees of source selection and contractor (for the purposes of this act, a business that enters into contracts with government to provide goods or services) bid or proposal information. Examples of information contained in bids include employee pay rates and proprietary information about the contractor’s business processes. Further, this act applies this restriction to nongovernment employees who provided consulting services on procurement matters. Finally, a former government employee who served in certain positions on a procurement action or contract in excess of $10 million is barred from receiving compensation as an employee or consultant from that contractor for one year. The act was passed after there were reports of military contracts for $500 toilet seats. There was also a $5,000 hammer.

Federal Sentencing Guidelines for Organizations Act The second attempt occurred with the passage of the 1992 Federal Sentencing Guidelines for Organizations (FSGO) Act, which outlined an effective ethics training program and explained the seven minimum requirements for an effective program to prevent and detect violations.14 The FSGO promised softer punishments for wayward corporations that already had ethics programs in place. In the law were recommendations regarding standards, ethics training, and a system to anonymously report unacceptable conduct. Executives were supposed to be respon- sible for the misconduct of those lower in the organization. If executives were proactive in their efforts to prevent white-collar crime, it would lessen a judgment against them and reduce the liability. Organizations responded by creating ethics officer positions, installing ethics hotlines, and developing codes of ethics. But it is one thing to have a code of ethics and quite another to have this code instilled in all employees from top to bottom.

Corporate and Auditing Accountability, Responsibility and Transparency Act The third attempt at legislating business ethics was the Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002, which criminalized many corporate acts that were previously relegated to various regulatory structures. Known as the Sarbanes–Oxley Act, its primary focus is to redress accounting and financial reporting abuses in light of  corporate scandals.15 The Sarbanes–Oxley Act was intended to eliminate or at least reduce conflicts of inter- est by requiring audit-committee-level preapproval for nonaudit services auditors at companies they audit and enforcing a code of ethics on senior client financial management.16 The act contains broad employee whistleblower protections that subject corporations and their managerial person- nel to significant civil and criminal penalties for  retaliating, harassing, or discriminating against employees who report suspected corporate wrongdoing. The whistleblower protections of the act apply to corporations listed on U.S. stock exchanges; companies otherwise obligated to file reports under the Securities and Exchange Act; and officers, employees, contractors, subcontractors, and agents of those companies.

The act states that management may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee protected by the act. It protects any employee who lawfully provides information to governmental authorities concerning conduct he or she reasonably believes constitutes mail, wire, or securities fraud; violations of any rule or regula- tion issued by the Securities and Exchange Commission (SEC); or violations of any other federal law relating to fraud against shareholders. The act evidently has teeth because in the Bechtel v. Competitive Technologies Inc. (2003) Supreme Court case involving wrongful termination under Sarbanes–Oxley’s whistleblower-protection rule, the Court ruled that the company violated the act by firing two employees and ordered them reinstated. They were fired because during a meeting they had raised concerns about the company’s decision not to report, on its SEC filing, an act they thought should have been disclosed.17

The law prohibits loans to executives and directors. It requires publicly traded companies to disclose whether or not they have adopted a code of ethics for senior officers. The act does not require banks and bank-holding companies that report to the SEC to have a code of ethics, but if an SEC reporting company does not have one, it must explain why.18 However, as former SEC

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 29

Chairman Arthur Levitt said, “While the Sarbanes–Oxley Act has brought about significant change, the greatest change is being brought about not by regulation or legislation, but by humiliation and embarrassment and private rights of action.”19

Dodd–Frank Wall Street Reform and Consumer Protection Act The fourth, the Dodd–Frank Wall Street Reform and Consumer Protection Act, was signed into law in 2010. The act was brought on by the worst financial crisis since the Great Depression, which resulted in the loss of 8 million jobs, failed businesses, a drop in housing prices, and wiped out personal savings of many workers. As the financial crisis advanced, it became clear that executive compensation played a major role in the financial services sector as well as in the capital markets following the collapse of investment services firms such as Lehman Brothers, Merrill Lynch, Bear Stearns, and AIG.20

Whistleblower Protection In the legal use of the term, a whistleblower is someone who participates in an activity that is protected. Corporate whistleblowing involves ethics, a topic of this chapter. It requires an individual to choose between personal ethics and the status quo. Often whistleblowers view themselves as the company’s conscience.21 The use of whistleblowers has been around since 1863 when President Abraham Lincoln signed into law the Federal False Claims Act, which was designed to protect the United States from purchases of fake gunpowder during the Civil War.22 The number of whistleblower suits has increased dramatically in recent years under federal and state laws aimed at uncovering fraud and protecting the public. In 2012, the Justice Department recovered $3.3 billion in taxpayer funds thanks to whistleblowers, who originated hundreds of lawsuits and shared $439 million of the proceeds.23

The Dodd–Frank Wall Street Reform and Consumer Protection Act contains a whistle- blower protection provision, which is shaped after the successful IRS program. In passing the act, Congress believed that award programs were a good method to get people to provide fraud information to responsible law enforcement officials. The act requires the Securities SEC to give an award to qualified whistleblowers of between 10 and 30 percent of the total amount obtained if the information is voluntarily provided and leads to a successful enforcement or related action. The act also improves whistleblowers’ retaliation protection from their employ- ers through the expansion of the whistleblower protections of the Sarbanes–Oxley Act of 2002. Firms may not directly or indirectly discharge, demote, suspend, threaten, harass, or in any way discriminate against whistleblowers that provide information to the SEC as specified in the program.24 This is important because in the past whistleblowers often were fired, demoted, blacklisted, or quit under duress. SEC Chair Mary L. Schapiro said, “While the SEC has a his- tory of receiving a high volume of tips and complaints, the quality of the tips we have received has been better since Dodd–Frank became law, and we expect this trend to continue.”25 The Whistleblower Office received 3,001 whistleblower tips, complaints, and referrals during fiscal year 2012.26 The most common complaint categories reported by whistleblowers were corpo- rate disclosures and financials (18.2 percent), fraud offerings (15.5 percent), and manipulation (15.2 percent).27

Many believe that information provided by whistleblowers is much more effective in uncov- ering wrongdoings than are external auditors. In testimony to the Senate Banking Committee, Certified Fraud Examiner Harry Markopolos stated that “whistleblower tips detected 54.1 percent of uncovered fraud schemes in public companies. External auditors detected a mere 4.1 percent of fraud schemes.”28

Companies have some uneasiness regarding the whistleblower provision of the Dodd–Frank Act.29 A recent survey of senior legal, compliance, and HR executives at publicly traded or highly regulated companies found that 96 percent expressed either great concern or moderate concerns about potential whistleblower complaints.30 The major concern is that the rules run counter to a firm’s internal compliance efforts.31 Companies are afraid that employees will not go through internal channels first and instead go directly to government authorities to collect the reward.32 Another fear is that an employee might have another grievance with the company and use the whistleblower provision to get back at the company.

30 Part 1 • Setting the Stage

Creating an ethical Culture and a Code of ethics Mark Twain once said, “Always do right. This will gratify some people and astonish the rest.”33 This is certainly good advice for both employees and employers if the firm wants to create an ethical culture. Saying that a company has an ethical culture and actually having one may be two different things. Culture is concerned with the way people think, which affects the way that they act. Changing an organization’s culture thus requires modifying the com- mon way of thinking of its members.34 Organizations with strong ethical cultures take steps to ensure that their standards are widely accessible, promoted, and followed by their leaders and employees.35 For example, the Enron debacle was not supposed to happen. The Enron Code of Ethics was 62 pages long and had a foreword by Kenneth L. Lay, who was then the company’s chairman, saying “Enron’s reputation finally depends on its people, on you and me. Let’s keep that reputation high.”36 Even with the ethical code, it is apparent that Enron’s top management pursued business as usual.

One way for a firm to create and sustain an ethical culture is to audit ethics, much like a company audits its finances each year.37 An ethics audit is simply a systematic, independent, and documented process for obtaining evidence regarding the status of an organization’s ethi- cal culture. It takes a closer look at a firm’s ethical culture instead of just allowing it to remain unexamined. An ethical culture is made up of factors such as ethical leadership, accountability, and values. The climate with top management is fundamental to a company’s ethical culture.38 Ethical leadership begins with the board of directors and CEO and continues to middle manag- ers, supervisors, and employees. Building an ethical culture that lasts requires a foundation of practices that continue even when leaders change.39 The following Watch It video illustrates how employees and members of management are brought together to enact a change within the company. Their goal is to limit the negative environmental impacts of their company as much as possible by applying the best practices concept to their everyday activities.

Watch It 1 If your instructor has assigned this, go to MyManagementLab to watch a video titled Patagonia: Ethics and Social Responsibility and to respond to questions.

According to the Corporate Executive Board in Arlington, Virginia, companies with weak ethical cultures experience 10 times more misconduct than companies with strong ethical cultures.40 In strong ethical cultures, employees are at ease to speak up about their concerns with- out fear of retaliation. In workplaces with a strong ethical culture, only 4 percent of employees feel pressure to compromise standards and commit misconduct compared to 15 percent in a weaker culture.41

For organizations to grow and prosper, good people must be employed. Companies are also searching for new employees who have a sound ethical base because they have discovered that an ethical person tends to be more successful. Dov Seidman, a management guru who advocates corporate virtue to many companies, believes that companies that “outbehave” their competitors ethically will generally outperform them financially.42 Further, according to the National Association of Colleges and Employers, the ethical—or unethical—behavior of an organization is a critical factor for new college graduates seeking jobs.43

By fostering a strong ethical culture, firms are better able to gain the confidence and loyalty of their employees and other stakeholders, which can result in reduced financial, legal, and reputation risks, as well as improvements in organizational performance. Organizations are redesigning their ethics programs to facilitate a broader and more consistent process that incor- porates the analysis of outcomes and continual improvement. To build and sustain an ethical culture, organizations need a comprehensive framework that encompasses communication of behavior expectations, training on ethics and compliance issues, stakeholder input, resolution of reported matters, and analysis of the entire ethics program. To make it really work, involvement by top management is certainly necessary.

A distinction needs to be made between a code of conduct and a code of ethics; the former should tell employees what the rules of conduct are. The code of ethics helps employees know

ObjeCtive 2.5

Explain the importance of creating an ethical culture and code of ethics.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 31

what to do when there is not a rule for something.44 Jim Ward, associate vice president of ethics and compliance at Georgetown University, summed it up by saying, “You can’t draft enough rules to cover everything.”45 A broad-based participation of those subject to the code is important. For a company to behave ethically, it must live and breathe its code of ethics, train its personnel, and communicate its code through its vision statements. It cannot just print a manual that sits on a corporate shelf. The code is a statement of the values adopted by the company, its employees, and its directors and sets the official tone of top management regard- ing expected behavior. Many industry associations adopt such codes, which are then recom- mended to members. There are many kinds of ethical codes. An excellent example of a code of ethics was developed by the Society for Human Resource Management (SHRM). The six core provisions in the SHRM code of ethics are professional responsibility, professional develop- ment, ethical leadership, fairness and justice, conflicts of interest, and use of information.46

Just what should be included in a code of ethics? Topics typically covered might be business conduct, fair competition, and workplace and HR issues. For example, employees in purchas- ing would be shown what constitutes a conflict of interest. The same would occur for sales. At Walmart, it is considered unethical to accept gifts from suppliers. Gifts are either destroyed or given to charity. Fidelity International recently fired two Hong Kong–based fund managers over breaches of its internal code of ethics. Fidelity said, “Our routine checks discovered a pattern of behavior that breached our internal policies.”47

To keep the code on the front burner for employees, larger firms appoint an ethics officer. The ethics officer is the point person in guiding everyone in the company toward ethical actions. This individual should be a person who understands the work environment. To obtain the involvement of others within the organization, an ethics committee is often established.

There are reasons to encourage industry associations to develop and promote codes of ethics. It is difficult for a single firm to pioneer ethical practices if its competitors take advantage of unethical shortcuts. For example, U.S. companies must comply with the Foreign Corrupt Practices Act, which prohibits bribes of foreign government officials or business executives. Obviously, the law does not prevent foreign competitors from bribing government or business officials to get business, and such practices are common in many countries. This sometimes puts U.S. companies at a disadvantage.

Even the criteria for winning the Malcolm Baldrige National Quality Award have changed, and an increased emphasis on ethics in leadership is now stressed. The criteria say senior lead- ers should serve as role models for the rest of their organizations. Baldrige applicants are asked questions about how senior leaders create an environment that fosters legal and ethical behavior. They need to show how the leaders address governance matters such as fiscal accountability and independence in audits.

human resource ethics human resource ethics is the application of ethical principles to HR relationships and activities. It is vitally important that HR professionals know the practices that are acceptable and unacceptable and work to ensure that organizational members also have this awareness in dealing with others.

Some believe that those in HR have a great deal to do with establishing an organization’s conscience. In fact, according to a SHRM report, integrity and ethical behavior rank in the top five competencies needed for senior HR leaders.48 Certainly ethics is a quality the HR professionals should possess; it is the duty of HR professionals to help create an ethical climate in their organization.49

HR professionals can help foster an ethical culture, but that means more than just hanging the ethics codes posters on walls. Instead, because the HR professionals’ primary job is dealing with people, they must help to instill ethical practices into the corporate culture. Those values must be clearly communicated to all employees, early and often, beginning with the interview process, reinforced during employee orientation, and regularly recognized during performance reviews, public ceremonies, celebrations, and awards. They need to help establish an environment in which employees throughout the organization work to reduce ethical lapses. The ethical bearing of those in HR goes a long way toward establishing the credibility of the entire organization.

ObjeCtive 2.6

Define human resource ethics.

human resource ethics Application of ethical principles to human resource relationships and activities.

32 Part 1 • Setting the Stage

There are many topics through which HR professionals can have a major impact on ethics, and therefore, on creating an ethical corporate culture. Some ethical questions that might be considered include:

• Do you strive to create a diverse workforce? • Do you insist that job descriptions are developed to accurately depict jobs that are

dangerous or hazardous? • Do you strive to recruit and select the best-qualified applicant for the job? • Are your training initiatives geared so that everyone will have an opportunity to receive

the best training and development possible? • Is your performance management and appraisal system able to identify those who are

indeed the best producers and rewarded accordingly? • Is your compensation and benefit system developed so that employees will view it as fair

and impartial? • Does your organization make a sincere attempt to provide a safe and healthy work

environment? • Does your organization attempt to develop a work environment in which employees will

not feel compelled to join a union? • Are you fair and impartial when dealing with disciplinary action, promotion, transfer,

demotion, resignation, discharge, layoff, and retirement? • Does your firm adhere to ethical norms when operating in the global environment?

HR should review, develop, and enforce organizational policies to ensure a high level of ethics throughout the organization. All employees should know what is ethical and unethical in their specific area of operations. It is insufficient to say that everyone should behave ethically.

Linking pay to ethical behavior The importance of linking pay to performance is an appropriate topic when discussing ethics. It is well known in the compensation world that “what you reward is what you get.” If the statement is correct, then a problem exists because most companies do not link pay to ethical behavior but base pay on entitlement and custom.50 A survey of 358 compliance and ethics professionals by the Society of Corporate Compliance and Ethics (SCCE) and Health Care Compliance Association found that only a few companies have made ethics and compliance a process for determining how employees are compensated, and only about one company in six ties employee bonuses and incen- tives to ethical performance.51 In another survey, when asked how much impact the ethics and compliance function has on the compensation process for executives, just 34 percent of respon- dents said it had some or a great deal of impact. The majority indicated that compliance and ethics played very little (27 percent) or no role (29 percent), and the balance was unsure of the role of ethics and compliance.52 CEO Roy Snell of SCCE said, “The net result is that there is more work to be done in aligning business practices with stated commitment to compliant, ethical behavior.”53 For example, ethical expectation could be made part of the performance review and the results tied to pay raises.54 As one author recently stated, “When employees behave in undesirable ways, it’s a good idea to look at what you’re encouraging them to do.”55

ethics training The FSGO Act outlined an effective ethics training program and explained the seven minimum requirements for an effective program to prevent and detect violations. The fourth requirement stated, “Educate employees in the company’s standards and procedures through publications and training.” Companies train employees on many topics, but ethics training is often not consid- ered, which is a major oversight. Because of its inclusion within the FSGO, a brief discussion of ethics training will be provided in this chapter.

Companies that consistently rank high on the lists of best corporate citizens tend to make eth- ics training part of a company-wide initiative to promote integrity.56 Ethics training should be part of a proactive, not reactive, strategy. Regular training builds awareness of common ethical issues and provides tools for effective problem solving. Warren Buffett once said, “Pick out associates whose behavior is better than yours and you’ll drift in that direction.”57 Ethics training should begin

ObjeCtive 2.7

Discuss the importance of linking pay to ethical behavior.

ObjeCtive 2.8

Describe ethics training.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 33

at the top and continue through all levels in the organization.58 However, training should take into consideration the differences in these levels. Although top management sets the ethical tone, middle managers are the ones who will likely be the first to receive reports of unethical behavior.

KPMG believes that there are three fundamental factors in handing ethics issues: provide multiple channels for raising alarms, eliminate fear of retaliation for those who raise questions, and ensure consistent investigation and resolution of all matters reported. Individuals who report potential ethics violations could be subject to retaliation, so KPMG monitors performance reviews and other metrics to proactively identify retaliatory behavior. The credibility of the program requires all reports to be consistently investigated and resolved.59

Cisco created a unique ethics training program that showcased cartoon contestants singing about various ethical workplace situations found in Cisco’s Code of Business Conduct. Jeremy Wilson, manager, ethics office for Cisco Systems, Inc., said, “We wanted what was right for our employees, based upon our own risk analysis.” When Cisco created its program, it invited input from more than 120 people from departments across the organization, including legal, human resources, IT security, and records management.60

Ethics training for global organizations is more complicated than preparing the training for U.S. employees. One must also train for the country in which the global company operates. Since 1994, LRN has helped 15 million people at 700 companies across the world simultaneously navigate legal and regulatory environments and foster ethical cultures.61 A few of their customers include CBS, Dow Chemical, eBay, 3M, and Siemens. Chris Campbell, creative director at LRN, says, “Localization is as important as the accuracy of the translation process. Learners need to be able to connect in a way that is believable to them.”62

Corporate social responsibility As stated in the introduction, CSR is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves. A   recent survey revealed that 86 percent of consumers wanted companies to tell them more about the results of CSR efforts.63 Also, according to Net Impact’s What Workers Want in 2012 talent report, 35 percent of graduating college students said they would be willing to take a 15  percent pay cut to work for a company committed to CSR and 65 percent expect to make a positive social or environmental difference in the world at some point through their work.64 What do the following U.S. companies have in common: Biogen Idec Inc., Intel Corp., Cisco Systems Inc., Agilent Technologies Inc., The Clorox Company, GE, Motorola Solutions Inc.,

ObjeCtive 2.9

Describe the concept of corporate social responsibility.

If your professor has assigned this, go to mymanagementlab.com to complete the HR Bloopers exercise and test your application of these concepts when faced with real-world decisions.

h R B l o o p E R s

Sales Incentives at Pinser Pharmaceuticals Quarterly sales reports are in at Pinser

Pharmaceuticals and Ben Ross looks forward to sharing the reports with the sales team. As a compensation analyst, Ben calculates sales commissions for the sales representatives, and high sales mean big paychecks for the team. The sales representatives receive incentive pay bonuses based on how many times doctors in their sales territory prescribe Pinser drugs. The number of prescriptions has increased with several of the popular drugs Pinser makes and the sales representatives that have the doctors writing the most prescriptions stand to benefit significantly. Ben knows that they have steep competition on some of their products, but he has also heard some rumors about how they stay ahead of competitors.

Apparently many of the sales representatives are using some of their own extra earnings to earn the favor of the doctors. Gifts, dinners, and other incentives are provided to the doctors to encourage them to write Pinser prescriptions. At first he thought there might be a problem with this practice, but Ben knows that Pinser has a Code of Ethics and provides ethics training to all employees, so the sales representatives must know that their practices are acceptable. Ben understands that this is just the way business is done, and Ben’s job is just to make sure they get paid what they have earned.

34 Part 1 • Setting the Stage

Prologis Inc., and the Campbell Soup Company? They have been identified as having a commit- ment to excellence in the area of CSR and are included in the 2014 Global 100 Most Sustainable Corporations in the World.65 These companies have demonstrated the ability to manage the “triple bottom line” of social responsibility (society, environment, and economy).66 They repre- sent the top 5 percent of socially responsible companies.

CSR is the model in which economic, social, and environmental responsibilities are satis- fied concurrently.67 Figure 2-1 illustrates the layers of responsibility associated with CSR. When a corporation behaves as if it has a conscience, it is said to be socially responsible. CSR con- siders the overall influence of corporations on society at large and goes beyond the interests of shareholders. It is how a company as a whole behaves toward society. In many companies, social responsibility has moved from nice to do to must do.68 More and more companies are issuing CSR reports that detail their environmental, labor, and corporate-giving practices. Some firms, such as Burger King, have created the position of director of CSR.

Apparently, socially responsible behavior pays off on the bottom line. When GE CEO Jeffrey Immelt announced that the company would double its spending on green technology research, it was no grand attempt to save the planet; it was an example of astute business strat- egy. Immelt said, “We plan to make money doing it.”69 Social responsibility has also impacted the recruiting process. College graduates of today often seek out corporations that have a reputation for being socially responsible, which was not often the case in the past. In fact, job seekers tend to be more attracted to organizations known for CSR.70

Procter & Gamble has long believed it has a responsibility for the long-term benefit of society as well as the company. Over the years, P&G has pursued programs to strengthen U.S. education, to encourage employment opportunities for minorities and women, to develop and implement environment-protection technology, and to encourage employee involvement in civic activities and the political process.

Deborah Leipziger, an Ethical Corporation Institute researcher, said, “The more credible efforts tend to be led by key players within a company.”71 An organization’s top executives usu- ally determine a corporation’s approach to social responsibility. For example, when McDonald’s began, it was Ray Kroc’s philosophy to be a community-based business. His philosophy from the beginning was to give back to the communities that McDonald’s served.72

One of the best benchmarks for defining social responsibility in manufacturing is the one- page set of operating principles developed 60 years ago by Robert Wood Johnson, then Johnson & Johnson’s chairman of the board. The document is still in use today and addresses supporting good works and charities.73

During the Vietnam War, Dow Chemical gained a bad reputation for not being socially respon- sible because it produced the deadly chemical agent napalm. As a result Dow had difficulty recruit- ing the best scientists and other professionals. To overcome this image, Dow built a campaign that highlighted how Dow has benefitted agricultural production. Once people saw the positive side of Dow, its ability to recruit and retain the best chemists improved.74 However, the chemical industry continues to face widespread public mistrust despite being an enabler of advances that are vital to solving global challenges as well as efforts to improve product and process safety.75

HR Web Wisdom

Business for Social Responsibility http://www.bsr.org

This is a global organization that helps member companies achieve success in ways that respect ethi- cal values, people, communities, and the environment.

FiguRE 2-1 Carroll’s Pyramid of Corporate Social Responsibility Source: SHRM Foundation, “HRM’s Role in Corporate Social Responsibility and Environmental Sustainability,” 2012, Alexandria, VA: SHRM Foundation, page 4. Accessed February 3, 2014, at www. shrmfoundation.org.

Discretionary

Ethical

Legal

Economic Economic responsibilities: The first responsibility of any organization is to deliver an acceptable return for shareholders (while contributing to local and global economies through their core business).

Legal responsibilities: The second aspect of responsibility requires that organizations operate within the law at all locations in which they do business.

Ethical responsibilities: The third layer of the pyramid requires organizations to consider social and environmental impacts of their operations and, as far as possible, to do no harm while pursuing business interests.

Discretionary responsibilities: The fourth layer of responsibility is to proactively seek opportunities to make a positive contribution to society beyond profitability, compliance and business ethics. At the discretionary, or voluntary, level, organizations have a responsibility to understand broad stakeholder needs and to address societal concerns though their business practices.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 35

Thus far only the virtues of CSR have been provided. However, the question of whether businesses should promote CSR is at times hotly debated and not all companies have embraced the concept.76 Some have challenged the concept that doing well is doing good (DWDG). They believe that although appealing to some, DWDG is also profoundly wrong.77 Milton Friedman was a U.S. economist, statistician, academic, and author who taught at the University of Chicago for more than three decades and was a recipient of the Nobel Memorial Prize in Economic Sciences. In his book Capitalism and Freedom, he argued that the only social responsibility of business was to increase its profits. According to Friedman, as a firm creates wealth for its share- holders, society as a whole will also be benefited.78 Friedman disciples continue to condemn CSR as a hotchpotch of “value-destroying nonsense.”79

These days, more employers are publicly endorsing a culture of ethics and social responsibil- ity. However, some believe that it is being done more as a public relations campaign. Long before the enormous oil spill in 2010, BP promoted itself as being eco-friendly. Its literature stated that BP stood for “Beyond Petroleum.” BP marketed itself as a producer of alternative energies, an image that was seriously damaged by the devastating oil spill in the Gulf of Mexico in 2010.80 Instead of spending billions on eco-friendly energy and building an employer brand campaign around it, many believe that BP would have been much better off if it had spent more time and effort in training its employees on its oil drilling platforms, establishing stronger safety protocols, and waiting until they were safe to operate. Even during this public relations campaign, BP had a history of safety violation. BP had been “fined more than $100 million for safety violations that led to deaths of workers, explosions of refineries, and leaking pipelines.”81

Another example is about Duke Energy Corporation. One of its storm water pipes burst, jettisoning tons of coal ash into the Dan River north of Greensboro, North Carolina. This company’s CEO agreed to face environmentalists who are up in arms about this environmental threat. She agreed to embark on a canoe trip with environmentalists to the spill site to show a willingness to face the problem.82 But, some within the company have argued that members of its board of directors’ environmental committee are inexperienced working with coal.

Brighter Planet, a sustainability technology company, discovered in a recent survey that although more firms are engaging in green activities, the effectiveness of these efforts has declined.83 Some believe that the problem with CSR is that it consists of a universal set of guidelines such as the “triple bottom line” (society, environment, and economy) mentioned previously. To be “socially responsible,” each firm has to follow the same guidelines instead of what would be the most appropriate strategy for each firm. Using this logic, it would be more logical for oil companies such as BP to focus on being profitable, yet be an environmentally conscious oil company. Fast-food restaurants such as McDonald’s and retailers such as Walmart should each use a different set of rules to do the same thing in their own industries.

There are those who believe that all shareholders should not be required to be involved in CSR investments. They think that only investors who want to be involved should participate. These investors would do so with the understanding that the objective is not just to make money but also to do good. For example, an oil company such as Exxon could establish an alternative- energy subsidiary. Exxon would own a controlling stake, but funding would come from new investors who want to support alternative energy and thus be socially responsible. If the sub- sidiary was unsuccessful, the losses would be confined to the new investors. If it succeeded, the profits would be shared by all shareholders.84

Corporate sustainability Corporate sustainability has evolved from the more traditional view of CSR. According to the World Commission on Environment and Sustainability, the narrow definition of sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”85 The Dow Jones World sustainability Index (DJSI) provides a good working definition of this term. They define it as, “An approach to creating long-term share- holder value by embracing opportunities and managing risks deriving from economic, environ- mental and social trends and challenges.”86 In recent years, sustainability has been expanded to include the social, economic, environmental, and cultural systems needed to support an organi- zation. This type of organization is capable of continuing both now and in the future. Evidently

ObjeCtive 2.10

Explain corporate sustainability.

36 Part 1 • Setting the Stage

Numerous companies are working toward becoming eco-friendly. Unilever has placed sustainability at the core of its business. The company promised by 2020 to double its sales even as it cuts its environmental footprint in half and sources all its agricultural products in ways that don’t degrade the Earth.90 Target’s waste-reduction efforts have cut waste by 70 percent. Home Depot attempts to make sure that wood and lumber sold in its stores come from sustainable forests. Corporate environmental responsibility for McDonald’s focuses on energy efficiency, sustainable packing and waste management, and green restaurant design.91 McDonald’s has eliminated the use of containers made with ozone-depleting chlorofluorocarbons, cut down on the amount and type of packaging it uses, and implemented a program of purchasing goods made from recycled materials. Walmart is working on sustainable initiatives. Solar panels are being installed in all of the retailer’s super centers with unused energy being sold back into the energy grid, a cost-saving move for the community.92

Watch It 2 If your instructor has assigned this, go to MyManagementLab to watch a video titled Honest Tea: Corporate Social Responsibility and to respond to questions.

HR Web Wisdom

Deloitte Sustainability Are You Overlooking Opportunities? http://www.deloitte.com/us/ sustainability

Many executives are turning to sustainability to help improve the bottom line.

FiguRE 2-2 How to Embed Sustainability Using HRM Tools Source: SHRM Foundation, “HRM’s Role in Corporate Social Responsibility and Environmental Sustainability,” 2012, Alexandria, VA: SHRM Foundation, page 8. Accessed February 3, 2014, at www. shrmfoundation.org.

• employee attraction: using the organization’s commitment to sustainability in recruitment helps attract more applicants and at the same time ensures the right “fit” with the company’s sustainability goals.

• employee attitudes: although the research is unclear whether an organization’s commitment to sustainability leads to higher employee retention, it does have positive effects on employee commitment and job satisfaction.

• employee skills and knowledge: Many organizations provide initial and ongoing training and development on the knowledge and skills needed to achieve their sustainability goals, although the research on the impact of achieving sustainability goals is still limited.

• employee sustainability goal attainment: including sustainability targets in evaluation and compensation systems can lead to greater attention to and achievement of those goals.

• Sustainability organizational climate: though the research is lacking in this area, a sustainability strategy will likely fail if the company’s organizational climate does not appropriately support it.

• employee sustainability behaviors: Supervisory and organizational support can lead to more sustainability behaviors in employees.

the importance of corporate sustainability is being taken seriously because every manufacturer on the S&P 500 reported some form of sustainability disclosure in 2012.87

Corporate sustainability may be thought of as being a business and investment approach that strives to use the best business practices to meet the needs of current and future shareholders. HR professionals play an important role in promoting corporate sustainability objectives. Figure 2-2 illustrates how HR professionals can use their expertise toward this end. Today it relates to how an organization’s decisions could affect society and the environment as a whole. Essentially it is about how a firm handles its business while understanding how these decisions may affect others. One could think of corporate sustainability in a business sense as providing long-term profitability. Thus, sustainability should be a fundamental part of business strategy, product development, talent development, and capital investment. Some organizations have emphasized the importance of corporate sustainability by establishing the position of chief sustainability officer.88

Others such as Johnson & Johnson prefer to see it developed into the overall culture of the firm. Tish Lascelle, Johnson & Johnson’s senior director environment, said, “Sustainability is embedded in our culture. It’s been a part of who we are for more than 65 years, long before the notion of sustainability became trendy.”89 The following Watch It video illustrates how a company has taken to become, and remain, a “mission-driven business” with corporate social responsibility as one of its mission’s core values.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 37

Increasingly, environmentally sound and cost-cutting operating procedures are being included in firms’ business plans not only for their own employees, products, and facilities, but also for sup- pliers and trade partners. Walmart Stores Inc. has initiated and promoted sustainability not only in its own stores and production facilities, but also for its U.S. and global suppliers.93 Frito-Lay, which operates the world’s seventh-largest private delivery fleet, has put 176 all-electric box trucks on the road in places such as California, Texas, and the Pacific Northwest. The trucks are expected to cut diesel consumption by 500,000 gallons a year while limiting greenhouse emissions by 75 percent compared with combustion engines. The trucks will also cut annual maintenance costs by as much as $700,000.94 Coca-Cola Enterprises Corporate Responsibility and Sustainability Report stated that they have taken steps to reduce the number of calories per liter by five percent by 2014. Also, Sprite was relaunched in 2013 leading to a 30 percent reduction in calories.95

Approximately 62 percent of large and medium-sized companies worldwide have an active sustainability program in place, and another 11 percent are developing one, according to a sustainability survey commissioned by consulting firm KPMG.96 Corporate Knights, a Toronto-based media company and sustainability reporter, recently released its seventh annual report of the world’s best sustainable corporations. The top five U.S. companies with the most green-friendly, sustainable practices were Johnson & Johnson, Intel Corp., GE, Agilent Technologies, Inc., and Johnson Controls Inc.97

PPG Industries recently issued a corporate sustainability report that provides information about the company’s financial performance, environmental metrics such as greenhouse gas emis- sions and energy use, safety statistics, stakeholder engagement, philanthropic activities, and awards and recognition. In the report, Charles E. Bunch, PPG chairman and CEO, said, “Sustainability is business as usual at PPG. An underlying principle for the company since its founding in 1883, a commitment to sustainability has been crucial to our long-term success.”98 Leading up to 2020, PPG will strive to reduce environmental impact, improve employees’ safety, health and well-being and encourage and report employee charitable donations and volunteerism.99 Dow Chemical’s way of thinking regarding sustainability is, “If you can’t do it better, why do it?” This philosophy is at the very heart of sustainability at Dow. Every decision is made with the future in mind.100

Institutional investors managing more than $1.6 trillion in assets are starting to put pressure on the world’s 30 largest stock exchanges to force companies to improve their sustainability reporting. Twenty-four institutional shareholders said they want it to be easier to judge the envi- ronmental, social, and governance risks of the firms in which they invest.101

Sustainability has also become extremely popular for companies operating in the global envi- ronment. Recently, Danone’s German division switched to a plastic made from plants (not oil) for its Activia yogurt packaging sold in Germany.102 Coca-Cola Enterprises in Great Britain has cut its carbon emissions by 470,000 tons, which is about a third of its 2020 target. It is also recycling 99 percent of the factory waste it produces, with five out of six of its production sites sending zero waste to landfills.103 Global polystyrene leader Styron LLC has more than 2,000 employees at 20 plants worldwide with annual sales of $5 billion. It begins each corporate meeting with the topic of sustainability. Employees’ bonuses are tied in to meeting sustainability goals. Recently, Styron introduced a recycled-content grade of polycarbonate at the Chinaplas trade show in Guangzhou, China.104 Renault partnered with Veolia Environment to build the world’s first zero-emissions, 100-percent renewable energy-reliant car manufacturing plant in Morocco.105

Conducting a social audit To overcome the negative publicity of corporate misdeeds and to restore trust, businesses are now conducting audits of their social responsibility activities and not just financial audits. A social audit is a systematic assessment of a company’s activities in terms of its social impact.

Some of the topics included in the audit focus on core values such as social responsibility, open communication, treatment of employees, confidentiality, and leadership. Firms are now acknowledging responsibilities to various stakeholder groups other than corporate owners.106

Some audits even set specific objectives in social areas. They are attempting to formally mea- sure their contributions to various elements of society and to society as a whole. An increasing number of companies, as well as public and voluntary sector organizations, are trying to assess their social performance systematically. Three possible types of social audits are currently being

ObjeCtive 2.11

Describe a social audit.

Social audit Systematic assessment of a company’s activities in terms of its social impact.

38 Part 1 • Setting the Stage

used: (1) simple inventory of activities, (2) compilation of socially relevant expenditures, and (3) determination of social impact. The inventory is generally a good starting place. It consists of a listing of socially oriented activities undertaken by the firm. Here are some examples: minority employment and training, support of minority enterprises, pollution control, corporate giving, involvement in selected community projects by executives, and a hard-core unemployment program. The ideal social audit would go well beyond a simple listing and involve determining the true benefits to society of any socially oriented business activity.

Can Corporate social responsibility succeed in the Global environment? The global environment has traditionally judged management primarily on furthering the firm’s bottom line. If this is so, it may be easier to be socially responsible in a prospering economy but more difficult when the economy is bad. Recently, some global firms appear to be questioning the wisdom of being socially responsible. The question being asked is, “Can firms competing in the global environment continue the lowest possible production costs while still being in compli- ance with national laws and also be socially responsible?”

Even before the recent recession began, corporations and their contractor manufacturers (often Korean, Taiwanese, and Hong Kong companies operating throughout the world) focused on obtaining the lowest production costs regardless of the accompanying social and environmental impacts. As labor costs have increased in China, companies quickly moved their manufacturing to lower labor cost countries such as Cambodia, Laos, India, and Vietnam.107 No consideration was made for the workers and families of the workers who were left behind.

Although some companies continue to say that they are fully committed to CSR, their less-than-socially-responsible behavior does not support their stated commitment.108 The garment factory building collapse in Bangladesh in 2013 stands among history’s worst indus- trial disasters, officially claiming 1,127 lives. The tragedy raised questions about the liability of western retailers for the working conditions of those in their supply chains.109 For instance, it exposed defects in the CSR machinery of Loblaw, Canada’s largest grocer. Loblaw had launched significant CSR programs tackling a wide variety of environmental, labor, and social issues. But it proved wholly insufficient to protect its brand from this disaster, much less ensure the safety of Bangladeshis making Joe Fresh garments.110 In previous years, a fire in a garment factory in Bangladesh killed 29 workers and hundreds were injured as they were suffocated, burned alive, were trampled in stairwells, or leapt to their deaths from the ninth and tenth floors because four of seven exit doors were locked. After more than 15 years of CSR programs, female garment workers continue to die making clothing for retailers such as Abercrombie & Fitch, Kenneth Cole, DKNY, Gap, Tommy Hilfiger, H&M, Izod, JC Penney, Calvin Klein, Kohl’s, Lee, North Face, OshKosh, Sears, Target, Timberland, Wrangler, and Walmart. Moreover, Bangladesh’s garment workers are among the worst paid in the world.111

There is a growing recognition among some leading global CSR organizations that the first 15  years of CSR efforts have not produced the desired results, and that significant changes will have to be made if CSR is to be anything more than an expensive exercise in “reputational management.” Dan Rees, director of the UK’s Ethical Trading Initiative, said, “CSR in general has become a bit of a victim of its own hype. . . . we have to stop pretending that companies in and of themselves can on their own transform industrial relations in foreign lands.”112 However, a recent study does not fully support these conclusions. In the study on global CSR conducted during the economic breakdown, 44 percent believe that CSR policies will be applied more often as a result of the crisis, 28 percent think that the real meaning of CSR will change in the  framework of the new conditions, and 22  percent believe that the crisis will have a negative impact on CSR.113

ObjeCtive 2.12

Explain whether corporate social responsibility can succeed in the global environment.

Try It! If your instructor has assigned this, go to MyManagementLab to complete the Management & Ethics simulation and test your application of these concepts when faced with real-world decisions.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 39

summary 1. Define ethics, corporate social responsibility, and corporate

sustainability. Ethics is the discipline dealing with what is good and bad, right and wrong, or with moral duty and obligation. Corporate social responsibility is the implied, enforced, or felt obligation of managers, acting in their offi- cial capacity, to serve or protect the interests of groups other than themselves, and corporate sustainability focuses on the possible future impact of an organization on society, includ- ing social welfare, the economy, and the environment.

2. Explore business ethics. Business ethics addresses matters of choices about right and wrong made by business leaders.

3. Describe sources of ethical guidance. One might use a number of sources to determine what is right or wrong, good or bad, and moral or immoral such as holy books, or one’s conscience. Another source of ethical guidance is the behavior and advice of people, including our parents, friends, and role models and members of our churches, clubs, and associations. For most professionals, there are codes of ethics that prescribe certain behavior.

4. Discuss attempts at legislating ethics. There have been four attempts to legislate business ethics since the late 1980s: the Procurement Integrity Act, the Federal Sentencing Guidelines for Organizations, the Corporate and Auditing Accountability, Responsibility and Transparency Act, and the Dodd–Frank Wall Street Reform and Consumer Protection Act.

5. Explain the importance of creating an ethical culture and code of ethics. An ethical culture is made up of factors such as ethical leadership, accountability, and values. The climate at the top is fundamental to a company’s ethical culture. Ethical leadership begins with the board of directors and CEO and continues to middle managers and supervisors. Building an ethical culture that lasts requires a foundation of practices that continue even when leaders change.

A code of ethics establishes the rules that the organi- zation lives by. Only a few companies have made ethics and compliance a process for determining how employees are compensated.

6. Define human resource ethics. Human resource ethics is the application of ethical principles to HR relationships and activities.

7. Discuss the importance of linking pay to ethical behavior. It is well known in the compensation world that “what you reward is what you get.” If the statement is correct, then a problem exists with regard to compen- sation because most companies do not link pay to ethical behavior.

8. Describe ethics training. Ethics training is not merely for top-level managers; it should be for everyone from the bottom to the top. Companies that consistently rank high on the lists of best corporate citizens tend to make eth- ics training part of a company-wide initiative to promote integrity. Ethics training should be part of a proactive, not reactive, strategy. Regular training builds awareness of common ethical issues and provides tools for effective problem solving.

9. Describe the concept of corporate social responsibility. Corporate social responsibility is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves.

10. Explain corporate sustainability. Corporate sustainabil- ity has evolved from the more traditional corporate social responsibility. According to the World Commission on Environment and Sustainability, the narrow definition of sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” In recent years, sustainability has been expanded to include the social, economic, environmental, and cultural systems needed to support an organization. This type of organization is capable of continuing both now and in the future.

11. Describe a social audit. A social audit is a systematic assessment of a company’s activities in terms of its social impact.

12. Explain whether corporate social responsibility can succeed in the global environment. The global environ- ment often judges management primarily on protecting the firm’s bottom line. If this is so, it may be easy to be socially responsible in a prospering economy but more difficult when the economy is bad.

Key terms ethics 25 human resource ethics 31

corporate social responsibility (CSR) 25

corporate sustainability 25 social audit 37

40 Part 1 • Setting the Stage

i n c i D E n t 1 An Ethical Flaw Amber Davis had recently graduated from college with a degree in general business. Amber was quite bright, although her grades did not reflect this. She had thoroughly enjoyed school, dating, playing tennis, and swimming, but found few stimulating academic endeavors. When she graduated, she had not found a job. Her dad was extremely upset when he discovered this, and he took it upon himself to see that Amber became employed.

Amber’s father, Allen Davis, was executive vice president of a medium-sized manufacturing firm. One of the people he contacted in seeking employment for Amber was Bill Garbo, the president of another firm in the area. Mr. Davis purchased many of his firm’s supplies from Garbo’s company. After telling Bill his problem, Allen was told to send Amber to Bill’s office for an interview. Amber went, as instructed by her father, and before she left Bill’s firm, she was surprised to learn that she had a job in the accounting department. Amber may have been lazy, but she certainly was not stupid. She real- ized that Bill had hired her because he hoped that his action would lead to future business from her father’s company. Although Amber’s work was not challenging, it paid better than the other jobs in the accounting department.

It did not take long for the employees in the department to discover the reason she had been hired; Amber told them. When a difficult job was assigned to Amber, she normally got one of the other employees to do it, implying that Mr. Garbo would be pleased with that person if he or she helped her out. She developed a pattern of coming in late, taking long lunch breaks, and leaving early. When the department manager attempted to reprimand her for these unortho- dox activities, Amber would bring up the close relationship that her father had with the president of the firm. The department manager was at the end of his rope.

Questions 2-11. From an ethical standpoint, how would you evaluate the

merits of Mr. Garbo’s employing Amber? Discuss. 2-12. Now that she is employed, what course would you follow to

address her on-the-job behavior? 2-13. It may be that Mr. Garbo viewed the hiring of Amber as strictly

a business decision that would ensure receiving continued business from Amber’s father. What might be some negative results of this questionable ethical decision?

MyManagementLab® Go to mymanagementlab.com to complete the problems marked with this icon .

Questions for review 2-3. What laws have been passed in an attempt to legislate

ethics? 2-4. Why is it important to have a code of ethics? 2-5. With regard to business ethics, what does the statement

“what you reward is what you get” mean? 2-6. What are HR ethics?

2-7. What are the areas in which HR professionals can have a major impact on ethics?

2-8. What is corporate social responsibility? 2-9. What does corporate sustainability mean? 2-10. Why might it be difficult for corporate social responsibil-

ity to succeed in the global environment?

exercises 2-1. As discussed in this chapter, a survey of 358 com-

pliance and ethics professionals by the Society of Corporate Compliance and Ethics (SCCE) and Health Care Compliance Association found that only a few companies have made ethics and compliance a pro- cess for determining how employees are compensated, and only about one company in six ties employee bo- nuses and incentives to ethical performance. Should

companies link pay to ethical behavior? What might the pros and cons be? Explain your answer.

2-2. These days, more employers are publicly endorsing a culture of ethics and social responsibility. However, some believe that it is being done more as a public relations campaign. Do you accept this belief? Defend your position.

ChaPter 2 • BuSineSS ethiCS and CorPorate SoCial reSPonSiBility 41

i n c i D E n t 2 “You Can’t Fire Me” Norman Blankenship came in the side door of the office at Consolidation Coal Company’s Rowland mine, near Clear Creek, West Virginia. He told the mine dispatcher not to tell anyone he was there. Norman was general superintendent of the Rowland operation. He had been with Consolidation for 23 years, having started out as a mining machine operator.

Norman had heard that one of his section bosses, Tom Serinsky, had been sleeping on the job. Tom had been hired two months earlier and assigned to the Rowland mine by the regional personnel office. He had gone to work as section boss, working the midnight to 8:00 a.m. shift. Because of his age and experience, Serinsky was the senior person in the mine on his shift.

Norman took one of the battery-operated jeeps used to transport personnel and supplies in and out of the mine and went to the area where Tom was assigned. Upon arriving, he saw Tom lying on an emer- gency stretcher. Norman stopped his jeep a few yards away from where Tom was sleeping and approached him. “Hey, are you asleep?” Norman asked. Tom awakened with a start and said, “No, I wasn’t sleeping.”

Norman waited for Tom to collect his senses and then said, “I could tell that you were sleeping, but that’s beside the point. You weren’t at your workstation. You know that I have no choice but to fire you.” After Tom had left, Norman called his mine foreman and asked him to come in and complete the remainder of Tom’s shift.

The next morning, Norman had the mine HR manager officially terminate Tom. As part of the standard procedure, the mine HR

manager notified the regional HR manager that Tom had been fired and gave the reasons for firing him. The regional HR manager asked the mine HR manager to get Norman on the line. The regional HR manager said, “Norm, you know Tom is Justus Frederick’s brother-in- law, don’t you?” Frederick was a regional vice president. “No, I didn’t know that,” replied Norman, “but it doesn’t matter. The rules are clear. I wouldn’t care if he was Frederick’s son.”

The next day, the regional HR manager showed up at the mine just as Norman was getting ready to make a routine tour of the mine. “I guess you know what I’m here for,” said the HR manager. “Yeah, you’re here to take away my authority,” replied Norman. “No, I’m just here to investigate,” said the regional HR manager.

By the time Norman returned to the mine office after his tour, the regional HR manager had finished his interviews. He told Norman, “I think we’re going to have to put Tom back to work. If we decide to do that, can you let him work for you?” “No, absolutely not,” said Norman. “In fact, if he works here, I go.” A week later, Norman learned that Tom had gone to work as section boss at another Consolidation coal mine in the region.

Questions 2-14. What would you do now if you were Norman? 2-15. Do you believe the regional HR manager handled the matter in

an ethical manner? Explain.

MyManagementLab® Go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:

2-16. Why should a firm want to create an ethical culture? 2-17. Why is everyone not on board with regard to corporate social responsibility?

endnotes Scan for Endnotes or go to http://www.pearsonhighered.com/mondy

42

1 Explain the concept of equal employment opportunity.

2 Identify the federal laws affecting equal employment opportunity.

3 Discuss who is responsible for ensuring equal employment opportunity.

4 Define and operationalize types of employment discrimination.

5 Define and discuss affirmative action.

Learn It If your professor has chosen to assign this, go to mymanagementlab.com to see what you should particularly focus on and to take the Chapter 3 Warm-Up.

MyManagementLab® Improve Your Grade!

Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems.

6 Explain the Uniform Guidelines related to sexual harassment, national origin, religion, and caregiver (family responsibility) discrimination.

7 Describe sexual harassment in the global environment.

8 Describe the concept of diversity.

9 Discuss diversity management.

10 Explain the various elements of a diverse workforce.

3 Equal Employment Opportunity, Affirmative Action, and Workforce Diversity

Chapter ObjeCtives After completing this chapter, students should be able to:

43

The workforce of today has become truly diverse. But this was not the case in the early 1960s; in fact, little of the workforce of those days remotely resembled that of today. Then, few main- stream opportunities were available to women, minorities, and those with disabilities. The Civil Rights Movement in the 1960s during which time blacks sought equality in employment and other areas of society led to a series of laws and executive orders, starting with Equal Employment Opportunity laws passed by the U.S. federal government. equal employment Opportunity (eeO) refers to the set of laws and policies that requires all individuals’ rights to equal opportunity in the workplace, regardless of race, color, sex, religion, national origin, age, or disability. Additional requirements, known as Affirmative Action, were established. affirmative action creates the expectation and program requirements that companies make a positive effort to recruit, hire, train, and promote employees from groups who are underrepre- sented in the labor force.

Since the Civil Rights movement and the passage of EEO laws, most companies have chosen to embrace the idea of promoting diversity in the workplace. Diversity refers to any actual or perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, gender identity, geographic origin, lifestyle, tenure with the organization or position, and any other perceived difference, including values and nontraditional work experiences. As you can see, characteristics of diversity go well beyond protected classes such as race in EEO law. Unlike EEO and Affirmative Action, promoting a diverse workforce is not required by law. Companies choose to embrace workforce diversity as a strategic choice. Capitalizing on a diverse workforce may be seen as contributing to a company’s objectives such as profit, productivity, and morale. Diversity is inclusive, encompassing everyone in the workplace. Diversity management is aimed at creating a workplace in which every employee fits, feels accepted, has value, and contributes.

The purpose of this chapter is to explore EEO and Affirmative Action requirements. Then, we will take up the subject of workplace diversity.

Equal Employment opportunity (EEo) The set of laws and policies that requires all individuals’ rights to equal opportunity in the workplace, regardless of race, color, sex, religion, national origin, age, or disability.

Affirmative Action Stipulated by Executive Order 11246, it requires employers to take positive steps to ensure that employment of applicants and treatment of employees during employment are without regard to race, creed, color, or national origin.

diversity Any perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, geographic origin, lifestyle, tenure with the organization or position, and any other perceived difference.

44 Part 1 • Setting the Stage

equal employment Opportunity: an Overview Legislation (federal, state, and local), Supreme Court decisions, and executive orders have required both public and private organizations to tap the abilities of a workforce that was largely underused before the mid-1960s. The concept of EEO has undergone much modification and fine-tuning since the passage of the Equal Pay Act of 1963, the Civil Rights Act of 1964, and the Age Discrimination in Employment Act of 1967.

Numerous amendments to these acts have been passed, as well as other acts in response to oversights in the initial legislation. Major Supreme Court decisions interpreting the provisions of the acts have also been handed down. A presidential executive order was signed into law that provided for affirmative action. Five decades have passed since the introduction of the first legis- lation, and EEO has become an integral part of the workplace.

Although EEO has come a long way since the early 1960s, continuing efforts are required because some problems still exist. Although perfection is elusive, the majority of businesses today do attempt to make employment decisions based on who is the best qualified, as opposed to whether an individual is of a certain gender, race, religion, color, national origin, or age or is disabled. Hiring standards to avoid will be identified based on some of the laws and executive orders that have had a major impact in creating this diverse workforce.

Federal Laws affecting equal employment Opportunity Numerous federal laws have been passed that have had an impact on EEO. The passage of these laws reflects society’s attitude toward the changes that should be made to give everyone an equal opportunity for employment. The most significant of these laws will be described in the follow- ing sections after clarifying the sources of legislation based on the unit of government—federal government, state government, and local government The federal government enacts and passes laws that apply throughout the entire United States, and the set of federal laws pertaining to EEO are our focus in this chapter. However, we will briefly consider the role of state and local govern- ments later as well. State government (for example, the states of Illinois and Louisiana) enacts legislation that applies throughout its jurisdiction within the state border. Local government may oversee the activities of a county or municipality within the state (for example, Suffolk County in Massachusetts or New York City in New York). Our main focus will be on federal laws, and we will make reference to state and local laws as necessary.

Constitutional Amendments and the Civil Rights Act of 1866 The oldest federal legislation affecting staffing is the Civil Rights Act of 1866, which is based on the Thirteenth Amendment to the U.S. Constitution. The Thirteenth Amendment abolished slavery in the United States and provides that “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” The Civil Rights Act of 1866 granted citizenship and the same rights enjoyed by white citizens to all male persons in the United States “without distinction of race or color, or previous condition of slavery or involuntary servitude.” Subsequently, the Fourteenth Amendment to the U.S. Constitution was enacted to ensure that the Civil Rights Act passed in 1866 would remain valid ensuring that “all persons born in the United States . . . excluding Indians not taxed. . . .” were citizens and were to be given “full and equal benefit of all laws.”

Title VII of the Civil Rights Act of 1964, Amended in 1972 The statute that has had the greatest impact on EEO is Title VII of the Civil Rights Act of 1964, as amended by the Equal Employment Act of 1972. Under Title VII, it is illegal for an employer to discriminate in hiring, firing, promoting, compensating, or in terms, conditions, or privileges of employment on the basis of race, color, sex, religion, or national origin. The act also forbids retaliation against an employee who has participated in an investigation, proceeding, or hearing.

Title VII covers employers engaged in or affecting interstate commerce who have 15 or more employees for each working day in each of 20 calendar weeks in the current or preceding

ObjeCtive 3.1

Explain the concept of equal employment opportunity.

ObjeCtive 3.2

Identify the federal laws affecting equal employment opportunity.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 45

calendar year. Also included in the definition of employers are state and local governments, schools, colleges, unions, and private employment agencies with 15 or more employees. All pri- vate employers who are subject to the Civil Rights Act of 1964 as amended with 100 employees or more must annually submit an EEO-1 (see Figure 3-1).

Three notable exceptions to discrimination as covered by Title VII are bona fide occupational qualifications (BFOQs), seniority and merit systems, and testing and educational requirements. According to the act it is not an unlawful employment practice for an employer to hire and employ employees on the basis of his or her religion, sex, or national origin in those certain instances where religion, sex, or national origin is a BFOQ reasonably necessary to the normal operation of the par- ticular business or enterprise. For example, religious institutions, such as churches or synagogues, may legally refuse to hire teachers whose religious conviction is different from that of the hiring institution. Likewise, a maximum-security correctional institution housing only male inmates may decline to hire females as security guards. The concept of BFOQ was designed to be narrowly, not

Section B—COMPANY IDENTIFICATION (To be answered by all employers)

Section C—EMPLOYERS WHO ARE REQUIRED TO FILE (To be answered by all employers)

EQUAL EMPLOYMENT OPPORTUNITY

EMPLOYER INFORMATION REPORT EEO—1

Joint Reporting Committee

Equal Employment Opportunity Com- mission Office of Federal Contract Compli - ance Programs (Labor)

Standard Form 100 (Rev. 4–92)

O.M.B. No. 3048–0007 EXPIRES 12/31/93 100-213

•

•

Indicate by marking in the appropriate box the type of reporting unit for which this copy of the form is submitted (MARK ONLY ONE BOX).

1.

Parent Company a. Name of parent company (owns or controls establishment in item 2) omit if same as label

1.

Address (Number and street)

Address (Number and street)

Total number of reports being filed by this Company (Answer on Consolidated Report only)2.

(1) Single-establishment Employer Report

Section A—TYPE OF REPORT Refer to instructions for number and types of reports to be filed.

(2) (3) (4)

(5)

Consolidated Report (Required) Headquarters Unit Report (Required) Individual Establishment Report (submit one for each es- tablishment with 50 or more employees) Special Report

Multi-establishment Employer:

Yes No 1. Does the entire company have at least 100 employees in the payroll period for which you are reporting? Yes No 2. Is your company affiliated through common ownership and/or centralized management with other entitles

in an enterprise with a total employment of 100 or more? Yes No 3. Does the company or any of its establishments (1) have 50 or more employees AND (b) is not exempt

as provided by 41 CFR 60–1.5, AND either (1) is a prime government contractor or first-tier subcontractor, and has a contract, subcontract, or purchase order amounting to $50,000 or more, or (2) serves as a depository for Government funds in any amount or is a financial institution which is an issuing and paying agent for U.S. Savings Bonds and Savings Notes?

NOTE: If the answer is yes to questions 1, 2, or 3, complete the entire form, otherwise skip to Section G. NSN 7540–00–180–6384

If the response to question C–3 is yes, please enter your Dun and Bradstreet Identification number (if you have one):

Establishment for which this report is filed. (Omit if same as label)2.

b. Employer identification No. (IRS 9-DIGIT TAX NUMBER)

Was an EEO–1 report filed for this establishment last year? Yes No

a. Name of establishment

City or town State

City or town County State ZIP code

ZIP code

a.

b.

c.

d.

e.

f.

OFFICE USE

ONLY

Figure 3-1 Equal Employment opportunity Employer Information Report

46 Part 1 • Setting the Stage

broadly, interpreted and has been so interpreted by the courts in a number of cases. For instance, historically women sales representative were barred from working in a male clothing store because it was thought that men would not purchase from them. This stereotype has certainly been over- come because men regularly see female salespersons working in men’s clothing stores. The burden of proving the necessity for a BFOQ rests entirely on the employer.

The second exception to discrimination under Title VII is a bona fide seniority system such as the type normally contained in a union contract. Differences in employment conditions among workers are permitted, provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex, or national origin. Even if a bona fide seniority system has an adverse impact on those individuals protected by Title VII (i.e., it affects a class or group), the system can be invalidated only by evidence that the actual motives of the parties to the agreement were to discriminate.

Finally, in the matter of testing and educational requirements, Title VII states that it is not “an unlawful employment practice for an employer to give, and to act upon, the results of any profes- sionally developed ability test provided that such test, its administration, or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex, or national origin.” Employment testing and educational requirements must be job related, and when adverse impact is shown, the burden of proof is on the employer to establish that a demonstrable relation- ship exists between actual job performance and the test or educational requirement.

The Civil Rights Act of 1964 also created the Equal Employment Opportunity Commission (EEOC) and assigned enforcement of Title VII to this agency. Consisting of five members appointed by the president, the EEOC is empowered to investigate, conciliate, and litigate charges of discrimination arising under provisions of Title VII. In addition, the commission has the responsibility of issuing procedural regulations and interpretations of Title VII and the other

Figure 3-1 Continued

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 47

statutes it enforces. The most significant regulation issued by EEOC is the Uniform Guidelines on Employee Selection Procedures. The EEOC enforces other EEO laws, with exceptions noted when those laws are discussed next.

Equal Pay Act of 1963, Amended in 1972 Passed as an amendment to the Fair Labor Standards Act, the Equal Pay Act (EPA) of 1963 prohibits an employer from paying an employee of one sex less money than an employee of the opposite sex, if both employees do work that is substantially the same. The EPA was passed largely to overcome the outdated belief that a man should be paid more than a woman because he was the primary breadwinner. The EPA covers work within the same physical place of business. For example, an employer could pay a female more in San Francisco than a male working in the same position in Slippery Rock, Pennsylvania, even if the jobs were substantially the same, because of the cost-of-living difference. A key point to remember is that the pay difference must be substantial and that small pay differences might be acceptable. Four exceptions that permit unequal pay for equal work include:

• Seniority system • Merit system • System that measures earnings by quantity or quality of production • Any other factor other than sex

The EEOC enforces the EPA. The EEOC possesses the authority to investigate and reconcile charges of illegal discrimination. Title VII protects employees who work for all private sec- tor employers; local, state, and federal governments; and educational institutions that employ 15 or more individuals. Title VII also applies to private and public employment agencies, labor organizations, and joint labor management committees controlling apprenticeship and training. It should be noted that the remaining laws that follow are also enforced by the EEOC.

Lilly Ledbetter Fair Pay Act of 2009 Lilly Ledbetter worked as a supervisor for Goodyear Tire from 1979 until 1998. Just before retirement, she received information that compared her salary with salaries of male coworkers. She was earning $3,727 monthly compared with 15 male coworkers who earned between $4,286 and $5,236. She sued, claiming pay discrimination under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963.1 In the 2007 Supreme Court case of Ledbetter v. Goodyear Tire & Rubber Co., Inc., the Court said that discrimination charges must be filed within 180 days after the allegedly discriminatory pay decision. Lilly Ledbetter had worked for Goodyear for many years but she did not realize until she was close to retirement that she was being discrimi- nated against because of pay. Because she did not file a discrimination charge within 180 days of her employment, the Supreme Court ruled against her. To reverse the Ledbetter decision, the Lilly Ledbetter Fair Pay Act was passed by Congress and signed into law in 2009. The law creates a rolling or open time frame for filing wage discrimination claims. Each paycheck that unfairly pays a worker less than it should is a discriminatory act. The act gives the worker a fresh 180-day period (300 days in some states) to file a charge of discrimination with the EEOC.

Pregnancy Discrimination Act of 1978 Passed as an amendment to Title VII of the Civil Rights Act, the Pregnancy Discrimination Act prohibits discrimination in employment based on pregnancy, childbirth, or related medical conditions. Questions regarding a woman’s family and childbearing plans should not be asked. Similarly, questions relating to family plans, birth control techniques, and the like may be viewed as discriminatory because they are not asked of men. The basic principle of the act is that women affected by pregnancy and related conditions must be treated the same as other applicants and employees on the basis of their ability or inability to work. A woman is therefore protected against such practices as being fired or refused a job or promotion merely because she is preg- nant or has had an abortion. She usually cannot be forced to take a leave of absence as long as she can work. If other employees on disability leave are entitled to return to their jobs when they are able to work again, so too are women who have been unable to work because of pregnancy. Also, limiting job advancement opportunities while a woman is pregnant may be a violation of the act.

48 Part 1 • Setting the Stage

The same principle applies in the benefits area, including disability benefits, sick leave, and health insurance. A woman unable to work for pregnancy-related reasons is entitled to disability benefits or sick leave on the same basis as employees unable to work for other medical reasons. Also, any health insurance provided must cover expenses for pregnancy-related conditions on the same basis as expenses for other medical conditions.

Civil Rights Act of 1991 During 1988–1989, the Supreme Court rendered six employment discrimination decisions of such magnitude that a congressional response was required to overturn these decisions. The result was passage of the Civil Rights Act of 1991. The act amended five statutes: (1) the Civil Rights Act of 1866; (2) Title VII of the Civil Rights Act of 1964, as Amended; (3) the Age Discrimination in Employment Act of 1967, as Amended; (4) the Rehabilitation Act of 1973; and (5) the Americans with Disabilities Act of 1990.

The Civil Rights Act of 1991 had the following purposes:

• To provide appropriate remedies for intentional discrimination and unlawful harassment in the workplace.

• To codify the concepts of business necessity and job-relatedness pronounced by the Supreme Court in Griggs v. Duke Power Company.

• To confirm statutory authority and provide statutory guidelines for the adjudication of disparate impacts under Title VII of the Civil Rights Act of 1964. Disparate impact occurs when certain actions in the employment process work to the disadvantage of members of protected groups. Disparate impact will be discussed under the heading, “Adverse Impact.”

• To respond to decisions of the Supreme Court by expanding the scope of relevant civil rights statutes to provide adequate protection to victims of discrimination.

Under this act, a complaining party may recover punitive damages if the complaining party demonstrates that the company engaged in a discriminatory practice with malice or with reckless indifference to the law. However, the following limits, based on the number of people employed by the company, were placed on the amount of the award:

• Between 15 and 100 employees—$50,000 • Between 101 and 200 employees—$100,000 • Between 201 and 500 employees—$200,000 • More than 500 employees—$300,000

In each case, aggrieved employees must be with the firm for 20 or more calendar weeks in the current or preceding calendar year.

With regard to burden of proof, a complaining party must show that a particular employment practice causes a disparate impact on the basis of race, color, religion, sex, or national origin. It must also be shown that the company is unable to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity. The act also extends the coverage of the Civil Rights Act of 1964 to extraterritorial employment. However, the act does not apply to U.S. companies operating in other countries if compliance “would cause such employer, or a corporation controlled by such employer, to violate the laws of the country in which such workplace is located.”2 The act also extends the nondiscrimination principles to Congress and other government agencies, such as the General Accounting Office and the Government Printing Office.

Age Discrimination in Employment Act of 1967, Amended in 1978 and 1986 As originally enacted, the Age Discrimination in Employment Act (ADEA) prohibited employers from discriminating against individuals who were 40 to 65 years old. The 1978 amendment provided protection for individuals who were at least 40, but less than 70 years old. In a 1986  amendment, employer discrimination against anyone age 40 or older is illegal. Questions asked about an applicant’s age or date of birth may be ill-advised. Also, assuming that only younger applicants are more eager and ready to learn new technology may bring an age discrimination suit because people of any age may possess these qualities. However, a firm may ask for age information to comply with the child labor law. For example, the question could be asked, “Are you under the age of 18?” Nonetheless, questions about the ages of children, if any,

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 49

could be potentially discriminatory because a close approximation of the applicant’s age often is obtained through knowledge of the ages of the applicant’s children. The EEOC is responsible for administering this act. The ADEA pertains to employers who have 20 or more employees for 20 or more calendar weeks (either in the current or preceding calendar year); unions with 25 or more members; employment agencies; and federal, state, and local government subunits.

Enforcement begins when a charge is filed, but the EEOC can review compliance even if no charge is filed. The ADEA differs from Title VII of the Civil Rights Act because it provides for a trial by jury and carries possible criminal penalty for violation of the act. The trial-by-jury provi- sion is important because juries are thought to have great sympathy for older people who may have been discriminated against. The criminal penalty provision means that a person may receive more than lost wages if discrimination is proved. Further, an employer found to have wilfully violated the ADEA can be liable to the victimized person for “liquidated damages” or double damages.3 The 1978 amendment also makes class action suits possible.

Age Can Actually Be a Bona Fide Occupational Qualification Age can actually be a BFOQ when it is reasonably necessary to the essence of the business, and the employer has a rational or factual basis for believing that all, or substantially all, people within an age class would not be able to perform satisfactorily. Courts have continued to rule that the Federal Aviation Administration adequately explained its long-standing rule that it can force commercial pilots to retire at age 60. The age 60 rule was first imposed in 1959 and was long controversial. However, in 2007, the retirement age for commercial pilots was raised to 65.

This ruling supported the 1974 Seventh Circuit Court decision that Greyhound did not violate the ADEA when it refused to hire persons 35 years of age or older as intercity bus driv- ers. Again, the likelihood of risk or harm to its passengers was involved. Greyhound presented evidence concerning degenerative physical and sensory changes that humans undergo at about age 35 that have a detrimental effect on driving skills, and that the changes are not detectable by physical tests. These skills would gradually deteriorate with increased age.

Rehabilitation Act of 1973 The Rehabilitation Act prohibits discrimination against disabled workers who are employed by certain government contractors and subcontractors and organizations that receive federal grants in excess of $2,500. Individuals are considered disabled if they have a physical or mental impairment that substantially limits one or more major life activities or if they have a record of such impairment. Protected under the act are diseases and conditions such as epilepsy, cancer, cardiovascular disorders, AIDS, blindness, deafness, mental retardation, emotional disorders, and dyslexia.

There are two primary levels of the act. All federal contractors or subcontractors exceeding the $2,500 base are required to post notices that they agree to take affirmative action to recruit, employ, and promote qualified disabled individuals. If the contract or subcontract exceeds $50,000, or if the contractor has 50 or more employees, the employer must prepare a written affirmative action plan for review by the Office of Federal Contract Compliance Programs (OFCCP), which administers the act. In it, the contractor must specify that reasonable steps are being taken to hire and promote disabled persons.

In an interpretation of Section 8 of the Rehabilitation Act, federal technology buyers are forced to think about people who are blind, deaf, paralyzed, or have other disabilities before they buy software, computers, printers, copiers, fax machines, kiosks, telecommunications devices, or video and multimedia products. Federal employees with disabilities must have access to and use of information and data that is comparable to the access and use by federal employees who are not individuals with disabilities, unless an undue burden would be imposed on the agency.

Vietnam Era Veteran’s Readjustment Assistance Act of 1974 The Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) requires covered federal government contractors and subcontractors to take affirmative action to employ and advance in employment specified categories of veterans protected by the act and prohibits discrimina- tion against such veterans. In addition, VEVRAA requires contractors and subcontractors to

HR Web Wisdom

Office of Contract Compliance Programs http://www.dol.gov/ofccp/

Home page for the OFCCP, the agency responsible for ensuring that employers doing business with the federal government com- ply with the laws and regulations requiring nondiscrimination and affirmative action.

50 Part 1 • Setting the Stage

list their employment openings with the appropriate employment service delivery system and that covered veterans receive priority in referral to such openings. Further, VEVRAA requires federal contractors and subcontractors to compile and submit annually a report on the number of current employees who are covered veterans. The affirmative action and mandatory job-listing provisions of VEVRAA are enforced by the Employment Standards Administration’s Office of Federal Contract Compliance Programs (OFCCP) within the U.S. Department of Labor (DOL). DOL’s Veterans’ Employment and Training Service (VETS) administers the veterans’ employment reporting requirement.

Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as Amended Under VEVRAA, federal contractors and subcontractors are required to take affirmative action in hiring covered veterans. VEVRAA prohibits federal contractors from discriminating against speci- fied categories of veterans and requires them to take affirmative action to recruit, employ, and pro- mote protected veterans. Contractors with 50 or more employees (and $100,000 in federal contracts made on or after December 1, 2003) must maintain a written affirmative action plan.4 As originally passed, only covered honorably discharged persons who served more than 18 days on active duty between August 5, 1964, and May 7, 1975. Now the definition of “protected” or “covered” veteran has been expanded to include those who have served in a campaign or expedition for which a cam- paign badge was issued.5 This includes campaigns such as current engagements in the Middle East.

Recently, there have been rather significant changes in the OFCCP requirement regarding the Rehabilitation Act and the VEVRAA. The final regulations require contractors to establish a nationwide 7 percent utilization goal for disabled individuals and veterans in each job group of their workforce. If a contractor has less than 100 employees, the final rule requires the 7 percent goal to be applied to the entire workforce. In addition, OFCCP’s final rules provide two methods for contractors to establish hiring benchmarks for disabled individuals and veterans based on either the current national percentage of veterans in the workforce, which currently stands at 8  percent, or their own benchmark based on the best available data. The OFCCP stresses that goal is not a rigid and inflexible quota which must be met.

Americans with Disabilities Act of 1990 According to the U.S. Census Bureau, about 56.7 million people in the United States had some type of diagnosed disability in 2010 and more than 40 percent of them were of working age.6 The Americans with Disabilities Act (ADA) prohibits discrimination against qualified individu- als with disabilities. The ADA prohibits discrimination in all employment practices, including job application procedures, hiring, firing, advancement, compensation, training, and other terms, conditions, and privileges of employment. It applies to recruitment, advertising, tenure, layoffs, leaves, benefits, and all other employment-related activities. The employment provisions apply to private employers, state and local governments, employment agencies, and labor unions. Persons discriminated against because they have a known association or relationship with a disabled indi- vidual are also protected. Employers with 15 or more employees are covered. The ADA defines an individual with a disability as a person who has, or is regarded as having, a physical or mental impairment that substantially limits one or more major life activities and has a record of such an impairment or is regarded as having such an impairment.

Americans with Disabilities Act Amendments Act of 2008 The Americans with Disabilities Act Amendments Act (ADAAA) brings millions more people within the ADA’s protection. The ADAAA expands the definition of “disability,” so that many more applicants and employees are eligible for reasonable accommodations.7 The ADAAA broadened the ADA’s definition of disability by expanding the term “major life activities,” doing away with the “substantially limited” requirement (previously mentioned) for those regarded as having a disability, and overturning two U.S. Supreme Court decisions that interpreted the ADA’s definition of disability narrowly.

According to the EEOC, one of the purposes of the ADAAA is the reinstatement of a broad scope of protection by expanding the definition of the term disability. Congress found that persons with many types of impairments—including epilepsy, diabetes, multiple sclerosis, major depression,

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 51

and bipolar disorder—had been unable to bring ADA claims because they were found not to meet the ADA’s definition of disability. The ADA still covers only qualified individuals with disabilities and provides that to be disabled, an individual must have “a physical or mental impairment that sub- stantially limits one or more major life activities,” must have a record of such an impairment, or must be regarded as having such an impairment. The ADAAA also defines and vastly expands the term major life activities as including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working. The amendment states that major life activities include the operation of a major bodily function, such as functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions. The only exception to this rule is that if a person’s vision can be corrected with eyeglasses or contact lenses, he or she will not be considered disabled.

Immigration Reform and Control Act of 1986 The Immigration Reform and Control Act (IRCA) makes it illegal for certain employers to fire or refuse to hire a person on the basis of that person’s national origin or citizenship. This law also makes it illegal for an employer to request employment verification only from people of a certain national origin or only from people who appear to be from a foreign country. An employer who has citizenship requirements or gives preference to U.S. citizens also may violate IRCA.

Uniformed Services Employment and Reemployment Rights Act of 1994 The Uniformed Services Employment and Reemployment Rights Act (USERRA) provides protection to Reserve and National Guard members. Under the USERRA, those workers are entitled to return to their civilian employment after completing their military service. The USERRA is intended to eliminate or minimize employment disadvantages to civilian careers that can result from service in the uniformed services. The USERRA was enacted to protect the reemployment benefits and nondiscrimination rights of individuals who voluntarily or invol- untarily take a leave of absence from employment to serve in the military. As a general rule, a returning employee is entitled to reemployment in the same job or position that he or she would have attained with reasonable certainty if not for the absence to serve in the military. Known as the escalator principle, this requirement is designed to ensure that a returning employee is not penalized (by losing a pay raise, promotion, etc.) for the time spent on active duty, not exceeding five years. To accomplish this, organizations should track factors ranging from compensation to promotions that employees would have received had they not been on military leave.8 There are no special rights under USERRA for temporary workers or the new hires taking over the Reserve or National Guide members’ jobs.

The Veterans Opportunity to Work (VOW) Act passed in 2011 amended the USERRA. It is now easier for employees to sue employers based on hostile work environment claims related to an employee’s military status. Estimates are that USERRA cases will increase based on the new law and the projected budget reduction at the Department of Defense.9 USERRA is administered by the U.S. Department of Labor.

Genetic Information Nondiscrimination Act of 2008 The Genetic Information Nondiscrimination Act (GINA) of 2008 protects job applicants, current and former employees, labor union members, and apprentices and trainees from discrimination based on their genetic information by making unlawful the misuse of genetic information to discriminate in health insurance and employment. GINA contains two titles.

Title I of GINA applies to employer-sponsored group health plans. This title generally pro- hibits discrimination in group premiums based on genetic information and the use of genetic information as a basis for determining eligibility or setting health insurance premiums. Title I also places limitations on genetic testing and the collection of genetic information.

Title II of GINA prohibits the use of genetic information in the employment setting for making employment decisions such as hiring decisions, compensation, training, and termination. GINA further restricts the deliberate acquisition of genetic information by employers and others covered by Title II and strictly limits disclosing genetic information.

52 Part 1 • Setting the Stage

State and Local Laws Numerous state and local laws also affect EEO. A number of states and some cities have passed fair employment practice laws prohibiting discrimination on the basis of race, color, religion, sex, or national origin. Even prior to federal legislation, several states had antidiscrimination legisla- tion relating to age and gender. For instance, New York protected individuals between the ages of 18 and 65 prior to the passing of the ADEA, and California had no upper limit on protected age. San Francisco has voted to ban weight discrimination. The Board of Supervisors added body size to city laws that already bar discrimination based on race, color, religion, age, ancestry, sex, sexual orientation, disability, place of birth, or gender identity. The state of California has a law that requires sexual harassment prevention training. Recently, New York City passed a law designed to protect unemployed job seekers from discrimination by employers.10 When EEOC regulations conflict with state or local civil rights regulations, the legislation more favorable to women and minorities applies. Recently state laws have addressed drug and alcohol testing, EEO, human trafficking, immigration, time off, wages paid, and worker privacy.11

Who’s responsible for ensuring equal employment Opportunity? The main groups that take responsibility for establishing and supporting EEO include the govern- ment (EEOC and OFCCP) and employers.

Equal Employment Opportunity Commission Title VII of the Civil Rights Act, as amended, created the EEOC, which is charged with adminis- tering most of the aforementioned laws. Under Title VII, filing a discrimination charge initiates EEOC action. The EEOC continually receives complaints. According to the EEOC, employees filed 99,412 workplace discrimination charges in 2012. The most common claims focused on discrimination on the basis of race (33.7 percent), sex (30.5 percent), and age (23.0 percent).12 In 2012, the EEOC obtained approximately $365.4 million in monetary relief for thousands of discrimination victims as well as significant nonmonetary remedies from employers.13

Charges may be filed by one of the presidentially appointed EEOC commissioners, by any aggrieved person, or by anyone acting on behalf of an aggrieved person. Charges must be filed within 180 days of the alleged act; however, the time is extended to 300 days if a state or local agency is involved in the case.

Notice in Figure 3-2 that when a charge is filed, the EEOC first attempts a no-fault settlement. Essentially, the organization charged with the violation is invited to settle the case with no admis- sion of guilt. Most charges are settled at this stage. Failing settlement, the EEOC investigates the charges. Once the employer is notified that an investigation will take place, no records relating to the charge may be destroyed. During the investigative process, the employer is permitted to present a position statement. After the investigation has been completed, the district director of the EEOC will issue a probable cause or a no probable cause statement.

In the event of a probable cause statement, the next step involves attempted conciliation. In the event this effort fails, the case will be reviewed for litigation potential. Some of the factors that determine whether the EEOC will pursue litigation are (1) the number of people affected by the alleged practice; (2) the amount of money involved in the charge; (3) other charges against the employer; and (4) the type of charge. Recommendations for litigation are then passed on to the general counsel of the EEOC. If the recommendation is against litigation, a right-to-sue notice will be issued to the charging party.

Office of Federal Contract Compliance Programs The purpose of the OFCCP is to enforce the requirements of affirmative action and EEO required of those who do business with the federal government. The OFCCP is an agency within the U.S. DOL. According to the U.S. DOL, the OFCCP uses the following enforcement procedures:14

• Offers technical assistance to federal contractors and subcontractors to help them understand the regulatory requirements and review process.

• Conducts compliance evaluations and complaint investigations of federal contractors and subcontractors personnel policies and procedures.

ObjeCtive 3.3

Discuss who is responsible for ensuring equal employment opportunity.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 53

• Obtains conciliation agreements from contractors and subcontractors who are in violation of regulatory requirements. When a compliance review discloses problems, OFCCP attempts to work with the contractor, often entering into a conciliation agreement. A conciliation agreement may include back pay, job offers, seniority credit, promotions or other forms of relief for victims of discrimination. It may also involve new training programs, special recruitment efforts, or other affirmative action measures

• Monitors contractors and subcontractors progress in fulfilling the terms of their agreements through periodic compliance reports.

• Forms linkage agreements between contractors and DOL job training programs to help employers identify and recruit qualified workers.

• Recommends enforcement actions to the Solicitor of Labor. • The ultimate sanction for violations is debarment—the loss of a company’s federal contracts.

Other forms of relief to victims of discrimination may also be available, including back pay for lost wages.

Employers Much has occurred since the first piece of EEO legislation was enacted approximately 50 years ago, and the basic hiring standards to avoid are largely understood by those in the workforce. In a perfect world, discrimination, retaliation, and harassment would not exist. However, despite a company’s best efforts to treat employees fairly, suits are still brought and won because of mis- takes in adherence to these standards.15 Perhaps, it was only a temporary lapse where a manager knowingly decides to hire a less-qualified friend over a qualified member of a protected group. Or the manager may sincerely believe that he or she has the best intention of abiding by the law but still makes a mistake perhaps because of some complexity in the law.

To limit the prospect of an EEO lawsuit, an organization can do a few things. First, and foremost, it must have and enforce a strong EEO policy against discrimination. This policy must begin with top management and filter down to everyone in the organization. This pol- icy should clearly spell out what standards are to be avoided. It should also conspicuously

Steps in Handling a Discrimination Case

Charge Filed

Attempt at a No-Fault Settlement

Investigation by the EEOC

Issue a Probable Cause or a No Probable Cause Statement

Attempt at Conciliation

Recommendations for or Against Litigation

Recommendation Against Litigation — Right to Sue

Notice Issued to Charging Party

Recommendation for Litigation — EEOC

Initiates Action

Figure 3-2 EEoC Procedure once a Charge Is Filed

HR Web Wisdom

EEOC http://www.eeoc.gov

The home page for the Equal Employment Opportunity Commission.

54 Part 1 • Setting the Stage

describe the complaint procedure and the various avenues that can be followed if the person in charge is the cause of the complaint. Certainly, the policy should provide a strong anti- retaliation clause. Workers need to believe that a complaint will result in immediate and appropriate action.

Even with a policy such as the one described, there may still be breakdowns. When they do occur, it becomes an opportunity to train employers how to handle an employee-relations prob- lem better the next time. By taking the high road in the solution of a suit, it provides a means of reinforcing the seriousness of the nondiscrimination policy. 16

Defining and Operationalizing illegal Discrimination Unfortunately, we hear about illegal discrimination in the workplace all too often in the news, through friends or family who may have been victims, or personally. At minimum, every employee should possess an awareness of how the law defines illegal workplace discrimination. Even a basic understanding may help employers and employees to minimize the prevalence of illegal discriminatory acts through self-monitoring or reporting concerns of possible illegal dis- crimination to human resource management professionals.

Uniform Guidelines on Employee Selection Procedures Prior to 1978, employers were faced with complying with several different selection guidelines. In 1978, the EEOC, the Civil Service Commission, the Department of Justice, and the DOL adopted the Uniform Guidelines on Employee Selection Procedures. These guidelines cover several federal EEO statutes and executive orders, including Title VII of the Civil Rights Act, EO 11246, and the Equal Pay Act.

The Uniform Guidelines provide a single set of principles that were designed to assist employers, labor organizations, employment agencies, and licensing and certification boards in complying with federal prohibitions against employment practices that discriminate on the basis of race, color, religion, sex, and national origin. The Uniform Guidelines provide a framework for making legal employment decisions about hiring, promotion, demotion, referral, retention, licensing and certification, the proper use of tests, and other selection procedures. Under the Uniform Guidelines, recruiting procedures are not considered selection procedures and therefore are not covered.

Regarding selection procedures, the Uniform Guidelines state that a test is any measure, combination of measures, or procedures used as a basis for any employment decision. Selection procedures include the full range of assessment techniques from traditional paper-and-pencil tests, performance tests, testing programs or probationary periods, and physical, education, and work experience requirement through informal or casual interviews and unscored application forms.

Using this definition, virtually any instrument or procedure used in the selection decision is considered a test.

Concept of Disparate Treatment Unlawful employment discrimination, as established through various Supreme Court decisions, can be divided into two broad categories: disparate treatment and adverse impact. Disparate treatment means that an employer treats some employees less favorably than others because of race, religion, color, sex, national origin, or age. It is the most easily understood form of discrimination.

For example, males are treated differently from females; Caucasians are treated differently from blacks. The crux of disparate treatment is different treatment on the basis of some nonallow- able criterion. It may be thought of as direct discrimination. Common forms of disparate treatment include selection rules with a racial, sexual, or other premise; prejudicial action; unequal treatment on an individual basis; and different hiring standards for different groups. McDonald v. Santa Fe Trail Transportation Company offers an example of disparate treatment. Three of the company’s employees, two whites and one black, had allegedly misappropriated 60 gallons of antifreeze. Santa Fe took disciplinary action against the workers by terminating the two whites, but not the black employee. The discharged white workers filed suit against the company, charging that their

ObjeCtive 3.4

Define and operationalize the types of employment discrimination.

Uniform Guidelines Provide a single set of principles that were designed to assist employers, labor organizations, employment agencies, and licensing and certification boards in complying with federal prohibitions against employment practices that discriminate on the basis of race, color, religion, sex, and national origin.

disparate treatment Employer treats some people less favorably than others because of race, religion, color, sex, national origin, or age.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 55

termination violated both Title VII and the Civil Rights Act of 1866. The Supreme Court agreed with the plaintiffs that they had been the recipients of unequal treatment on the basis of their race. Central to disparate treatment is the matter of proof. The plaintiff must first be able to establish a prima facie case (that is, the appearance of possible illegal discrimination), and second, be able to establish that the employer was acting on the basis of a discriminatory motive.

Concept of Adverse Impact Before the issuance of the Uniform Guidelines, the only way to prove job-relatedness was to validate each test. The Uniform Guidelines do not require validation in all cases. Essentially, it is required only in instances in which the test or other selection device produces an adverse impact on a minority group. adverse impact, a concept established by the Uniform Guidelines, occurs if women and minorities are not hired at the rate of at least 80 percent of the best-achieving group.

Under the Uniform Guidelines, adverse impact has been described in terms of selection rates, the selection rate being the number of qualified applicants hired or promoted, divided by the total number of qualified applicants. This has also been called the four-fifths rule, which is actually a guideline subject to interpretation by the EEOC. The groups identified for analysis under the guidelines are (1) blacks, (2) American Indians (including Alaskan natives), (3) Asians, (4) Hispanics, (5) women, and (6) men.

The following formula is used to compute adverse impact for hiring:

Success rate for least@achieving group of applicants

Success rate for best@achieving group of applicants = Determination of adverse impact

The success rate for the least-achieving group (often women and minority applicants) is determined by dividing the number of members of a specific group employed in a period by the number of qualified applicants in a period. The success rate of best-achieving group applicants is determined by dividing the number of people in the best-achieving group employed by the number of the best-achieving group applicants in a period.

Using the formula, let us determine whether there has been adverse impact in the following case. During 2014, 400 people were hired for a particular job. Of the total, 300 were white and 100 were black. There were 1,500 qualified applicants for these jobs, of whom 1,000 were white and 500 were black. Blacks were determined to be the least-achieving group because 100/500 = 0.2. Whites were determined to be the best-achieving group because 300/1000 = 0.3. Using the adverse formula, you have:

100/500

300/1000 =

0.2

0.3 = 66.67,

Thus, adverse impact exists. Evidence of adverse impact involves more than the total number of minority workers

employed. Also considered is the total number of qualified applicants. For instance, assume that 300 blacks and 300 whites were hired. But there were 1,500 qualified black applicants and 1,000 qualified white applicants. Blacks were determined to be the least-achieving group because 300/1500 = 0.2. Whites were determined to be the best-achieving group because 300/1000 = 0.3. Putting these figures into the adverse impact formula, it can be concluded that adverse impact still exists.

300/1500

300/1000 =

0.2

0.3 = 66.67,

Therefore, it is clear that firms must monitor their recruitment efforts carefully. Obviously, firms should attempt to recruit qualified individuals because once in the applicant pool, they will be used in computing whether adverse impact is evident.

Assuming that adverse impact is shown, employers have two avenues available to them if they still desire to use a particular selection standard. First, the employer may validate a selection device by showing that it is indeed a predictor of success. For instance, the employer may be able to show a strong relationship between the selection device and job performance, and that if it

adverse impact Concept established by the Uniform Guidelines; it occurs if women and minorities are not hired at the rate of at least 80 percent of the best-achieving group.

56 Part 1 • Setting the Stage

did not use this procedure, the firm’s training costs would become prohibitive. If the device has proved to be a predictor of job performance, business necessity has been established.

The second avenue available to employers should adverse impact be shown is the BFOQ defense. The BFOQ defense means that only one group is capable of performing the job successfully. Courts have narrowly interpreted this defense because it almost always relates to sex discrimination. For instance, courts have rejected the concept that because most women cannot lift 100 pounds, all women should be eliminated from consideration for a job requiring heavy lifting.

The Uniform Guidelines adopted the bottom-line approach in assessing whether a firm’s employment practices are discriminatory. For example, if a number of separate procedures are used in making a selection decision, the enforcement agencies will focus on the end result of these procedures to determine whether adverse impact has occurred. Essentially, the EEOC is more concerned with what is occurring than how it occurs. It admits that discriminatory employment practices that cannot be validated may exist; however, the net effect, or the bottom line, of the selection procedures is the focus of the EEOC attention.

affirmative action An executive order (eO) is a directive issued by the president and has the force and effect of a law enacted by Congress because it applies to federal agencies and federal contractors. An example of a contractor is a company that provides carpentry work in federal government buildings. In 1965, President Lyndon B. Johnson established EO 11246 has two provisions. First, it prohibits federal contractors and subcontractors from engaging in illegal employment discrimination on the basis of race, color, religion, sex, or national origin. This requirement applies to contractors and subcontractors whose contracts with the federal government exceed $10,000. Second, contractors and contractors are required to take affirmative action to hire individuals from underrepresented groups. Contractors and subcontractors must prepare writ- ten affirmative action when their contracts exceed $50,000. The OFCCP is responsible for enforcing EO 11246. In 1968, EO 11375 changed the word creed to religion and added sex discrimination to the other prohibited items.

President Richard M. Nixon issued EO 11478 in 1969. It covers the federal civilian workforce. This EO prohibits discrimination in employment on the basis of race, color, religion, sex, national origin, handicap, and age. And it requires all federal government departments and agencies to take affirmative steps to promote employment opportunities for those classes it covered. In 1998, President Bill Clinton amended EO 11478 with EO 13087, which adds sexual orientation to the list of protected classes. These EOs are enforced by the DOL through the OFCCP. Recently the VEVRAA and the Rehabilitation Act have received additional attention from the OFCCP.17

Affirmative action, stipulated by EO 11246, requires covered employers to take positive steps to ensure that employment of applicants and treatment of employees during employment are without regard to race, creed, color, or national origin.

Covered human resource practices relate to employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoffs or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeships. Employers are required to post notices explaining these requirements in conspicuous places in the workplace. In the event of contractor noncompliance, contracts can be canceled, terminated, or suspended in whole or in part, and the contractor may be declared ineligible for future government contracts.

An affirmative action program (aap) is an approach developed by organizations with gov- ernment contracts to demonstrate that workers are employed in proportion to their representation in the firm’s relevant labor market.

An AAP may be voluntarily implemented by an organization. In such an event, goals are established and actions taken to hire and move minorities and women up in the organization. In other situations, an AAP may be mandated by the OFCCP. The degree of control the OFCCP will impose depends on the size of the contract, with contracts of $10,000 or less not covered. The first level of control involves contracts that exceed $10,000 but are less than $50,000. The second level of control occurs if the contractor (1) has 50 or more employees; (2) has a contract

ObjeCtive 3.5

Define and discuss affirmative action.

executive order (Eo) Directive issued by the president that has the force and effect of law enacted by Congress as it applies to federal agencies and federal contractors.

affirmative action program (AAP) Approach developed by organizations with government contracts to demonstrate that workers are employed in proportion to their representation in the firm’s relevant labor market.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 57

of $50,000 or more; (3) has contracts that, in any 12-month period, total $50,000 or more or reasonably may be expected to total $50,000 or more; or (4) is a financial institution that serves as a depository for government funds in any amount, acts as an issuing or redeeming agent for U.S. savings bonds and savings notes in any amount, or subscribes to federal deposit or share insurance. Contractors meeting these criteria must develop a written AAP for each of their estab- lishments and file an annual EEO-1 report. Note that the threshold is 50 employees here, but it is 100 with regard to those covered by the Civil Rights Act of 1964.

The third level of control on contractors is in effect when contracts exceed $1 million. All previously stated requirements must be met, and in addition, the OFCCP is authorized to conduct pre-award compliance reviews. In determining whether to conduct a pre-award review, the OFCCP may consider, for example, the items presented in Table 3-1. Alcoa Mill Products Inc. paid $484,656.19 in back wages to 37 Hispanics and blacks as well as $35,516.88 to two women who were rejected for job positions at the company’s plant in Lancaster, Pennsylvania. The OFCCP determined that the company had violated EO 11246 by failing to meet its obligations as a federal contractor. Alcoa holds contracts with the U.S. Army in excess of $50 million.

Recently every 25th supply and service federal contractor selected for a compliance evaluation by the OFCCP is subjected to a full compliance review that includes on-site visits by compliance officers, even though there are no indicators of potential discrimination or other violations. The “active case enforcement” directive also provides that the OFCCP will perform a full desk audit in every compliance evaluation to comprehensively analyze a contractor’s written AAPs.18 Before this decision, only 25 compliance reviews were made per year.19

If an investigation indicates a violation, the OFCCP first tries to secure compliance through persuasion. If persuasion fails to resolve the issue, the OFCCP serves a notice to show cause or a notice of violation. A show cause notice contains a list of the violations, a statement of how the OFCCP proposes that corrections be made, a request for a written response to the findings, and a  suggested date for a conciliation conference. The firm usually has 30 days to respond. Successful conciliation results in a written contract between the OFCCP and the contractor. In a conciliation agreement, the contractor agrees to take specific steps to remedy noncompliance with an EO. Firms that do not correct violations can be passed over in the awarding of future con- tracts. The procedures for developing AAPs were published in the Federal Register of December 4, 1974. These regulations are referred to as Revised Order No. 4. Revised Order No. 4 is quite specific with regard to dissemination of a firm’s EEO policy, both internally and externally. An executive should be appointed to manage the firm’s EEO program. This person should be given the necessary support by top management to accomplish the assignment. Revised Order No. 4 specifies the minimum level of responsibility associated with the task of EEO manager. The OFCCP guide for compliance officers, outlining what to cover in a compliance review, is known as Order No. 14.

The OFCCP is specific about what should be included in an AAP. A policy statement has to be developed that reflects the CEO’s attitude regarding EEO, assigns overall responsibility for preparing and implementing the AAP, and provides for reporting and monitoring procedures. The policy should state that the firm intends to recruit, hire, train, and promote persons in all job

Table 3-1

Factors That the oFCCP May Consider in Conducting a Pre-award Review

1. The past EEO performance of the contractor, including its current EEO profile and indications of underutilization.

2. The volume and nature of complaints filed by employees or applicants against the contractor.

3. Whether the contractor is in a growth industry.

4. The level of employment or promotional opportunities resulting from the expansion of, or turnover in, the contractor’s workforce.

5. The employment opportunities likely to result from the contract in issue.

6. Whether resources are available to conduct the review.

58 Part 1 • Setting the Stage

titles without regard to race, color, religion, gender, or national origin, except where gender is a BFOQ. Recently protected military veterans and individuals with disabilities have been included in affirmative action. The policy should guarantee that all human resource actions involving areas such as compensation, benefits, transfers, layoffs, return from layoffs, company-sponsored training, education, tuition assistance, and social and recreational programs will be administered without regard to race, color, religion, gender, or national origin.

An acceptable AAP must include an analysis of deficiencies in the utilization of minority groups and women. The first step in conducting a utilization analysis is to make a workforce analysis. The second step involves an analysis of all major job groups. An explanation of the situation is required if members of protected groups are currently being underutilized. A job group is defined as one or more jobs having similar content, wage rates, and opportunities.

Underutilization is defined as having fewer minorities or women in a particular job group than would reasonably be expected by their availability. The utilization analysis is important because the calculations determine whether underutilization exists. For example, if the utilization analysis shows that the availability of blacks for a certain job group is 30 percent, the organi- zation should have at least 30 percent black employment in that group. If actual employment is less than 30 percent, underutilization exists, and the firm should set a goal of 30 percent black employment for that job group. The goal of affirmative action is for a contractor’s work- force to generally reflect the gender, racial, and ethnic profile of the labor pools from which the contractor recruits and selects.

The primary focus of any AAP is on goals and timetables, with the issue being how many and by when. Goals and timetables developed by the firm should cover its entire AAP, including correction of deficiencies. These goals and timetables should be attainable; that is, they should be based on results that the firm, making good-faith efforts, could reasonably expect to achieve. Goals should be significant and measurable, as well as attainable. Two types of goals must be established regarding underutilization: annual and ultimate. The annual goal is to move toward elimination of underutilization, whereas the ultimate goal is to correct all underutilization. Goals should be specific in terms of planned results, with timetables for completion. However, goals should not establish inflexible quotas that must be met. Rather, they should be targets that are reasonably attainable. Some techniques that can be used to improve recruitment and increase the flow of minority and women applicants are shown in Table 3-2.

Table 3-2

Techniques to Improve Recruitment of Minorities and Women

• Identify referral organizations for minorities and women. • Hold formal briefing sessions with representatives of referral organizations. • Encourage minority and women employees to refer applicants to the firm. • Include minorities and women on the personnel relations staff. • Permit minorities and women to participate in career days, youth motivation programs, and related

activities in their community. • Actively participate in job fairs and give company representatives the authority to make on-the-spot

commitments. • Actively recruit at schools having predominant minority or female enrollments. • Use special efforts to reach minorities and women during school recruitment drives. • Undertake special employment programs whenever possible for women and minorities. These might

include technical and nontechnical co-op programs, after-school or work-study jobs, summer jobs for underprivileged individuals, summer work-study programs, and motivation, training, and employment programs for the hardcore unemployed.

• Pictorially present minorities and women in recruiting brochures. • Include the minority news media and women’s interest media when expending help wanted

advertising.

Source: Federal Register, 45, no. 251 (Tuesday December 30, 2008): 86243.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 59

Uniform Guidelines on preventing specific illegal employment Discrimination Since the Uniform Guidelines were published in 1978, they have been modified several times. Some of these changes reflect Supreme Court decisions; others clarify implementation procedures. The five major changes discussed are the Guidelines on Sexual Harassment, Guidelines on Discrimination Because of National Origin, Guidelines on Discrimination Because of Religion, Guidelines on Caregiver (Family Responsibility) Discrimination, and Discrimination Because of Disability.

Guidelines on Sexual Harassment As previously mentioned, Title VII of the Civil Rights Act generally prohibits discrimination in employment on the basis of gender. The EEOC has also issued guidelines that state that employers have a duty to maintain a workplace that is free from sexual harassment. The OFCCP has issued similar guidelines. Managers in both for-profit and not-for-profit organizations must be particularly alert to the issue of sexual harassment. The EEOC issued the guidelines because of the belief that sexual harassment was a widespread problem. Table 3-3 contains the EEOC’s definition of sexual harassment. As you see, there are two distinct types of sexual harassment: (1)  where a hostile work environment is created, and (2) when there is a quid pro quo, for example, an offer of promotion or pay raise in exchange for sex.

According to these guidelines, employers are totally liable for the acts of their supervi- sors, regardless of whether the employer is aware of the sexual harassment act. In Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth, the Supreme Court held that an employer is strictly liable, meaning that it has absolutely no defense, when sexual harassment by a supervisor involves a tangible employment action. Courts expect employers to carefully train supervisors so they do not engage in any type of behavior that could be construed as sexual harassment. In addition, all employees should be trained so as to understand their rights and responsibilities.20

As with the Civil Rights Act of 1964, retaliation is forbidden against an employee who has participated in an investigation, proceeding, or hearing. Recently Blockbuster, Inc. entered into a consent judgment requiring it to pay more than $2 million to settle an employment discrimination lawsuit filed by EEOC. The EEOC had charged Blockbuster with subject- ing female temporary employees to sexual harassment, retaliating against them for resisting sexual advances and complaining, and subjecting Hispanic temporary employees to national origin and race harassment and other discrimination. “This case should act as a warning to all employers who use staffing agency personnel,” said EEOC Philadelphia Regional Attorney Debra M. Lawrence, whose jurisdiction includes Maryland. “Employers who are customers of staffing agencies have a responsibility to protect their temporary workers from unlawful discrimination. Too frequently, such employers fail to create systems to prevent and detect abuse of temporary workers and fail to respond forcefully to it. Those employers do so at their peril.”21

ObjeCtive 3.6

Explain the Uniform Guidelines related to illegal employment discrimination.

Table 3-3

EEoC Definition of Sexual Harassment

Unwelcome sexual advances, requests for sexual favors, and verbal or physical conduct of a sexual nature that occur under any of the following situations:

1. When submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment.

2. When submission to or rejection of such contact by an individual is used as the basis for employment decisions affecting such individual.

3. When such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment.

60 Part 1 • Setting the Stage

Where coworkers are concerned, the employer is responsible for such acts if the employer knew, or should have known, about them. The employer is not responsible when it can show that it took immediate and appropriate corrective action on learning of the problem. Another impor- tant aspect of these guidelines is that employers may be liable for acts committed by nonemploy- ees in the workplace if the employer knew, or should have known, of the conduct and failed to take appropriate action.

Firms are responsible for developing programs and policies to prevent sexual harassment in the workplace. Managers must be trained to know what to do when there is a complaint. They must investigate all formal and informal complaints alleging sexual harassment.22 Failure to do so constitutes a violation of Title VII, as interpreted by the EEOC. To prevail in court, companies must have clear procedures for handling sexual harassment complaints. If the sexual harass- ment complaint appears legitimate, the company must take immediate and appropriate action.23 However, this does not mean that everyone who is guilty of sexual harassment must be fired. A single incident does not mean that sexual harassment exists unless the employer ignores the incident and lets the situation worsen.24

The first sexual harassment case to reach the U.S. Supreme Court was the case of Meritor Savings Bank v. Vinson in 1986. In the Vinson decision, the Supreme Court recognized for the first time that Title VII could be used for offensive-environment claims. According to the EEOC, specific actions that could create a hostile workplace include a pattern of threatening, intimidat- ing, or hostile acts and remarks, negative sexual stereotyping, or the display of written or graphic materials considered degrading. The 1993 Supreme Court decision in Harris v. Forklift Systems, Inc. expanded the hostile-workplace concept and made it easier to win sexual harassment claims. In a unanimous decision, the Supreme Court held that “to be accountable as abusive work envi- ronment harassment, conduct need not seriously affect … the psychological well-being or lead the plaintiff to suffer injury.” No longer does severe psychological injury have to be proved. Under this ruling, the plaintiff only needs to show that his or her employer allowed a hostile-to- abusive work environment to exist.

Duane Reade, the New York/New Jersey drug store chain, agreed to settle an EEOC law- suit for $240,000 for allowing the work environment at one of its New York stores to become hostile. The store manager frequently made vulgar remarks about women’s anatomy, sexu- ally propositioned female employees, made lewd comments about them during pregnancies, assigned pregnant women the least desirable store tasks, and sometimes grabbed female employees’ buttocks while they worked.25 Unchecked sexual harassment can be financially crippling. In a recent case, a jury awarded the plaintiff $95 million, including $80 million in punitive damages.26

Males are not precluded from sexual harassment. From 1990 to 2009, the percentage of sexual harassment claims filed by male employees increased from 11.6 to 136.3 percent.27 Recently, the Ninth U.S. Circuit Court of Appeals held that a female coworker’s “relentless” pursuit of a male employee could form the basis of a sexually hostile environment claim, even without any physical conduct of a sexual nature. The Ninth Circuit pointed out that under Title VII of the Civil Rights Act of 1964, “[b]oth sexes are protected from discrimination.”28

For a long time, an unresolved question in employment law has been whether same-sex harassment (for example, males harassing males) is unlawful under Title VII of the Civil Rights Act of 1964. The Supreme Court, in the case of Oncale v. Sundowner Offshore Services, held that same-sex sexual harassment may be unlawful under Title VII. The Supreme Court decided that a plaintiff could make a claim for sexual harassment as long as the harassing conduct was because of sex. The Court emphasized that Title VII does not prohibit all verbal or physical harassment in the workplace, only that which constitutes discrimination because of sex.

Guidelines on Discrimination Because of National Origin Both EEOC and the courts have interpreted national origin protection under Title VII as extend- ing far beyond discrimination against individuals who came from, or whose forebears came from, a particular country. National origin protection also covers (1) marriage or association with a person of a specific national origin; (2) membership in, or association with, an organiza- tion identified with, or seeking to promote the interests of national groups; (3) attendance at, or participation in, schools, churches, temples, or mosques generally used by persons of a national

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origin group; and (4) use of an individual’s or spouse’s name that is associated with a national origin group. As Table 3-4 shows, the EEOC has identified certain selection procedures that may be discriminatory.

Harassment on the basis of national origin is a violation of Title VII. Employers have a duty to maintain a working environment free from such harassment. Ethnic slurs and other verbal or physical conduct relating to an individual’s national origin constitute harassment when this conduct (1) has the purpose or effect of creating an intimidating, hostile, or offen- sive working environment; (2) has the purpose or effect of unreasonably interfering with an individual’s work performance; or (3) otherwise adversely affects an individual’s employment opportunity.

Of interest with regard to national origin is the English-only rule. Courts have generally ruled in the employer’s favor if the rule would promote safety and product quality and stop harassment. For example, suppose a company has a rule that only English must be spoken except during breaks. That rule must be justified by a compelling business necessity. In Garcia v. Spun Steak, the Ninth Circuit Court of Appeals (the Supreme Court refused to review) concluded that the rule did not necessarily violate Title VII. Spun Steak’s management implemented the policy after some workers complained they were being harassed and insulted in a language they could not understand. The rule allowed workers to speak Spanish during breaks and lunch periods. A recent ruling supported the job-related aspect of the English-only rule. In Montes v. Vail Clinic, Inc., the Tenth Circuit Court agreed with the English-only rule prohibiting housekeepers from speaking Spanish while working in the operating room. However, English-only policies that are not job related have been challenged and eliminated. The EEOC settled a Title VII lawsuit against a company that enforced an English-only rule solely against Hispanics. “What was strange was that the rule was only targeted at Hispanics. Tagalog, a Spanish language spoken in the Philippines, was openly spoken,” said Anna Park, the EEOC’s regional attorney in Los Angeles. “This was very troublesome.”29

Guidelines on Discrimination Because of Religion The number of religion-related discrimination complaints filed with the EEOC continues to increase. According to the Supreme Court’s decision in TWA v. Hardison, employers have an obligation to accommodate sincerely held religious practices as long as the requested accommodation does not create more than a minimum cost to the employer.30 Courts generally do not require employers to hire additional employees just to cover for another employee who needs a religious accommodation. Consideration is given to identifiable costs in relation to the size and operating costs of the employer and the number of individuals who actually need the accommodation. These guidelines recognize that regular payment of premium wages con- stitutes undue hardship, whereas these payments on an infrequent or temporary basis do not. Undue hardship would also exist if an accommodation required a firm to vary from its bona fide seniority system.

The most common claims filed under the religious accommodation provisions involve employees objecting to either Sabbath employment or membership in or financial support of labor unions. These guidelines identify several means of accommodating religious practices that

Table 3-4

Selection Procedures That May Be Discriminatory with Regard to National origin

1. Fluency in English requirements: One questionable practice involves denying employment opportuni- ties because of an individual’s foreign accent or inability to communicate well in English. When this practice is continually followed, the EEOC will presume that such a rule violates Title VII and will study it closely. However, a firm may require that employees speak only in English at certain times if business necessity can be shown.

2. Training or education requirements: Denying employment opportunities to an individual because of his or her foreign training or education, or practices that require an individual to be foreign trained or educated may be discriminatory.

62 Part 1 • Setting the Stage

prohibit working on certain days. Some of the methods suggested included voluntary substitutes, flexible scheduling, lateral transfer, and change of job assignments. Basically, employers that refuse to accommodate an employee’s religious practice may need to provide evidence that doing so would constitute an undue burden.31 However, if making an accommodation places a true hard- ship on the company, the accommodation does not have to be given.32 Some collective bargain- ing agreements include a provision that each employee must join the union or pay the union a sum equivalent to dues. When an employee’s religious beliefs prevent compliance, the union should accommodate the employee by permitting that person to make an equivalent donation to a charitable organization.

Guidelines on Caregiver (Family Responsibility) Discrimination Caregiver (family responsibility) discrimination is discrimination against employees based on their obligations to care for family members. The EEOC has issued a technical assistance document titled “Employer Best Practices for Workers with Caregiving Responsibilities” on how employers of workers with caregiving responsibilities can avoid violations of Title VII of the 1964 Civil Rights Act and other fair employment laws and reduce the likelihood of discrimi- nation complaints. This form of discrimination makes an assumption based on what a person assumes to be true about a group, including people with family responsibilities.

According to the EEOC, the guidance is not binding on employers but rather offers best practices that are proactive measures that go beyond federal nondiscrimination requirements. Federal law does not prohibit discrimination on the basis of “caregiver status,” but rather it is concerned when workers with caregiving responsibilities are treated differently based on a characteristic that is protected by laws, such as gender, race, or association with an individual with a disability.

Caregiver discrimination has become the new battleground in employment claims.33 Examples of possible caregiver discrimination violations include treating male caregivers more favorably than female caregivers; reassigning a woman to less desirable projects based on the assumption that, as a new mother, she will be less committed to her job; or lowering subjective evaluations of a female employee’s work performance after she becomes the primary caregiver of her grandchil- dren, despite the absence of an actual decline in work performance.34

In recent years, employees have begun filing more and more caregiver discrimination lawsuits. Most cases share a common element—the employee alleges that the caregiving responsibilities cause the alleged discriminatory action by the employer. In EEO-related suits, plaintiffs win in only about 20 percent of cases alleging race, sex, or other more familiar types of discrimination. However, with caregiver discrimination, the win rate is twice that.35 The challenge for employers is to develop the right mix of flexibility and fairness in work scheduling, leave policies, dependent-care assistance, and benefits. This will promote positive employee rela- tions, recruit and retain a diverse and well-qualified workforce, address and resolve job-related issues, and defend against claims of unfair or unlawful conduct.

Discrimination Because of Disability The ADA prohibits discrimination in employment as a result of one’s disability and requires that employers provide an employee or job applicant with a reasonable accommodation unless doing so would cause significant difficulty or expense for the employer. In 2011, UPS Supply Chain Solutions agreed to pay $95,000 to settle a disability discrimination lawsuit filed by the EEOC. The EEOC had charged that UPS unlawfully denied a reasonable accommodation to a deaf employee.

The EEOC guidelines on pre-employment inquiries and tests regarding disabilities prohibit inquiries and medical examinations intended to gain information about applicants’ disabilities before a conditional job offer. In the Supreme Court case of Leonel v. American Airlines, the Court ruled that the airline violated the ADA’s required sequence for prehire medical inquiries/examinations by making medical inquiries and requiring individuals to take medical examinations before completing and making its hiring decisions.

The guiding principle is to ask only about potential employees’ ability to do the job, and not about their disabilities. Lawful inquiries include those regarding performance of specific func- tions or possession of training appropriate to the job, whereas illegal inquiries include those that ask about previous medical conditions or extent of prior drug use. The ADA does not protect

caregiver (family responsibility) discrimination Discrimination against employees based on their obligations to care for family members.

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people currently using illegal drugs. It does protect those in rehabilitation programs who are not currently using illegal drugs, those who have been rehabilitated, and those erroneously labeled as drug users. Coverage under the ADA continues to evolve as evidenced with the passing of the American with Disabilities Act Amendments Act of 2008.

Global sexual harassment Sexual harassment was discussed in this chapter only as it pertained to the United States, but it is also a global issue. When individuals from two different cultures interact, there is a potential for sexual harassment problems. Some behaviors that violate U.S. cultural norms may not be perceived as a problem in another culture. In many Mediterranean and Latin countries, physi- cal contact and sensuality are a common part of socializing. The famous Cirque du Soleil, headquartered in Montreal, Canada, has had to adapt to the U.S. definition of sexual harass- ment when performing in the United States. While kissing good friends and coworkers on both cheeks is common in Montreal, such behavior could be considered a form of sexual harass- ment in the United States. Also, there are the seminude photos of Cirque performers hanging on the walls of the company’s Montreal headquarters.36 These would likely never be seen in the United States.

The level of enforcement against workplace sexual harassment varies considerably from country to country. Although 117 countries outlaw sexual harassment in the workplace, 311 million working-age women continue to live and work in countries without this legal protection.37 In a recent study, 26 percent of the workers surveyed in India said they had been sexually harassed, whereas only 1 percent of Sweden’s employees said that they had been sexu- ally harassed. Chinese workers had the second-highest rate of sexual harassment victimization (18 percent), followed by Saudi Arabia (16 percent).38 Sexual harassment remains a significant problem in Pakistan, and women must constantly be alert to protect themselves from problem situations. Lara Arif, 32, who sells fabric for women’s dresses from her home in Karachi, avoids taxis when she visits clients. Instead, she favors crowded buses or rickshaws, which have no doors, making escape easier. “You have to be very reserved and remain alert all the time,” Arif says.39

Australia, Canada, the Netherlands, Sweden, United States, and the United Kingdom have laws specifying prohibited conduct and allowing employees to seek individual remedies. Italy, the Philippines, Taiwan, and Venezuela define sexual harassment as a criminal offense, and penalties and remedies are provided in special statutory penal codes. In Germany, Spain, and Thailand, sexual discrimination laws allow employees to terminate their employment relationships because of discrimination or harassment. Employers are required to pay employees a substantial sum if the cause of their termination is the result of discrimination or harassment.40

France considers quid pro quo as the only form of sexual harassment claims. The country does not recognize claims of a sexually hostile work environment. However, France considers the request for sexual favors for a job or promotion to be a criminal matter with the possibility of prison.

ObjeCtive 3.7

Describe sexual harassment in the global environment.

You were recently hired as information technol- ogy manager, and one of your first tasks was to prescreen candidates for an IT position with a subsidiary. After interviewing 20 candidates, you recommend to upper management a minority person as the most qualified, and he should be invited for a second interview. A day later, you are taken aside by a friend who suggested that you should not

waste management’s time by sending certain types for an interview. The intent of the message was clear: if you want to be accepted as a team player with this company, you had better get with the program. 1. What would you do? 2. What factor(s) in this ethical dilemma might influence a person

to make a less-than-ethical decision?

e T h i c a l D i l e m m a

What Was the Real Message?

64 Part 1 • Setting the Stage

In Thailand, quid pro quo is not recognized as sexual harassment because getting a work benefit such as promotion for having sexual relations is considered mutually beneficial. Sexual harassment is mainly defined as some type of sexual assault of a serious nature under criminal law.41

In Burma women do not really have an outlet to complain about sexual harassment, and only recently emerged from a 63-year regime that did not allow women some basic freedoms such as freedom of speech. France considers quid pro quo as the only form of sexual harass- ment claims. The country does not recognize claims of a sexually hostile work environment. However, France considers the request for sexual favors for a job or promotion to be a criminal matter with the possibility of prison. In Thailand, quid pro quo is not recognized as sexual harassment because getting a work benefit such as promotion for having sexual relations is considered mutually beneficial. Sexual harassment is mainly defined as some type of sexual assault of a serious nature under criminal law.

Diversity Twenty-five years ago, diversity was primarily concerned with race and gender.42 Today, the definition is quite different. As we defined in the chapter introduction, diversity refers to any actual or perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, gender identity, geographic origin, lifestyle, tenure with the organization or position, and any other perceived difference. Further, as companies have become more global, the work group itself has become more diverse.43 The challenge for managers is to recognize that people with characteristics that are common but are different from those in the mainstream, often think, act, learn, and communicate differently. Diversity is more than equal employment and affirmative action; the actual definition is constantly changing and expanding.

Diversity Management Diversity management is ensuring that factors are in place to provide for and encourage the continued development of a diverse workforce by combining these actual and perceived differences among workers to achieve maximum productivity. Because every person, culture, and business situation is unique, there are no simple rules for managing diversity; but diversity experts say that employers need to develop patience, open-mindedness, acceptance, and cultural awareness. Diversity management focuses on the principle that all workers regardless of any factor are entitled to the same privileges and opportunities.44 According to R. Roosevelt Thomas Jr., former president of the American Institute for Managing Diversity, “diversity and diversity management are about managing and engaging people who are different and similar, all for the benefit of the organization and its goals.”45 In his book, The Future and the Work Ahead of Us, Harris Sussman writes, “Diversity is about our relatedness, our connectedness, our interactions, where the lines cross.”46

If organizations want to remain competitive in the marketplace, diversity has to be a part of the strategic goal. New York–based accounting giant KPMG employs more than 23,000 people in the United States. It has a complex diversity program that includes a diversity advisory board, diversity networks, diversity recruiting, accountability mechanisms, scorecards, mandatory train- ing, and a diversity officer. Kathy Hannan, national managing partner for diversity and corporate social responsibility with KPMG, reports directly to the CEO.47 Programs that highlight a firm’s diversity management program can be used to help attract desirable recruits.48 The following Watch It video captures workers’ concerns about the minimum wage level and the collective response of restaurant owners to their concerns. In a diverse workplace, where employees come from a variety of backgrounds and ethnicities, there is always the possibility of harassment between employees. The value of diversity sensitivity training is discussed in its capacity to help prevent incidence of employee harassment.

ObjeCtive 3.8

Describe the concept of diversity.

ObjeCtive 3.9

Discuss diversity management.

diversity management Ensuring that factors are in place to provide for and encourage the continued development of a diverse workforce by melding actual and perceived differences among workers to achieve maximum productivity.

Watch It 1 If your instructor has assigned this, go to MyManagementLab to watch a video titled UPS: Equal Opportunity Employment and to respond to questions.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 65

You will realize as you read the remainder of this chapter that diversity management and EEO are different. EEO focuses on laws, court decisions, and EOs. Diversity manage- ment is about pursuing an inclusive corporate culture in which newcomers feel welcome, and everyone sees the value of his or her job. It involves creating a supportive culture where all employees can be effective. In creating this culture, top management must strongly support workplace diversity as a company goal and include diversity initiatives in their companies’ business strategies. It has grown out of the need for organizations to recognize the changing workforce and other social pressures that often result. Achieving diversity is more than being politically correct; it is about fostering a culture that values individuals and their wide array of needs and contributions.

elements of the Diverse Workforce Elements that combine to make up the diverse workforce will be discussed next.

Single Parents and Working Mothers The number of single-parent households in the United States is growing. Although the divorce rate peaked in the early 1980s, the percentage of marriages ending in divorce remains around 50 percent. Often, children are involved. Of course, there are always widows and widowers who have children, and there are some men and women who choose to raise children outside of wedlock.

Managers need to be sensitive to the needs of working parents. Many women who formerly remained at home to care for children and the household now need and want to work outside the home. In fact, according to the U.S. Bureau of Labor Statistics data, just more than 70 percent of U.S. women with school-age children work.49 If this valuable segment of the workforce is to be effectively used, organizations must fully recognize the importance of addressing work– family issues. Businesses are seeing that providing child-care services and workplace flexibility may influence workers’ choice of employers. Companies that were chosen in Working Mother magazine’s 100 best companies to work for placed greater emphasis on work–life balance, telecommuting, and flextime. The number of single-parent men has also increased, thus making the same work friendly issues important. According to the Pew Research Center, in 2011 single fathers headed 8 percent of households with minor children, up from 1 percent in 1960.50

Women in Business Numerous factors have contributed to the growth and development of the U.S. labor force. However, nothing has been more prominent than the rise in the number of women in the labor force. More and more women are entering the labor force in high-paying, professional jobs and women dominate the health-care sector, which is one of the fastest-growing categories. In 2010, for the first time ever, women made up the majority of the U.S. workforce. Women-owned busi- nesses now account for nearly one-third of all enterprises in the market today. The American Express Open State of Women-Owned Businesses Report shows the number of women-owned firms from 1997 to 2011 increased by 50 percent.51

Professional women are entering the workforce at the same rates as men. However, many opt out of the corporate life. Perhaps this is one of the reasons that women hold only 23 of the 500 CEO positions in Fortune’s 2013 list of the largest U.S. companies.52 But this does not mean that they are opting out of business careers. Instead, they are making their own career paths that allow them to combine work and life on their own terms. As a result, organizations

ObjeCtive 3.10

Explain the various elements of a diverse workforce.

Try It 1 If your instructor has assigned this, go to MyManagementLab to complete the HR and Diversity simulation and test your application of these concepts when faced with real-world decisions.

66 Part 1 • Setting the Stage

are losing talented employees in whom they have made substantial investments. Numerous companies are working diligently keep professional women in the workforce although more work needs to be done.53

Women who chose to pursue advancement within corporations find it difficult to advance to the highest executive level positions. According to a key finding in Calvert Investments’ “Examining the Cracks in the Ceiling: A Survey of Corporate Diversity Practices of the S&P 100,” women were underrepresented on corporate boards and in C-level positions. Of the com- panies surveyed, less than 10 percent of women were found to be highly paid officials, and less than 20 percent were listed as board members.54

This phenomenon is often referred to as the glass ceiling. The glass ceiling is the invisible barrier in organizations that impedes women and minorities from career advancement. This act established a Glass Ceiling Commission to study the manner in which businesses fill management and decision-making positions, the developmental and skill-enhancing practices used to foster the necessary qualifications for advancement to such positions, and the com- pensation programs and reward structures currently used in the workplace. It was also to study the limited progress made by minorities and women. As you will learn in the following Watch It video, the challenges women face are particularly noteworthy in male-dominated professions.

glass ceiling Invisible barrier in organizations that impedes women and minorities from career advancement.

Mothers Returning to the Workforce (on Ramping) Today, many recruiters are focusing on educated women who have taken career breaks as a significant source of potential talent (on ramping).55 To get them to return, companies are going beyond federal law and giving mothers a year or more for maternity leave. Other businesses are specifically trying to recruit them to return to the labor force.

Although some companies are recruiting these women, other employers have programs that help their employees leave and later return. IBM has a program that allows employees to take up to three years off. Typically, working mothers who use the program take a year or more off, and then they use the remainder of their leave to re-enter work on a part-time basis. After the three years are up, they have the option of returning either full- or part-time. IBM surveyed employees who had taken the leave and found that 59 percent would have left the company if the program had not been available. “We didn’t want a situation where women had to opt out,” says Maria Ferris, manager of work–life and women’s initiatives at IBM. “We’ve invested in them, trained them. We want to retain them.”56

A concept called returnships is being used to let organizations try-out professionals who are resuming their careers. It provides a vehicle for relaunching a career after a break (most often for full-time parenting). Essentially it is an internship for experienced workers who have been out of work for a while whose résumés might scare recruiters away.57

Dual-Career Families The increasing number of dual-career families—in which both husband and wife have jobs and family responsibilities—presents both challenges and opportunities for organizations. The majority of children growing up today have both parents working outside the home. Households consisting of male breadwinner married to a housewife were a majority in the United States in the 1950s, but in the twenty-first century the proportion of U.S. households with only a male wage earner is less than 20 percent.58

Today, employees have turned down relocations because of spouses’ jobs and concerns about their children. Of the top three reasons employees turn down assignments, family or spouse’s career is cited almost twice as often as concern with the employee’s career or com- pensation.59 As a result, firms are developing polices to assist the spouse of an employee who

dual-career family A situation in which both husband and wife have jobs and family responsibilities.

Watch It 2 If your instructor has assigned this, go to MyManagementLab to watch a video titled Woman on Track to Become First NFL Rep and to respond to questions.

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is transferred. Some are offering assistance in finding a position for the spouse of a trans- ferred employee. However, companies may need to learn more about how to handle dual- career couples in a global environment. If companies make the willingness to locate globally a requirement for promotion, many in this group will reject the offer, thereby reducing the size of the labor pool.

Ethnicity and Race According to the U.S. Bureau of Labor Statistics, the percentage of the U.S. labor force made up of whites will decline while growth is expected for other racial groups.60 These include Hispanics, blacks, and Asians. Unfortunately, at times, these individuals may be subject to stereotyping. They may encounter misunderstandings and expectations based on ethnic or cul- tural differences. Members of ethnic or racial groups are socialized within their particular culture. People’s attitudes are influenced by the ancestral and cultural experiences of their childhood. Many are socialized as members of two cultural groups—the dominant culture and their racial or ethnic culture. Ella Bell refers to this dual membership as biculturalism. In her study of black women, Bell identifies the stress of coping with membership in two cultures simultaneously as bicultural stress. She indicates that role conflict (competing roles from two cultures) and role overload (too many expectations to comfortably fulfill) are common char- acteristics of bicultural stress. Although these issues can be applied to other minority groups, they are particularly intense for women of color because this group experiences dynamics affecting both minorities and women.61

Socialization in one’s culture of origin can lead to misunderstandings in the workplace. This is particularly true when the manager relies solely on the cultural norms of the majority group. According to norms within U.S. culture it is acceptable, even considered positive, to publicly praise an individual for a job well done. However, in cultures that place primary value on group harmony and collective achievement, this method of rewarding an employee may cause emotional discomfort. Some employees feel that, if praised publicly, they will lose face within their group.

HR Web Wisdom

Bureau of Labor Statistics http://www.bls.gov/

Principal fact-finding agency for the federal government in the broad field of labor economics and statistics.

Older Workers Today, employees age 50 and older represent almost a third of the U.S. workforce.62 In 2011, the first baby boomers turned 65, and approximately 10,000 more will continue to do so every day for the next 20 years. In recent years, many boomers deferred retirement because of a falter- ing economy and concerns about the viability of the Social Security retirement program.63 As the economy improves, plans must be in place to handle a rapid departure of boomers from the workforce. Even so, many boomers will resist retirement, some because they feel healthy enough to continue work and others because their retirement income was hit hard by the economy. The U.S. Bureau of Labor Statistics estimates that about 11 million workers 65 and older will be working in 2022, up from about 6 million today.64

Despite massive layoffs resulting from the recent recession, many companies try to keep the worker older than 55. This may be as a result, in part, of legal concerns based on the ADEA, discussed previously in this chapter, which protects workers 40 and older against discrimination. However, a large part of this movement is the desire to keep the experienced workers on board. “Seniority matters,” says Marcie Pitt-Catsouphes, director of the Sloan Center on Aging & Work at Boston College.65

People with Disabilities According to the U.S. Bureau of Labor Statistics, approximately 20 percent of the labor force possesses one or more disabilities.66 Common disabilities include limited hearing or sight, limited mobility, mental or emotional deficiencies, and various nerve disorders. Such

Try It 2 If your instructor has assigned this, go to MyManagementLab to complete the Diversity simulation and test your application of these concepts when faced with real-world decisions.

68 Part 1 • Setting the Stage

disabilities limit the amount or kind of work a person can do or make its achievement unusu- ally difficult. In jobs for which they are qualified, however, disabled workers do as well as unimpaired workers in terms of productivity, attendance, and average tenure. In fact, in certain high-turnover occupations, disabled workers have lower turnover rates. A DOL survey found that a majority of large businesses are hiring people with disabilities and discovering that costs for accommodations differ very little from those for the general employee population. In fact, the typical one-time expenditure is about $500, according the U.S. DOL’s Office of Disability Employment Policy.67 Further, once an employer hires one person with a disability, it is much more likely to hire other people with disabilities. Walgreens opened its second state- of-the-art distribution center in Windsor, Connecticut, designed specifically to employ people with disabilities. Its goal is to fill at least one-third of the available jobs with individuals with disabilities.68 The goal may have a business sense because in a recent survey, 92 percent of respondents viewed companies that hire people with disabilities more favorably than they viewed companies that do not.69

Immigrants Large numbers of immigrants from Asia and Latin America have settled in many parts of the United States. Some are highly skilled and well educated and others are only minimally qualified and have little education. They have one thing in common: an eagerness to work. They have brought with them attitudes, values, and mores particular to their home country cultures.

After the end of hostilities in Vietnam, Vietnamese immigrants settled along the Mississippi and Texas Gulf Coast. At about the same time, thousands of Thais fleeing the upheaval in Thailand came to the Boston area to work and live. New York’s Puerto Rican community has long been an economic and political force there. Cubans who fled Castro’s regime congregated in southern Florida, especially Miami. A flood of Mexicans and other Hispanics continues across the southern border of the United States. The Irish, the Polish, the Italians, and others who came here in past decades have long since assimilated into, and indeed became, the culture. Newer immigrants require time to adapt. Meanwhile, they generally take low-paying and menial jobs, live in substandard housing, and form enclaves where they cling to some semblance of the cultures they left.

Wherever they settle, members of these ethnic groups soon begin to become part of the regu- lar workforce in certain occupations and break out of their isolation. They begin to adopt the English language and U.S. customs. They learn new skills and adapt old skills to their new country. Managers can place these individuals in jobs appropriate to their skills, with excellent results for the organization. As corporations employ more foreign nationals in this country, managers must work to understand the different cultures of their employees.

Foreign Workers The H-1B employment visa brings in approximately 135,000 skilled foreign workers annually, including some 30,000 researchers and academicians not subject to the annual visa cap set by Congress. Of those 135,000, the majority are distributed to employers through a lottery system each April held by U.S. Citizenship and Immigration Services, an arm of the U.S. Department of Homeland Security. However, the exact number of H-1B visa holders is difficult to determine. A three-year initial visa can be renewed for another three years, and if a worker is on track for a green card, H-1B status can be renewed annually.

Until the recent recession, demand far outpaced supply, and companies constantly encour- aged Congress to raise the cap. Many employers say the H-1B visa program provided the only practical avenue for finding high-tech workers with cutting-edge skills. Others do not agree, and there continues to be a debate regarding the hiring of foreign workers. Still, U.S. employers at both ends of the skills spectrum say they have no choice.

Young Persons, Some with Limited Education or Skills A lower labor force participation rate for young people is being experienced for all those younger than 24 years of age and not merely young persons with limited education and skills, as was so often the case in the past. The recent recession denied many young workers the opportunity

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of entering the workforce, so a large number decided to gain additional education to be more competitive.70

The downturn was especially harsh for 16- to 24-year olds when the unemployment rate was the highest recorded since the government began monitoring it in the 1940s. Even so, each year, thousands of young, unskilled workers are hired, especially during peak periods, such as holiday buying seasons. These workers generally have limited education, sometimes even less than a high school diploma. Those who have completed high school often find that their education hardly fits the work they are expected to do. Many of these young adults and teenagers have poor work habits; they tend to be tardy or absent more often than experienced or better-educated workers.

Although the negative attributes of these workers at times seem to outweigh the positive ones, they are a permanent part of the workforce. Certainly, when teenagers are hired, an organization is not hiring maturity or experience; but young people possess many qualities, such as energy, enthu- siasm, excitement, and eagerness to prove themselves. There are many jobs they can do well. More jobs can be de-skilled, making it possible for lower-skilled workers to do them. A well-known example of de-skilling is McDonald’s use of pictures on its cash register keys. Managers should also look for ways to train unskilled workers and to further their formal education.

Baby Boomers, Gen X, Gen Y, and Gen Z Never in the history of the United States has so many different generations with such different views and attitudes been asked to work together. There have been tremendous changes since the boomers first entered the workplace. Each generation has its unique culture that has shaped its nature. Although generalizations about a group are risky, the following discussion may provide additional insight into each group. The discussion begins with baby boomers fully realizing that there remain some members of the Silent Generation in the workforce, those born during the Great Depression and World War II.71

BABy BooMERS baby boomers were born just after World War II through the mid-1960s. Corporate downsizing in the 1980s and 1990s cast aside millions of baby boomers. Companies now want to keep the boomers. Employers seek out boomers because they bring a wealth of skills and experience to the workplace, as well as have low turnover rates and high engagement levels. Companies today place considerable value on their skill, experience, and a strong work ethic, characteristics that many boomers possess.72

baby boomers People born just after World War II through the mid-1960s.

h r b l o o p e r s

Affirmative Action and Workforce Diversity

If your professor has assigned this, go to mymanagementlab.com to complete the HR Bloopers exercise and test your application of these concepts when faced with real-world decisions.

Anne Johnson is a newly hired human resources (HR) associate for Capitol Manufacturing Company. Her first assignment was to develop and propose a plan to increase the diversity of the company’s workforce. Anne spent two weeks pre- paring her ideas and creating a presentation for the company’s HR leadership team and department managers throughout the company. She started her presentation by saying that she is not a fan of jar- gon because it creates confusion. To that end, Anne told the audience “Diversity is just Affirmative Action with a new coat of paint.” And she made a similar statement about the relationship between diversity

and EEO. About workforce diversity and affirmative action, Anne claimed that both are enforced by the Fair Labor Standards Board. She went on to state that affirmative action, equal opportunity, and work- force diversity are numbers oriented and have little to do with the company’s culture. All are simply aimed at changing the demographic composition of the workforce. Anne continued by telling the audi- ence that ensuring EEO is nothing more than a marketing ploy. Finally, she concluded her presentation by saying that only the leadership of the HR and marketing departments within the company is responsible for promoting diversity, affirmative action, and EEO.

70 Part 1 • Setting the Stage

GENERATIoN X Generation X is the label affixed to the approximately 41 million U.S. workers born between the mid-1960s and late 1970s. Many organizations have a growing cadre of Generation X employees who possess lots of energy and promise. Ranjan Dutta, a director at PwC Saratoga said, “Gen X workers will be the largest part of the workforce for years to come, and increasingly make up senior leadership ranks in organizations.”73 They are one of the most widely misunderstood phenomena facing management today. Generation Xers differ from previous generations in some significant ways, including their natural affinity for technology and their entrepreneurial spirit. Job instability and the breakdown of traditional employer–employee relationships brought a realization to Generation Xers that it is necessary to approach the world of work differently from past generations.

Generation Xers recognize that their careers cannot be founded securely on a relationship with any one employer. They are skeptical, particularly when it comes to the business world and job security. They worry about their jobs being outsourced and how they are going to pay for their children’s education. They think of themselves more as free agents in a mobile workforce and expect to build career security, not job security, by acquiring marketable skills and expertise. Gen Xers are focused on gaining transferrable skills so that they can be ready should they no longer have a job.74 They are not afraid of changing jobs quite often. The surest way to gain Gen Xers’ loyalty is to help them develop career security. When a company helps them expand their knowledge and skills, it is preparing them for the job market. Gen Xers will often want to stay on board to learn those very skills.

GENERATIoN y Generation Y comprises people born between the late 1970s and mid-1990s. Estimates are that by 2016 Gen Yers (or Millennials) will account for nearly half of all employees worldwide.75 They have never wound a watch, dialed a rotary phone, or plunked the keys of a manual typewriter. But without a thought, they download music from the Internet and insert pictures of events on Facebook. Kevin C. Carlson, CEO of Brill Street + Company said, “They may not have lots of experience in the traditional sense, but they’ve grown up with technology and social media, which are skills many companies look for today.”76 They cannot imagine how the world ever got along without computers. These individuals are the leading edge of a generation that promises to be the richest, smartest, and savviest ever. They are well educated, well versed in technology, and bursting with confidence.77 Generation Yers—often referred to as the echo boomers, Millennials, and Nexters—are the coddled, confident offspring of post–World War II baby boomers. Generation Y individuals are a most privileged generation, who came of age during the hottest domestic economy in memory.

Gen Yers tend to have a strong sense of morality and civic-mindedness. They are more ethni- cally diverse than previous generations, and nearly one-third of them have been raised in single- parent households. They want a workplace that is both fun and rewarding. They want jobs where there is a balance between work and family. They want jobs that conform to their interests and do not accept the way things have been done in the past. Generation Y employees want flexible working hours, which is a benefit that they are very enthusiastic about. They also tend to have more of a sense of entitlement not found in other generation of workers. However, Gen Yers’ childhoods have been short-lived because they have been exposed to some of the worst things in life: schoolyard shootings, drug use, terrorism, sex scandals, and war.

GENERATIoN Z oR DIGITAl NATIvES After Generation Y came Generation Z or Digital Natives, the Internet-assimilated children born between 1995 and 2009. Gen Zers are more worldly, high-tech, and confident in their ability to multitask; they tend to have short attention spans and desire speed over accuracy; and they enjoy media that provides live social interaction.78 They tend to use social networks to avoid the complications of dealing with face-to-face situations. In a recent survey, almost 25 percent of respondents found their relationship with their significant other was over by first seeing it on Facebook.79 Digital Natives do not trust politicians, social institutions, the media, or corporations. Rather, they rely largely on themselves and their peers to decide what to think, what to do, and what to buy. The main thrust of the book 2018: Digital Natives Grow Up and Rule the World was that “Digital natives are protagonists for massive technology adoption and a consequent adaption of human

Generation X Label affixed to the 40 million U.S. workers born between the mid-1960s and late 1970s.

Generation y Comprises people born between the late 1970s and mid-1990s.

Generation Z or Digital Natives Internet-assimilated children born between 1995 and 2009.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 71

behavior.”80 Two Gen Zer children sitting in the back seat of the family car may now be texting each other instead of speaking with each other.

GENERATIoN AlPHA Some have suggested that the next generation, born from 2010 forward, will be called Generation Alpha. Although Generation Z is often referred to as the twenty- first- century generation, Generation Alpha will be the first true millennial generation, as they will be the first born into the twenty-first century.

Multigenerational Diversity Four generations are now participating in the workforce and each has different defining char- acteristics and nicknames. The concept of generational differences as a legitimate workplace diversity issue has gained increasing recognition. Baby boomers are remaining on the job longer because of the economy and often find themselves working with Generation Y employees. Traditionally, discussions of workplace diversity tended to focus on topics of race, ethnicity, gender, sexual orientation, and disability. Shirley A. Davis, SHRM’s director of diversity and inclusion initiatives, said, “In all parts of the world, there is another category of diversity that cannot be overlooked: multigenerational diversity.”81 Today, there are greater numbers of work- ers from each segment that bring both new opportunities and challenges. At time there are significant differences in communication style which has the potential to harm communica- tion. Dana Brownlee, president of corporate training firm Professionalism Matters in Atlanta, Georgia said, “Typically the older generations prefer talking face-to-face or on the phone, and the younger generations tend toward text-based messages like email and instant message.”82 If organizations want to thrive in this competitive environment of global talent management, they need employees and managers who are aware of and skilled in dealing with the different generations that make up the workforce.

Lesbian, Gay, Bisexual, and Transgender Employees There has been an increased focus in the political and workforce arena with regard to lesbian, gay, bisexual, and transgender (LGBT) employees. In addressing the United Nations General Assembly, President Barack Obama said, “No country should deny people their rights to free- dom of speech and freedom of religion, but also no country should deny people their rights because of who they love, which is why we must stand up for the rights of gays and lesbians everywhere.”83 President Obama also decided that the 1996 Defense of Marriage Act that bars federal recognition of same-sex marriages was unconstitutional and told the Justice Department to stop defending the law in court, bringing harsh criticism from many congressional members.84 This became a moot point because in 2013, the Supreme Court in its landmark decision voted 5–4 to strike down Section 3 of the act, which prohibited federal recognition of state-sanctioned, same-sex marriages.85

Nearly 90 percent of Americans favor equality of opportunity in the workplace. But the public remains virtually evenly divided on same-sex marriage. To date, 17 states have legalized same-sex marriage. Twenty-one states have passed some form of nondiscrimination law protecting gay and lesbian workers from sexual-orientation bias.86 Houston’s mayor signed an executive order pro- tecting LGBT city employees “at every level of municipal government” from discrimination and harassment based on their sexual orientation.87

Many companies have policies supporting LGBT employees perhaps because of legal require- ments. Other firms have policies to recruit and retain qualified employees no matter their sexual orientation.88 Over the last decade, corporations have increasingly created a more-welcoming envi- ronment for LGBT employees. An estimated 86 percent of Fortune 500 firms now ban discrimina- tion on the basis of sexual orientation, up from 61 percent in 2002, and approximately 50 percent also ban discrimination against transsexuals, compared with 3 percent in 2002.89 Nonetheless, sur- veys show that many LGBT employees still view their sexual orientation as a hindrance on the job, and approximately 48 percent of those surveyed remain “closeted” at work.90 However, by 2013, 59 percent of gay workers reported they were “out” at work, a 7 percentage point increase from the previous year.91

72 Part 1 • Setting the Stage

summary 1. Explain the concept of equal employment opportunity.

Equal employment opportunity (EEO) refers to the prin- ciples and the set of laws and policies that requires all individuals’ rights to equal opportunity in the workplace, regardless of race, color, sex, religion, national origin, age, or disability.

2. Identify the federal laws affecting equal employment opportunity. Major laws include the Civil Rights Act of 1866; Equal Pay Act (EPA) of 1963, amended in 1972; Lilly Ledbetter Fair Pay Act of 2009; Title VII of the Civil Rights Act of 1964, amended in 1972; Pregnancy Discrimination Act of 1978; Civil Rights Act of 1991; Age Discrimination in Employment Act (ADEA) of 1967, amended in 1978 and 1986; Rehabilitation Act of 1973; Americans with Disabilities Act (ADA) of 1990; Americans with Disabilities Act Amendments Act (ADAAA) of 2008; Immigration Reform and Control Act (IRCA) of 1986; the Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994; the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) of 1974, as amended, and the Genetic Information Nondiscrimination Act (GINA) of 2008.

3. Discuss who is responsible for ensuring equal employment opportunity. The government and employers are responsible for ensuring EEO in the workplace. Two government agencies are charged with this responsibility: Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP).

4. Define and operationalize the types of employment discrimination. With disparate treatment, an employer treats some people less favorably than others because of race, religion, sex, national origin, or age.

Adverse impact occurs if women and minorities are not hired at the rate of at least 80 percent of the best- achieving group.

5. Define and discuss affirmative action. Affirmative Action creates the expectation and program requirements that companies make a positive effort to recruit, hire, train, and promote employees from groups who are underrepresented in the labor force. An affirmative action program is an approach that an organization with government contracts develops to demonstrate that women or minorities are

employed in proportion to their representation in the firm’s relevant labor market.

6. Explain the Uniform Guidelines related to illegal employment discrimination. The Uniform Guidelines adopted a single set of principles that were designed to assist employers, labor organizations, employment agen- cies, and licensing and certification boards to comply with requirements of federal law prohibiting employment prac- tices that discriminated on the basis of race, color, religion, sex, and national origin. Employers have an affirmative duty to maintain a workplace free from sexual harassment. Discrimination on the basis of national origin is the denial of EEO because of an individual’s ancestors or place of birth or because an individual has the physical, cultural, or linguistic characteristics of a national origin group. Employers have an obligation to accommodate religious practices unless they can demonstrate a resulting hardship. Caregiver (family responsibility) discrimination is dis- crimination against employees based on their obligations to care for family members.

7. Describe sexual harassment in the global environment. Sexual harassment was discussed in this chapter only as it pertained to the United States, but it is also a global prob- lem. When individuals from two different cultures interact, there is a potential for sexual harassment problems. Some behaviors that violate U.S. cultural norms may not be perceived as a problem in another culture.

8. Describe the concept of diversity. Diversity refers to any perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, geo- graphic origin, lifestyle, tenure with the organization, or position, and any other perceived difference.

9. Discuss the concept of diversity management. Diversity management is ensuring that factors are in place to provide for and encourage the continued development of a diverse workforce by melding these actual and perceived differ- ences among workers to achieve maximum productivity.

10. Explain the elements of a diverse workforce. The workforce may include single parents and working mothers, women in business, mothers returning to the workforce, dual-career families, workers of color, older workers, people with disabilities, immigrants, foreign workers, young persons (some with limited education or skills), and multigenera- tional workers.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 73

Key terms equal employment opportunity

(EEO) 43 Affirmative Action 43 Uniform Guidelines 54 disparate treatment 54 adverse impact 55

executive order (EO) 56 affirmative action program (AAP) 56 caregiver (family responsibility)

discrimination 62 diversity 43 diversity management 64

dual-career family 66 baby boomers 69 Generation X 70 Generation Y 70 Generation Z or Digital Natives 70 glass ceiling 66

MyManagementLab® Go to mymanagementlab.com to complete the problems marked with this icon .

exercises 3-1. Many laws, court decisions, and EOs have had a pro-

found effect on the composition of the workforce. It is highly likely that our economy would have ground to a halt without these additional workers. How might the demographic composition of your classroom be different if it was not for these laws, court decisions, and EOs?

3-2. During 2013, 400 people were hired for a particular job. Of the total, 300 were white and 100 were black. There were 1,200 qualified applicants for these jobs, of whom 800 were white and 400 were black. Does adverse impact exist? If adverse impact exists, what does this mean?

3-3. You are a HR manager with a large manufactur- ing firm that does a large portion of its business with the federal government with sales more than

$1,000,000. Your application form asks the follow- ing questions: Marital Status, Height and Weight, Age, Sex, Occupation of Spouse, Education, Criminal Convictions, Plans to Have Children (if you are female), Handicaps, and Work Experience. Are any of these factors employment standards to avoid? Why? Discuss as appropriate.

3-4. You are the HR manager for a company that has recently received a federal contract in excess of $1 million. In conducting utilization analysis on your present workforce of operators you find that 10 percent of your workforce is black, whereas 30 percent of the workforce in the relevant labor market is black. According to Affirmative Action guidelines, what must be done to correct this difference?

Questions for review 3-5. What are the components that combine to make up the

present diverse workforce? Briefly describe each. 3-6. Briefly describe the following laws: (a) Civil Rights Act of 1866 (b) Equal Pay Act of 1963 (c) Lilly Ledbetter Fair Pay Act of 2009 (d) Title VII of the Civil Rights Act of 1964, as

amended in 1972 (e) Pregnancy Discrimination Act of 1978

(f) Civil Rights Act of 1991 (g) Age Discrimination in Employment Act of 1967,

as amended in 1978 and 1986 (h) Rehabilitation Act of 1973 (i) Americans with Disabilities Act of 1990 (j) Americans with Disabilities Act Amendments

Act of 2008 (k) Immigration Reform and Control

Act of 1986

74 Part 1 • Setting the Stage

i n c i D e n T 2 So, What’s Affirmative Action? Supreme Construction Company began as a small commercial builder located in Baytown, Texas. Until the early 2000s, Alex Boyd, Supreme’s founder, concentrated his efforts on small, freestanding shops and offices. Up to that time, Alex had never employed more than 15 people.

In 2008, Alex’s son Michael graduated from college with a degree in construction management and immediately joined the company full-time. Michael had worked on a variety of Supreme jobs while in school, and Alex felt his son was really cut out for the construction business. Michael was given increasing responsibility, and the com- pany continued its success, although with a few more projects and a few more employees than before. In 2012, Michael approached his father with a proposition: “Let’s get into some of the bigger projects now. We have the capital to expand and I really believe we can do it.” Alex approved, and Supreme began doing small shopping centers and multistory office buildings in addition to work in its traditional area of specialization. Soon, the number of employees had grown to 75.

In 2013, the National Aeronautics and Space Administration (NASA) released construction specifications for two aircraft hangars

to be built southeast of Houston. Although Supreme had never done any construction work for the government, Michael and Alex consid- ered the job within the company’s capabilities. Michael worked up the $1,982,000 bid and submitted it to the NASA procurement office.

Several weeks later the bids were opened. Supreme had the low bid. However, the acceptance letter was contingent on submission of a satisfactory affirmative action program.

Questions 3-23. Explain why Supreme must submit an affirmative action

program. 3-24. Generally, what should the program be designed to

accomplish? 3-25. In conducting a utilization analysis, Michael discovers that

although 30 percent of the general population of construc- tion workers is black, only 10 percent of Supreme’s employees are black. According to affirmative action, what is Supreme Construction required to do?

i n c i D e n T 1 I Feel Great Les Partain, manager of the training and development department for Gazelle Corporation, was 64 years old and had been with the firm for more than 30 years. For the past 12 years he had served as Gazelle’s training and development manager and felt that he had been doing a good job. This belief was supported by the fact that during the past five years he had received excellent performance reports from his boss, LaConya Caesar, HR director.

Six months before Les’s birthday, he and LaConya were enjoying a cup of coffee together. “Les,” said LaConya, “I know that you’re pleased with the progress our T&D section has made under your lead- ership. We’re really going to miss you when you retire this year. You’ll certainly live the good life because you’ll receive the maximum retire- ment benefits. If I can be of any assistance to you in developing the paperwork for your retirement, please let me know.”

“Gee, LaConya,” said Les. “I really appreciate the good words, but I’ve never felt better in my life, and although our retirement plan is excellent, I figure that I have at least five more good years. There are many other things I would like to do for the department before

I retire. I have some excellent employees, and we can get many things done within the next five years.”

After finishing their coffee, both returned to their work. As LaConya left, she was thinking, “My gosh, I had no idea that character intended to hang on. The only reason I gave him those good perfor- mance appraisals was to make him feel better before he retired. He was actually only an average worker, and I was anxious to move a more aggressive person into that key job. We stand to lose several good people in that department if Les doesn’t leave. From what they tell me, he’s not doing too much of a job.”

Questions 3-20. From a legal viewpoint, what do you believe LaConya can do

regarding this situation? Discuss. 3-21. What actions should LaConya have taken in the past to avoid

her current predicament? 3-22. What might occur if LaConya begins to evaluate Les in the

manner she should likely have been doing all along?

(l) Uniformed Services Employment and Reemployment Rights Act of 1994

(m) Vietnam Era Veterans’ Readjustment Assistance Act of 1974

(n) Genetic Information Nondiscrimination Act of 2008 3-7. Why have employee retaliation charges experienced a

dramatic increase? 3-8. What are the significant U.S. Supreme Court decisions

that have had an impact on EEO? On Affirmative Action? 3-9. What are the steps that the EEOC uses once a charge is

filed? 3-10. What is the purpose of the Uniform Guidelines on

Employee Selection Procedures?

3-11. What is the difference between disparate treatment and adverse impact?

3-12. How does the EEOC define sexual harassment? 3-13. How does the EEOC interpret the national origin

guidelines? 3-14. What are some guidelines to follow with regard to reli-

gion-related discrimination? 3-15. What is meant by the term caregiver discrimination? 3-16. What is the purpose of the OFCCP? 3-17. What is an affirmative action program? 3-18. How do countries other than the United States view

sexual harassment? 3-19. Define diversity and diversity management.

ChaPter 3 • equal emPloyment oPPortunity, affirmative aCtion, and WorkforCe diverSity 75

MyManagementLab® Go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:

3-26. What is the purpose of the EEOC? 3-27. How do equal employment opportunity laws differ from diversity management?

endnotes Scan for Endnotes or go to http://www.pearsonhighered.com/mondy

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